7 ms·

I think there is a 1st principles economic rationale that agrees with you. In a nutshell, you need to get down to the "utility" concept. It's used (for example

I think there is a 1st principles economic rationale that agrees with you. In a nutshell, you need to get down to the "utility" concept. It's used (for example) to theoretically prove/support the idea that free exchange is always beneficial for both parties. Putting prices onto otherwise unrestricted resources likewise optimizes for utility, especially if there are tragedy of the commons issues. The catch is that utility is measured in dollars. Price systems increase efficiency by introducing trade-offs. If you don't really need to use the road you won't, because there's a cost to it. But (like you say), this trade-off is different for different people. For rich people, $40 is always worth it. For the middle class, $40 might be worth it if you can get home in time for date night. For poor people, $40 means you can't afford a date night this week. It's never worth it. Basically, dollar-utility conversion is different for people with more or less money. To call this a utility-efficient outcome, you need to concede that a poor person's family dinner time is worth less. That's obviously false. We can't measure utility in dollars, if we have inequality. On top of all that, roads are not "full" markets. This is not a free market solution. You can add a price system. but you don't have supply side effects. Prices don't reflect marginal costs of commuting, because there isn't competition. Price signals don't control supply, or lead to more supply. Even if supply wasn't exogenous in practice, the fixed/marginal cost ratio would make the "market" unresponsive anyway. This is not really a "free market" vs "public good" because free market just isn't an available option. I would like to see some less idealistic economists take over on these issues. One interesting option is creating a fake "currency" for fast lanes. Ideas that assume people's time, enjoyment of the road and transport needs are equivalent. You probably can't take money entirely out of the equation, but there are ways of doing this without handing out benefits to the wealthy at the expense of the poor.

