Loss aversion to Road User Charging and the Autonomous Vehicle

Loss aversion is the critical barrier to acceptance of mileage-based user fees or VMT charging. Well known to behavioral economists, loss aversion says humans experience losses at about 2.5 times more intensity than an equivalent gain. Losing ten dollars feels as bad as winning 25 dollars feels good. Coupled with an exaggerated tendency to fear losses that incorporate uncertainty, loss aversion, is built deeply into the human psyche with roots extending far back in evolutionary time, preserving gene pools. Loss aversion cannot be ignored by transportation economists who wish to see a shift to paying for roads according to use.

Motorists’ perceived losses associated with road use charging include a wide variety of uncertain effects: additional taxation, privacy invasion, comparative inconvenience, reduced autonomy of movement, government spending misallocation, inequity for one group or another, etc. That the degree of these presumed effects is uncertain—each can, in fact, be readily avoided—merely adds to the weight of loss perception.

Our explanations of counterbalancing gains also weigh far less than we imagine due to their uncertainty and imperceivability. The potential repeal of fuel duties, congestion abatement, improved environment, and better transit—if believed—weigh little to drivers who feel at risk for larger personal losses. Abundant uncertainty further exaggerates the 2.5-factor spread between the loss of the status-quo and the tenuous gains of road user charging.

The way automobility and its taxation has evolved to now precludes a reasoned switch from fuel tax to road-use tax. We need to think about a very different route to the change we seek, and DC Councilmember MaryM. Cheh has just shown us one.
In September 2012, Cheh introduced a bill in DC Council “[t]o authorize autonomous vehicles to operate on the roadways of the District”, provided that the vehicle “[o]perates on alternative fuels,” and that, “[o]wners of autonomous vehicles pay a vehicle-miles travelled (VMT) fee of 1.875 cents per mile” and that [t]he VMT fee shall be tabulated using an autonomous vehicle’s telemetry systems.”
Cheh’s proposal shows us a way out of the loss aversion problem. If you think about the AV of a few years from now, you can imagine it changing a lot of things. Besides the effects related to road safety, congestion, and fuel consumption, it will have dramatic effects on public transportation, shared vehicles and private vehicle ownership.
And the Jevons Paradox, which says that when we use a resource more efficiently, we consume more of it—in this case, road space—suggests that we would likely experience an increase in vehicle miles traveled. Hence, Jevons predicts that a new efficiency given us by the AV would tend to keep congestion and fuel use—and the need for road funding—running high.
AVs can sufficiently alter the evolution of automobility to change the perception of gains and losses between fuel taxation and VMT charging. Councilmember Cheh is right to take advantage of the switch to the AV to switch tax regimes at the same time.


This week in self-driving cars

The autonomous car buzz continues to grow. I think the Jetsonian optimism of the mainstream press  is over the top.  Many predictions are in the range of two to five years. It will take longer. (hint: the policy will be harder than the technology, and the technology is not complete.) One writer predicted that autonomy will come sooner than electrification. That one could work out in the sense that autonomous VMT will surpass electric VMT in, say, 15 years. I certainly would not bet against that...  The switch to artificial intelligence will be easier than the switch to batteries.  (Why? because once self-driving tech is solved, distribution will be free and the infrastructure is ready. Not so with EVs.)
Anyway, both developments will erode the fuel tax further, so now what? The autonomous car had better learn more about potholes.


Peak Car? China says "not yet".

Peak Car is more likely to be related to an automotive-ownership saturation level given a particular configuration of wealth, age and other demographic components.  In countries such as the US and UK and Australia that number hovers around .7 (700/1000 pop) and is currently flat. Some hope it will climb given an economic recovery, some pray for permanent decline or at least continued stagnation.  It does make sense that there would be a ceiling to automotive useat least on a per capita basis. And something under .75, given the portion of a population under driving age or over driving capability, seems reasonable (as a guess, I mean, not for our cities).

Regardless of where such a ceiling might be, the rest of the world, (especially China) still wants to get to that lofty place. (more china news re traffic) Hence Two Billion Cars is the near-term prediction, hoping and praying aside.  If the Sperling-Gordon "doubling" prediction is off the mark, it will be off only by a couple of years.

Most of us think only about our car or the cars in our neighborhood or city. But the matter of automobility is much larger as it addresses a critical human and urban need. Wishing it would get fixed or go away won't make it so. You may personally have more or less use for an automobile.  You may arrange your life to use very little or over much. But world vehicle population will doublelikely in less than 20 years.


