By Seth Ciancio
The Soviet Union was infamous for its bread lines. But whether or not you realize it, the United States has breadlines too, and every time you’re stuck in traffic, you’re in one.
With most products and services, if there’s too much demand (the amount of a product or service that people want) relative to the supply (the amount that’s available), then the price goes up. The higher price drives people to buy less, reducing demand, until it meets the supply. But in the USSR, prices were set by the government, who set prices of essential goods as low as possible to avoid popular discontent. That might sound like a good thing, after all, who doesn’t want low prices? But the artificially low price meant that demand wasn’t controlled for, so people bought more of these essential goods than they needed, and had little reason to use them efficiently, resulting in shortages across the country. The Soviets didn’t want to risk sparking popular discontent by raising prices, but they still had to control demand somehow, so they came up with a novel solution to control demand: lines.
You might not realize it, but the same thing happens in the United States. Not for bread, but for highways. Most of our roads are what we call: “free at the point of use.” That means that, while tax revenue is collected to pay for the highways, drivers don’t pay when they actually use the road, and they don’t pay more based on when, or how much, they use the road. Essentially, the financial cost to use a highway is the same no matter the demand, leaving only one limiter on demand: congestion.
Despite functioning differently, and having a different name, this has the exact same economic effect as the artificially low bread prices of the USSR. Because our interstate highways are free to use, people use them more than they need to, and they have no incentive to use them efficiently, causing a shortage of road capacity. Ultimately, just as artificially low prices created bread lines up and down the city streets of Kyiv, artificially low prices create “bread lines” up and down the interstate highways of the United States.
Just as artificially low prices created bread lines up and down the city streets of Kyiv, artificially low prices create “bread lines” up and down the interstate highways of the United States.
There are only two ways that have been proposed to eliminate these “bread lines” on our highways. Some people suggest that we should just increase supply: spend hundreds of billions of dollars to build our highways bigger and bigger, until eventually everyone is driving on them, and there’s enough room for all of them. Or, as I suggest, we could charge people market rate to use the highway. The more people who want to use the highway, the more it costs to use it. Just like with any other product, the higher price would push people away. Either they will use another mode of transportation to get where they’re going, take their trip at a different time when there are not as many people using the road, or they might decide that they don’t want to make that trip at all. The price continues to rise until there’s enough highway to go around. This policy, charging market rate to use the freeway, is called “congestion pricing,” and no matter the road, a market-rate ‘congestion price’ would reduce traffic enough to eliminate congestion.
Why can’t we just meet the demand with more supply? The biggest issue is that demand is a lot higher than you think. Congestion – the American “bread line” – does reduce demand, it’s just a really inefficient way of doing it. So even though it might seem like just adding one lane would solve the issue, the reduced congestion is like a shorter bread line, it just attracts more people. So if we want to eliminate congestion by meeting demand, then we have to build a lot of highways. That’s not to mention the long-term problem issues regarding the new car-oriented developments that will spring up to take advantage of the freeway space. The end result of the ‘meet demand’ philosophy is an all-consuming highway that endlessly takes up more and more space, produces more and more pollution, and costs more and more money, all for the empty promise that, maybe one day, the lines will disappear.
The end result of the ‘meet demand’ philosophy is an all-consuming highway that endlessly takes up more and more space, produces more and more pollution, and costs more and more money, all for the empty promise that, maybe one day, the lines will disappear.
It also doesn’t help that, while highways are static and unchanging, demand for highways is flexible. If we want to build our way out of the issue, then we have to build highways wide enough for rush hour traffic, and just accept that they’re going to be mostly empty for the rest of the day. However, if we change prices based on demand, then people will do what they can to avoid the rush-hour congestion charges. Students will schedule their classes for different times; workers will come in early, or if they have a flexible schedule they’ll come in late, and people running errands will reschedule. It could be as simple as eating breakfast after getting off the highway instead of before, in order to “get ahead” of the rush hour charges. However, they do it, flattening the daily demand curve allows us to move the same number of people with fewer roads.
What’s so bad about bread lines, anyways? While it is true that lines do work to reduce demand, it’s useful to keep in mind that not all uses of a good or service are equally valuable. If there’s a limited amount of highway capacity, and there is, it ought to be allocated to the most valuable trips, not just to the people who happen to get in line first. For example, a guy who’s using the highway to go to work probably ought to have priority over someone else who’s just taking a joyride. It would be impossible, and inadvisable, for the government to try and figure out exactly what every driver is doing and then weigh the value of all those uses against each other. So instead, we just ask drivers how much they themselves value it, by asking how much they’re willing to pay for it. Whoever’s willing to pay the most probably values the trip the most, so it makes sense for them to have priority. After all, if you’re not willing to pay two dollars to use the highway, was that trip ever really that important to you?
If you’re not willing to pay two dollars to use the highway, was that trip ever really that important to you?
Beyond greater efficiency, lines have a real cost. It’s not as obvious as a big toll sign, but that doesn’t mean it’s not real. Expert opinions vary, but some estimate that the U.S. economy loses as much as 179 billion dollars annually to congestion. You might not feel the hours of your life that are wasted away behind the wheel, or know the exact dollar cost of the meeting that you missed. If you don’t know them directly, you might not feel the impact of the hundreds of people who are killed a year in traffic accidents on Colorado highways, or the thousands more that are injured, but that cost is still real, and the fact that you don’t feel or notice it is the exact reason we need congestion pricing. If you pay to use the highway, you feel that cost. You feel it more than you feel the (much bigger) costs that you’re paying right now, and you (and everyone else) can actually take that into account when making decisions about how to get around, and how to live your life.
Can we actually make it happen? So the Soviet government set bread prices too low, artificially increasing demand, and creating bread lines. Why though, would an authoritarian, unelected government care one bit about the cost of essential goods? Look no further than Kazakhstan. Late last year, their government raised the ‘price cap’ for fuel, because the prices were so artificially low, that they had massive lines at gas stations and widespread shortages of fuel. While the price hike would have gone some way to alleviate the shortage, the people of Kazakhstan did not see it that way. All they saw was the price of fuel go up, and they, literally, rioted. If not for Russian intervention, they likely would’ve overthrown the government.
Luckily, democratic countries don’t usually have this issue. Politicians tend to get voted out of office long before the people throw the government. Still, it’s evident that the people tend to greatly prefer lines over higher prices, regardless of overall economic efficiency. The problem, really, is that the benefits are spread out. Voters don’t see the widespread economic benefits afforded by lower traffic, and they don’t feel the economic burden that congestion puts on the economy. They don’t see the prioritization of valuable trips, and the economic benefits that brings. They might not even associate the lower levels of congestion with the new policy. What we can guarantee, though, is that voters will notice the big sign on the freeway entrance that reads: “$0.12/mi,” and they’ll certainly notice the new bill they get in their mailbox every week. Ultimately, the problem with “free at the point of use” service is an economic one – the costs are too hidden and too dispersed for people to take them into account when making their decisions. The problem with congestion pricing, then, is the opposite: the costs are so much more obvious, and so much more pointed, that voters would never support it, even if it is more economically efficient.