speedplane 9y ago
Agree that dollars are not the ideal measure of utility, primarily because of of diminishing marginal returns as you get more wealthy. But they are pretty good for the majority. Appealing to a right to an egalitarian "family dinner time" is also not terribly convincing. There are plenty of rich people who don't care much about family dinner time. There are plenty of poor who would eagerly spend half their day's wages to make it home on time. Also, I'm not sure I buy the whole no competition argument regarding highways. The competition are the non-toll highways and driving on streets. There are several free options, and a paid option. The paid option has to compete against the free ones by setting a price that corresponds to the value it provides. If all roads were a toll road, then that would be a monopoly and a broken market, but this one seems okay.
- dalbasal 9y ago
  I don't think that's fair. I'm not making an emotional appeal. I'm making (or attempting, at least) a rational one. You can put it in diminishing marginal value terms, but I'm basically saying the same thing with fewer assumptions. Family time (or TV time or whatever) is an example to demonstrate that utility does not scale with money. On the whole poor people commuting enjoy their free time, pleasant commutes and the other things at stake just as much as rich people. That's a fairly intuitive point. Given that, the price that does not correspond to the value it provides^, inasmuch as income is unequally distributed. It corresponds to the wealth of the person making a decision and the value it provides. The value of the fast lane is fairly evenly distributed between commuters. Everyone wants to get home. Everyone hates traffic. There are differences, but they're not huge on average. What isn't evenly distributed is income. Therefore the sorting that this mechanism does is a little bit of utility based sorting and a lot of income based sorting. If income was more even, there would be an argument for such a system. Given the actual distribution, the system is probably utility destroying. Tolls are just a revenue raising mechanism, not an efficient allocation one. ^or to marginal costs
  - speedplane 9y ago
    I see your point now. I think you could go further with it. Arguably, a poor person who has never been on an airplane would get far more "utility" from a flight on a private jet than someone who flies every day. So one could argue (a stretch), that the poor, and not the rich, should ride that toll road if it would increase total happiness more. But that seems ridiculous, and I think the issue here is that we're conflating capitalism with utilitarianism. Utilitarianism strives to maximize utility, i.e., total happiness. Capitalism strives for efficient use of scarce resources. They often overlap, but they are fundamentally different concepts. Going back to the example, I buy your argument that tolls are a crude way of maximizing utility. However, they are a good way of putting a scarce resource (fast commuting time) to economic use.
    - dalbasal 9y ago
      Capitalism is another kettle of fish perhaps. A lot of liberal market ideas (Smith, Ricardo, etc) are essentially utilitarian. That is, they use utilitarian arguments to prove their points, so they're basically tied into the same assumptions. Ricardo's theory of comparative advantage is pure utilitarianism, and is the classical economics "proof" that trade is efficient. To this day, the most important theory of trade. Efficiency in economic theory is almost all utility efficiency. The If not, what does efficiency? I guess you could say that in this case it's about maximizing revenue from willing payers. That's ok, but calling it efficiency is misleading. When you say putting a scarce resource to its (most productive) use, what do you mean if not the enjoyment and benefit of its users? Incidentally, there is a cool example of an artificial market for allocating food to US food banks. It uses a highly. Manipulated fake currency, with negative pricing and competitive bidding to improve "efficiency." The trick to making it work was all about being willing to define utility in non monetary terms. Stating efficiency in dollar terms can lead to circular logic.
jnty 9y ago
"For poor people, $40 means you can't afford a date night this week. It's never worth it" That's a slightly naive view of what 'poor' means. Try "can't eat this week."
- OJFord 9y ago
  You've misunderstood GP - the $40 is not being taken from the hypothetical poor person - it's a 'get home in time for date night' product being sold for $40, so not affording date night means not doing it; not spending the $40. The ability to afford food for the week is then unaffected, as it would be if the figure were $4 or $400.
  - pdkl95 9y ago
    However, this does impact gas, which could be significant if the difference in time is large enough. (This is assuming that the poor person is not driving e.g. a (more expensive, fewer available as used) hybrid car that can idle in traffic without wasting gas)
wyager 9y ago
> On top of all that, roads are not "full" markets. This is not a free market solution. You can add a price system. but you don't have supply side effects. The solution is to auction road capacity and use the auction proceeds to fund maintenance of that road and construction of others. Besides being vastly more efficient (from a market perspective) than an arbitrary fixed rate, it also means that resources are allocated towards roads more efficiently (if your fund allocation mechanism makes some sense).
- dredmorbius 9y ago
  How do you propose to run an auction on autos entering a given roadway?
  - thaeli 9y ago
    The dynamic toll pricing, based on utilization, on this roadway is very nearly an auction.
    - dredmorbius 9y ago
      Yes, but that's not an auction: one bidder raising over another. You might be able to do this in a two-at-a-time case, with two lanes of cars. Problem is that the lane behind the car that consistently underbids is being affected by a third party's decision. It seems that there's a problem with the feedback/response cycle in one-at-a-time pricing systems. The more effective systems approach is to set a scheduled or contingent pricing, perhaps at 10-15 minute increments, minimum. A regular schedule (as with peak / off-peak rail or transit schedules) is another option. Hence: how does OP propose to run an auction?
harryh 9y ago
I would like to see some less idealistic economists take over on these issues. One interesting option is creating a fake "currency" for fast lanes. If poor people don't have enough money, then we should give them money instead of fake currency. Giving them fake currency reduces utility. If we give them money they can buy whatever they want/need the most. If we give them scrip that can only be used on one thing then they have to buy that even if they would value it less than something else.
- dredmorbius 9y ago
  If it is some fake currency, say, HOV-credits, that is distributed on a monthly basis, equally, to everyone, then to a first approximation, you're providing for equivalence in capacity to pay. You can choose to spend, or not spend, your HOV-credits, on any given day. This also offers the opportunity for rationing, as it's possible to increase or decrease the allocations based on net usage. If the credits expire after some time, say a few months, then there's the ability to bank them, but not indefinitely. This is not a form of perpetual wealth accumulation. The argument could be made for either making the credits transferable, so that those less wealthy in other regards could sell them for other units of trade, or not, and/or to set limits on such transactions. All of this occurs independent of actual currency, though there would be an overall budget to the programme. And it accomplishes the goal of setting an opportunity cost to highway travel, and congestion, which could itself be varied according to circumstances (higher charges at peak hours / during high-congestion events, lower off-peak or when uncongested). Then there's the question of interactions with alternative transit, telecommute, or similar schemes.
  - harryh 9y ago
    1) If your roads are being overused you can easily ration that by raising the dollar price. 2) What is wrong with wealth accumulation? If credit recipients would rather do that than drive on roads they should be able to do so. They's how they get less poor! 3) If they credits are transferable then you are effectively giving people money. Just in an ass-backwards and overly confusing way.

speedplane 9y ago

Agree that dollars are not the ideal measure of utility, primarily because of of diminishing marginal returns as you get more wealthy. But they are pretty good for the majority. Appealing to a right to an egalitarian "family dinner time" is also not terribly convincing. There are plenty of rich people who don't care much about family dinner time. There are plenty of poor who would eagerly spend half their day's wages to make it home on time. Also, I'm not sure I buy the whole no competition argument regarding highways. The competition are the non-toll highways and driving on streets. There are several free options, and a paid option. The paid option has to compete against the free ones by setting a price that corresponds to the value it provides. If all roads were a toll road, then that would be a monopoly and a broken market, but this one seems okay.