The Five Faces of Public-Private Partnerships

A colleague from the D.C. area who is an expert in road finance wrote an insightful, concise and sobering note about Public-Private Partnerships. As I have written before about monetization of Toronto’s parking assets, and as I have found myself defending Ontario's 407, I found this valuable.

With Dan’s permission, I share this unaltered and unabridged.

Here is how Dan connected his work regarding what he prefers to call Public-Private Collaborations to my work in congestion pricing. I kept the original term to be sure his article is discovered by more people... 
"The relevance of the Many Faces of Public-Private Partnerships piece to road or congestion pricing is that many believe that P3s are the best way to implement road pricing on new alignment or HOT lanes. If so, it is best they understand the way certain detractors may use the negative rhetoric about P3s to undo worthy road pricing initiatives."

Daniel L. Dornan, P.E. — 2012.07.21

Let me begin by noting that I am a strong supporter of public-private collaboration to help address the fiscal and infrastructure needs of our nation. However this support is predicated on having both public sector and private sector participants benefit from the arrangement relative to the degree to which they each contribute to its success. In addition, such an arrangement should be made in a fully transparent manner with the respective parties held accountable for their responsibilities and promised results.

When politicians and public officials turn to the private sector (including investment-banking firms and venture capitalists) to help them finance public use infrastructure as part of a public-private partnership (P3), it is prudent to understand the short-term motives and the long-term consequences of these deals before they are finalized.

This paper discusses the various ways in which P3s can be viewed, depending on the nature of the deal, the roles and responsibilities of all parties to the deal, and the point of view of those assessing the deal. Understanding these differing views can help private firms become better positioned to successfully compete in the emerging and rapidly changing marketplace for P3s.

P3s as White Knight

Public-private partnerships are often touted as a panacea for addressing the transportation infrastructure needs of states and municipalities facing fiscal challenges during the continuing Great Recession. Proponents of P3s point to enhanced access to private capital as a major benefit of these arrangements. They paint P3 teams as White Knights able to rescue needed but fiscal-constrained infrastructure projects by providing ready access to financing, innovative project delivery, and cost-effective life-cycle asset management. These are the major advantages of successful P3s. Unfortunately most public sector agencies are unable to apply these processes to gain these benefits for their constituents since their time horizons for infrastructure management are much shorter than the service lives of these assets.

P3s as Pied Piper

In some P3 contracts, the concessionaire teams are asked to provide a sizable up-front concession fee in return for assuming control of public use infrastructure assets through long-term leases supported by tolls or other revenues. These deals inevitably involve a long-term repayment schedule that is significantly more than if the sponsoring public entities financed the projects using tax-exempt public bonds. This is because private consortia will only do a P3 deal if they are relatively sure that the project can generate the level of proceeds to more than cover the up-front payment; their own capital, operating, and maintenance costs, and an acceptable rate of return on the investment made by the financing members of the P3 team. The revenue potential of the facility under private management must be significant since the rates of return on private capital are much higher than interest rates associated with tax-exempt bonds, typically by 300 to 400 basis points (for example 6.2% versus 10.0%).

Those who oppose P3s out of concern that the private sector will make a profit on the deal fail to realize that when it comes to private financing, the profit motive is what makes these deals possible.  In all but the most altruistic cases, the Pied Pipers of capital finance expect to be paid for their services.  

P3s as Robin Hood

A particular problem arises when the up-front proceeds from a P3 concession payment are diverted to other unrelated purposes. This occurred in 2006 when the City of Chicago leased its rights to the Chicago Skyway and it’s future toll revenues to a P3 consortium of Spanish and Australian firms for 99 years in return for an up-front cash payment of $1.83 billion. In this case, the only transportation-related use of concession proceeds was for the City’s Meals-on-Wheels program. None of the up-front payment was dedicated to any other transportation projects or services, except to pay off the remaining City debt on the Skyway itself.

As a kind of Robin Hood, the City of Chicago took the proceeds from the Skyway lease and distributed it to a wide variety of social programs and causes. At the time, residents of Chicago did not pay much attention to this deal, even when it promised to significantly increase tolls on the Skyway. This was because most users of the Skyway, who would pay these higher tolls, lived in Indiana. Like a commuter tax, Chicago effectively tolled the citizens of Indiana to pay for social programs benefitting the citizens of Chicago.

