Law & Economics Working Papers
This Article argues, using the case of responses to traffic congestion, that public choice provides a greater explanation for the emergence of property rights than does economic efficiency. While the traditional solution to traffic congestion is to provide new roadway capacity, that is not an efficient response in that it does not lead to internalization of costs. Moreover, over time new capacity may serve to exacerbate congestion problems: New roadway capacity may induce additional travel that would not have taken place but for the new construction. By contrast, congestion charges—that is, imposing tolls designed to force drivers to internalize the costs that their driving imposes on other drivers—offer an efficient way to address the problem of congestion. The continued popularity, despite this, of providing new roadway capacity turns upon public choice theory. New roadway construction tends to be very attractive for politicians as a way to satisfy both constituents generally, as well as interest groups that tend to be well-organized and powerful. In contrast, congestion charging regimes tend to be less popular across the board politically. At present, there appears currently to be something of a shift in position. Experimentation with congestion pricing programs is growing overseas—including a notable program in London—and a serious proposal for New York City’s central business district. This Article thus argues that, while political economy tends to be a powerful force, it is possible for concerns of efficiency to override (or at least to curtail) that force when the inefficiencies of a response grounded in political economy become too large. At the same time, public choice continues to hold considerable sway: The shift toward congestion pricing may require not only pressing efficiency concerns, but also a shift in the political climate, as evidenced by backlash against New York City’s proposal.
Jonathan Nash, "Economic Efficiency versus Public Choice: The Case of Property Rights in Road Traffic" (John M. Olin Program in Law and Economics Working Paper No. 374, 2007).