dalbasal 9y ago
I don't think that's fair. I'm not making an emotional appeal. I'm making (or attempting, at least) a rational one. You can put it in diminishing marginal value terms, but I'm basically saying the same thing with fewer assumptions. Family time (or TV time or whatever) is an example to demonstrate that utility does not scale with money. On the whole poor people commuting enjoy their free time, pleasant commutes and the other things at stake just as much as rich people. That's a fairly intuitive point. Given that, the price that does not correspond to the value it provides^, inasmuch as income is unequally distributed. It corresponds to the wealth of the person making a decision and the value it provides. The value of the fast lane is fairly evenly distributed between commuters. Everyone wants to get home. Everyone hates traffic. There are differences, but they're not huge on average. What isn't evenly distributed is income. Therefore the sorting that this mechanism does is a little bit of utility based sorting and a lot of income based sorting. If income was more even, there would be an argument for such a system. Given the actual distribution, the system is probably utility destroying. Tolls are just a revenue raising mechanism, not an efficient allocation one. ^or to marginal costs
- speedplane 9y ago
  I see your point now. I think you could go further with it. Arguably, a poor person who has never been on an airplane would get far more "utility" from a flight on a private jet than someone who flies every day. So one could argue (a stretch), that the poor, and not the rich, should ride that toll road if it would increase total happiness more. But that seems ridiculous, and I think the issue here is that we're conflating capitalism with utilitarianism. Utilitarianism strives to maximize utility, i.e., total happiness. Capitalism strives for efficient use of scarce resources. They often overlap, but they are fundamentally different concepts. Going back to the example, I buy your argument that tolls are a crude way of maximizing utility. However, they are a good way of putting a scarce resource (fast commuting time) to economic use.
  - dalbasal 9y ago
    Capitalism is another kettle of fish perhaps. A lot of liberal market ideas (Smith, Ricardo, etc) are essentially utilitarian. That is, they use utilitarian arguments to prove their points, so they're basically tied into the same assumptions. Ricardo's theory of comparative advantage is pure utilitarianism, and is the classical economics "proof" that trade is efficient. To this day, the most important theory of trade. Efficiency in economic theory is almost all utility efficiency. The If not, what does efficiency? I guess you could say that in this case it's about maximizing revenue from willing payers. That's ok, but calling it efficiency is misleading. When you say putting a scarce resource to its (most productive) use, what do you mean if not the enjoyment and benefit of its users? Incidentally, there is a cool example of an artificial market for allocating food to US food banks. It uses a highly. Manipulated fake currency, with negative pricing and competitive bidding to improve "efficiency." The trick to making it work was all about being willing to define utility in non monetary terms. Stating efficiency in dollar terms can lead to circular logic.

jnty 9y ago

"For poor people, $40 means you can't afford a date night this week. It's never worth it" That's a slightly naive view of what 'poor' means. Try "can't eat this week."

OJFord 9y ago
You've misunderstood GP - the $40 is not being taken from the hypothetical poor person - it's a 'get home in time for date night' product being sold for $40, so not affording date night means not doing it; not spending the $40. The ability to afford food for the week is then unaffected, as it would be if the figure were $4 or $400.
- pdkl95 9y ago
  However, this does impact gas, which could be significant if the difference in time is large enough. (This is assuming that the poor person is not driving e.g. a (more expensive, fewer available as used) hybrid car that can idle in traffic without wasting gas)

wyager 9y ago

> On top of all that, roads are not "full" markets. This is not a free market solution. You can add a price system. but you don't have supply side effects. The solution is to auction road capacity and use the auction proceeds to fund maintenance of that road and construction of others. Besides being vastly more efficient (from a market perspective) than an arbitrary fixed rate, it also means that resources are allocated towards roads more efficiently (if your fund allocation mechanism makes some sense).

dredmorbius 9y ago
How do you propose to run an auction on autos entering a given roadway?
- thaeli 9y ago
  The dynamic toll pricing, based on utilization, on this roadway is very nearly an auction.
  - dredmorbius 9y ago
    Yes, but that's not an auction: one bidder raising over another. You might be able to do this in a two-at-a-time case, with two lanes of cars. Problem is that the lane behind the car that consistently underbids is being affected by a third party's decision. It seems that there's a problem with the feedback/response cycle in one-at-a-time pricing systems. The more effective systems approach is to set a scheduled or contingent pricing, perhaps at 10-15 minute increments, minimum. A regular schedule (as with peak / off-peak rail or transit schedules) is another option. Hence: how does OP propose to run an auction?

harryh 9y ago

I would like to see some less idealistic economists take over on these issues. One interesting option is creating a fake "currency" for fast lanes. If poor people don't have enough money, then we should give them money instead of fake currency. Giving them fake currency reduces utility. If we give them money they can buy whatever they want/need the most. If we give them scrip that can only be used on one thing then they have to buy that even if they would value it less than something else.

dredmorbius 9y ago
If it is some fake currency, say, HOV-credits, that is distributed on a monthly basis, equally, to everyone, then to a first approximation, you're providing for equivalence in capacity to pay. You can choose to spend, or not spend, your HOV-credits, on any given day. This also offers the opportunity for rationing, as it's possible to increase or decrease the allocations based on net usage. If the credits expire after some time, say a few months, then there's the ability to bank them, but not indefinitely. This is not a form of perpetual wealth accumulation. The argument could be made for either making the credits transferable, so that those less wealthy in other regards could sell them for other units of trade, or not, and/or to set limits on such transactions. All of this occurs independent of actual currency, though there would be an overall budget to the programme. And it accomplishes the goal of setting an opportunity cost to highway travel, and congestion, which could itself be varied according to circumstances (higher charges at peak hours / during high-congestion events, lower off-peak or when uncongested). Then there's the question of interactions with alternative transit, telecommute, or similar schemes.
- harryh 9y ago
  1) If your roads are being overused you can easily ration that by raising the dollar price. 2) What is wrong with wealth accumulation? If credit recipients would rather do that than drive on roads they should be able to do so. They's how they get less poor! 3) If they credits are transferable then you are effectively giving people money. Just in an ass-backwards and overly confusing way.