P3s as Alchemist

To public officials desperate for fiscal relief, P3s could appear like the alchemists’ dream of turning lead (i.e., current debt, deteriorated infrastructure) into gold (i.e., debt relief, rehabilitated or new infrastructure). The reality is that these deals generally rely on a transfer of future revenues to the private sector that is better able to take the risks and secure the benefits of long-term asset stewardship. Since the public sector is typically unable to generate these future proceeds from their maturing public-use infrastructure, today’s public officials are more likely to embrace P3s by swapping a much larger revenue stream that will take decades to accrue for a smaller but immediate capital infusion in the form of an up-front concession payment.

P3s as Trojan Horse

The history of transportation infrastructure is replete with examples of megaprojects predicated on overly optimistic projections of public use and benefits and grossly underestimated estimates of costs.  By the time the actual usage and costs are known, these projects are too far along to be stopped. Another 10-15 years must elapse before the induced economic development spawned by these megaprojects is realized.

Likewise, the negative consequences of P3 agreements generally only become apparent long after the dealmakers leave office. When these arrangements enable opportunistic officials to lease out existing public use infrastructure for many decades, future generations may be denied access to windfall revenues these assets might generate over the long term. In such cases, those public officials responsible for pushing through these quick cash-out deals, their current constituents, and their private sector partners may be the only ones who benefit financially from these agreements. Subsequent generations may be left to feel the gambler’s remorse resulting from these deals.

If P3s are Trojan Horses designed only to enable private interests to assume responsibility for public infrastructure assets where profit and return-on-investment are their primary concern, we may see the wholesale transfer of the nation’s most critical and strategic highways to international consortia accountable only to their investors or stockholders. As the saying goes, Beware of Greeks Bearing Gifts.


Pubic stakeholders will be better served if they fully understand the nature and details of these agreements as they evolve over the short term and mature over the long term. The public will be best served when P3 contracts are developed and executed in a fully transparent manner, with all participants held accountable for their respective contractual commitments throughout the terms of these agreements.

Private sector firms interested in pursuing P3 opportunities in this country will be better prepared and more successful if they understand how different stakeholder groups view P3s. It is only by first understanding the diverse and sometimes contrary perspectives of both advocates and detractors of P3s that private sector firms can take the appropriate actions to be successful in pursuing these innovative financing and project delivery approaches over the long term, to the mutual benefit of the public and private enterprise.

Daniel L. Dornan, P.E.
Dornandaniel at gmail…
+1 703-625-2152


Driverless journalism

Added on 2012.09.13
     Pro: Kiss Your Bus Goodbye

People are starting to note a lot of positive implications for the self-driving vehicle (SDV) that is resonating on either side of the car-anti-car divide. In the WSJ, Brooking’s Clifford Winston wrote: Paving the Way for Driverless Cars: Instead of focusing on an enormously expensive high-speed rail system, government should promote modern highway design for cars of the future. (2012.07.17)

While Winston is half right that "a much better technological solution [than high speed trains] is on the horizon", the comparison is off-base since the sweet-spot trip for heavy rail vs that for the SDV are widely separated. Kind of like saying a baby stroller is equivalent to a mountain bike, since both move children. I wish he had written: “a much better technological solution [than today’s car] is on the horizon". But he was more using the SDV story as an excuse to diminish heavy rail and promote private investment in transport infrastructure. (While appreciating a role for rail, I whole-heartedly support private investment.)

Winston is also half right to claim: No worries about rush hour, vacation congestion, bad drivers, speed traps and accidents." Urban rush hour trauma and congestion would be reduced. The cessation of bad driving (on whose definition?) will take a long period of attrition, but one interesting idea might be to suspend driver licenses for “bad drivers” for a year constraining such drivers to a SDV for that year. Perhaps onerous to some it would be life-changing and even life-saving for others. The same with “no accidents”. There would be fewer—many fewer, eventually—but zero would be unlikely. When I saw “speed traps” listed among the bad bits such as "rush hour", "congestion", "bad drivers" and "accidents", I first recalled the Sesame Street jingle: "One-of-these-things-don't-belong-together…", then I wondered if that provides us with a hint of an opportunistic attribute of Winston’s own driving?

