Congestion pricing for the Twin Cities metropolitan area

Author(s):

Herbert Mohring , David Anderson

January 1994

Report no. None

"Congestion pricing" is the "something" that many economists favor to solve the urban traffic problem. The conceptual underpinnings of this solution are straightforward: Automobile operators not only experience road congestion, they also contribute to it. The "marginal costs" of their trips - the value of the resources that would be saved if these trips were not made - include not just the time and vehicle-operating costs they experience directly but also the costs they cause by contributing to the congestion that slows each other down - a cost that few consider in deciding when, where, and by what mode to travel. Maximizing the value of what society's resources produce in a market economy requires commodity prices to equal their marginal costs. The portion of the marginal cost of a road trip reflecting the cost it imposes on other travelers can be very large.

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