Privatization Issues

Market Pricing to Solve Traffic Congestion

If nothing is done about congestion on the nation's highways, Americans will spend seven billion hours in traffic jams in 2005 -- more than quintuple the time wasted in 1985.

But help may be on the way. Planners are starting to apply economic rationality to traffic management.

  • Congestion pricing, first suggested in 1849, is being used or is under consideration in New York, San Francisco, Los Angeles and other cities.

  • Drivers would be charged premium prices to travel in underused car pool lanes.

  • Thanks to recently introduced technology, road authorities can now hand out credit-card size transponders that when mounted on dashboards pay tolls to overhead computers without necessitating a car stop.

  • On a privately-built and operated ten-mile stretch of four-lane highway in Orange County, Ca., about 24,000 motorists pay as much as $2.75 per trip every day to avoid a congested alternate road.

The California Private Transportation Company, which owns the road, is so pleased with the results that it is looking for other opportunities to build similar roads.

Source: Kim Clark, "How to Make Traffic Jams a Thing of the Past," Fortune, March 31, 1997.

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