I think Winston’s concern that “one-third of the nation's highways are still in poor or mediocre condition” is both exaggerated and in no way a showstopper with respect to the SDV. The SDV’s lead designer, Sebastian Thrun has admitted that the work is not done—specifically listing the challenges of driving in snow, construction zones and “avoiding a mattress on the roadway”. I am certain he or someone will solve the pothole problem. Thrun started on this in 2005 and has accomplished a lot in eight years (actually the early vision of the SDV goes back to the 1939 World’s Fair, and was electric, no less). Thrun has been clear that the “car will be ready when the car is ready”, so he and Google (and several other competitors) will not rush-to-release a technology that would be unsafe or trip on potholes—nor would they be allowed to do so. Nonetheless, the SDV will suffer from the same problem as does commercial air carriers—while far safer than human operated cars, they will be held to a far higher standard. And Thrun knows that, too.

Winston’s proposal to build a whole new infrastructure is alarming. Any scheme that puts two different roadbed compression strengths in adjacent lanes is especially misguided as a simple lane departure of a heavy vehicle could cause tremendous damage. If his intention is that such lanes be physically grade separated, then flexibility would be greatly reduced and the tiny portion of the network that would then avail to SDVs would greatly restrict their movement. If we can’t get people to buy EVs with restricted ranges why would they buy SDVs with restricted routes? Sounds like the bus to me. And to imagine that because of this separation “driverless cars … would not have to distinguish between cars and trucks” is a terrifying idea. Would you agree to be whisked along in a robotic car that could not distinguish among vehicle sizes, one of the simplest of robotic vision feats? Count me out.
The illustration accompanying Clifford Winston's article is misleading.
This shows a car on a guided runway, not an autonomous vehicle.
The SDV will operate on the existing infrastructure and an internal map can keep if off any parts of the network that would put vehicle or rider(s) at risk. Even the signal timing problems can be addressed partly by fixing some critical parts and adapting the vehicles to others. Consider that as the SDV fleet grows, learning algorithms that use massive quantities of trip data (such as do those used by INRIX to map country-wide congestion in near-real time) can get very smart. They could easily prioritize which of the signal timings need most urgent fixing.

The frontier benefits of the SDV will accrue during 2022-2042 as special, restricted applications such as replacing mostly-empty and oversized urban buses, expensive and poorly driven taxis and shared cars. Here is where I would like to see Winston’s call for private funding focused: urban fleets of self-driving jitneys to replace every form of motorized shared vehicle (bus, taxi, street car, shared car, vanpool) from the front door of your home or work right up to the light-rail and heavy-rail transit station and vice versa. Replace them all. Then by 2045, maybe the US Congress will be able to pass another Surface Transportation Reauthorization Bill in plenty of time to eulogize the last of the personally-operated SOVs and fix the last of the traffic signals in time to remove them all, because they will no longer be needed

Not to lose sight of the key value of Winston’s message, however, he is 100% right that more would be achieved per SDV dollar than per heavy rail dollar, although both are needed.


Use revenue from parking reform rather than tax property

The Stintz - De Baeremaeker “OneCity” plan for Toronto Transit got a B+ from former Toronto chief planner Paul Bedford and urban designer and author Ken Greenberg. On a story by the Star’s Tess Kalinowski on 2012 07 06, “Bedford thinks OneCity is still too reliant on senior governments to provide two-thirds of the projected $30 billion cost."

“Much of the controversy … is based on its funding proposition—raising property taxes 2 per cent and applying the money to a dedicated transit fund.”

Ken Greenberg’s understatement: “The politics that could thwart the latest and among the boldest transit visions to come before the city in years, are inevitable,” is correct. And this is unfortunately to be expected in the merry-go-round transportation conversation we have going for the GTHA.

According to a Globe article on 2012 06 28, “For the average Toronto homeowner, OneCity would add $180 to the annual tax bill by the time the plan is fully phased in in 2016. All the money would go to transit.”

That’s 50 cents per homeowner per day.

Proper parking reform—and I am not referring to the cost-of-living increase on the GreenP machines that is expected soon—could easily cover half of that, while reducing urban congestion at the same time. Increasing property tax increases land rents, and that tends to discourage people from moving closer to the center as some urbanists think they should do. Anything that moves or keeps people farther from the center increases the use of automobiles.

“Why should my parking money fund transit?” demands my neighbor. One could think of increased transit use as a way to increase existing roadway capacity, since congestion reduces performance.

Whether we use parking revenues or fuel-tax revenues to fund roads or transit, either is better than being heavily reliant on property taxes.



Parking policy can boost modality choice

We often use the notion of choice when discussing mobility:
“We should have better transportation choices.”
“We should be able to choose where we live.”
“I have no choice but to drive.”
“I would bike, but cars are dangerous leaving me no choice.”

Cartoon from
New York Times
A key effect of many parking policies—and some of this is largely unintended—is to diminish our choices. I use the expression “diminish” in both senses. Our parking policies sometimes give us fewer choices, but more often they bias our choices in ways we do not often recognize. One example is employer-subsidized parking. If I have cheap or free parking at my place of employment, I am more likely to use my car. While I haven't been completely denied the choice to use transit or a bike, the fact that I have free or cheap parking makes the selection of those other modalities more unlikely than they already are. Another example is street parking that is dramatically less expensive than nearby garage parking. In this case, while I still have the choice to use garage parking, the low cost on the street encourages me to cruise around the block—an average of 3.5 minutes according to parking guru Don Shoup—to find a cheap spot. Again my choice is strongly biased by a parking policy. A third example is a policy that permits monthly parking (or better put, the lack of a policy which forbids the practice). In this case, given a choice of a discounted monthly parking pass versus paying the full daily rate, it is easy for me to purchase the monthly pass. What this means, however, is that during the month, if faced with a choice of, say, carpooling, biking or an SOV, I would be more likely to choose to drive.

There are individual remedies for each of these. Regional or municipal governments could mandate a “parking cash-out”, i.e., an equivalent subsidy to all employees to offset employer-subsidized parking. For example, having non-driving employees receive an equivalent cash subsidy that may be used for transit, bike, shoes, gas money toward a carpool, or offsetting internet costs for teleworkers, would reduce the automaticity of driving for some people. This increases each employee's choice, and still provides for employer subsidized parking which in itself is not necessarily a bad thing—as long as it's balanced.

Cruising for street parking can easily be managed by setting prices so that there is a 15% vacancy rate for parking spots. This is another Shoup solution and ends the cruising problem, while not needing to match garage prices (garages have a different role to play than does street parking, anyway).

Monthly parking is a bit tougher, since it makes sense to know you have a spot for your vehicle if you are indeed going to drive into your office each day, or if we are talking about the condo building you live in. However, it is possible to replace monthly passes with some form of parking loyalty program or bulk purchase program. Rather than purchase a parking pass for a calendar month, purchase 200 hours of parking at a bulk rate and there is no need to spend it all in a particular month. In fact, employees could be rewarded for making the 200 hours last longer! This would free up some people to make divergent modal choices, since the value of the parking pass is not ticking away if they choose not to drive.

There are numerous ways to make parking policy fairer and more responsible to the environment and to our cities. As well, tweaks to parking policy, such as I have described, are not nearly as politically toxic as road-use charging, but can, if deployed thoughtfully, can lead to similar congestion-reducing results.  Unfortunately, many of them are not readily apparent.


Toll Road Revolt in South Africa

In Gauteng Province (South Africa) an ambitious and expensive toll road scheme has been put on indefinite hold 2-days before its launch due to popular, trade union, business leader, and Automobile Association protest according to The Economist (It doesn’t toll for thee 2012.05.12). This will have significant financial repercussions for the road authority and the government. In easy hindsight, there is little surprise this happened.

Road operators are in desperate need for funding the world over.  And roads get more congested every day. But installing a one-size-fits-all tolling system on a pre-existing road network does not go down easily. However necessary for any number of reasons, this indeed “represents the state’s bullying power” as The Economist bluntly put it.
Image from article in The Economist. Copyright:The Economist
Adding new lanes and tolling them as high-occupancy/toll (HOT) lanes for discretionary use meets little resistance. But tolling major routes that have few or diminished alternatives would generally be received poorly. People who have had free access to roadways for as long as they remember, expect free access to remain available as long as they live. In behavioral economics lingo, they are “anchored” to a road-price of zero. You can’t just start charging US 12 cents per mile on a Monday at 12:01am, which is what was to happen in Gauteng.

To have acceptance, you have to make the individuals subject to tolling better off than they were without tolling. Drivers don’t buy into tedious economic arguments about highway funding and congestion and pricing and the tragedy of the commons. They ask: “What’s in it for me?”

Here is an alternative.

Phase in gradual fuel duty increases over a few years expressly to pay for new or repaired roads. Preannounce the full plan to give users time to adjust (move, renegotiate contracts, different vehicle, etc.). This will be difficult enough.

Concurrently provide a voluntary choice: pay the newly increased fuel tax or use an autonomous, in-vehicle, time-and-place of use meter to trade road tolls for a fuel tax rebate (calculated by the same meter). Arrange the road prices (stored in the personal in-vehicle meter’s “pricemap”) to have drivers who avoid congestion save money with the meter and other drivers to pay about the same as the fuel tax. Then be sure that the smart in-vehicle meter offers several additional features that those self-selected drivers would like (reduced insurance premiums, parking conveniences and discounts, etc).  The trick is (again according to behavioral economists) to provide at least twice the perceived value to the driver than the perceived cost (nuisance, money, trouble) of using the meter. This is technically easy to do (including privacy, security and reliability), but needs policy that encourages usage-based insurance and permits wireless parking management and perhaps behavioral rewards for safety, emissions, and the like. Without associated value-added services and incentives with benefits that counterbalance this type of increasingly needed tolling, governments are not offering a vote-worthy solution.

What we are missing are policies to incent innovation and permit voluntary migration. We need a telemetrics-payment ecosystem that allows driver services to move metering away from one-size-fits-all gantries for users with a variety of needs.


Dutch Rewarding Drivers to Drive Off-peak

Is it possible that we don't need so many new roads as we think? Likely. Is it possible to manage congestion without tolling every road? Possibly not, but there is a way to put it off until “the next administration”, while still addressing congestion. So think the Dutch—those masters of nationwide road tolling ideas.

This article from a Dutch Newspaper was translated by Google, then edited for readability.
The original is here.

Could even be our city, eh?
With rewards, 3,000 fewer cars during Utrecht rush-hour
2012 04 12 
Since the start of the project Spits Free in the triangle Utrecht - Amersfoort - Hilversum driving during peak hours about 3,000 cars fewer are using the road in that area. Participants will receive a reward if they avoid morning or evening peak.
The deputy with responsibility for this is Remco van Lunteren from Utrecht. The project is now six months in the Utrecht region and according to van Lunteren, it is a success. In four weeks, participants drive 1.5 million fewer miles during rush hour, says the province.
In the region, 60,000 people drive daily during peak hours. The project involves about 5,400 motorists. There is a waiting list to participate.
The county calculates that spitsmijders ‘earn’ an average of about 30 euros per month to drive at other times. Participants especially avoid the rush hours on Tuesday and Wednesday. 
The province of Utrecht recently calculated the socio-economic impact of the project. It is noted that a few less cars on busy roads during rush hour already provide for the resolution of a file (the congestion file? ed.). In some places, the road is never silent, says the province. Spits runs freely until the end of this year.
While most governments may not be willing to hand out cash for drivers to use roads at different times (and I don’t think they should), there are many other direct, economic ways to reward such behavior, outlined in numerous other blogs, here. The point is that drivers respond to economic incentives, by shifting travel time (or mode). And there are many cash-equivalent economic incentives that are cost neutral to the taxpayer.

We should start looking at them.


Edward Glaeser’s Triumph of the City

Edward Glaeser’s 2011 book, Triumph of the City: How our Greatest Invention Make Is Richer, Smarter, Greener, Healthier, and Happier, is a worthy read. In the middle of a chapter called, “How Were the Tenements Tamed” is a gem about congestion.  I copy it here without permission and in the spirit of sharing a beautiful piece of writing that is among the clearest I have read in a decade of dedicated reading about traffic and congestion. Tim Harford, another economist I admire wrote a brilliant passage that I cribbed as well (that time with permission!).

As you will see, Glaeser’s urban view is about much more than congestion, so I left his context intact.
More Roads, Less Traffic?
Contagious diseases turn the great urban advantage—connecting people—into a cause of death. Traffic congestion eliminates that advantage altogether by making it too hard to get around in a city. Too much trash turns city streets into a health hazard; too many drivers turn city streets into a parking lot. Providing clean water requires an engineering solution, but providing uncongested streets requires more than just technical know-how. Our streets only become usable when people don’t overuse them, and that calls for the tools of the economist. Driving creates a negative externality, because each driver typically considers only his own private costs and benefits. Drivers don’t usually take into account the fact that their driving slows everyone else down. The best way to fix that externality is to charge people for using roads.
Moving water into cities and sewage out was a vast undertaking, which tested the very limits of engineering know-how. Traffic congestion is also an engineering challenge but a psychological one as well, mainly because each improvement changes drivers’ behaviors in a way that actually offsets the improvement. For decades, we’ve tried to solve the problem of too many cars on too few lanes by building more roads, but each new highway or bridge then attracts more traffic. Economists Gilles Duranton and Matthew Turner have found that vehicle miles traveled increases essentially one-to-one with the number of miles of new highway, and have called this phenomenon the fundamental law of road congestion. 
The traffic problem essentially reflects the impossibility of sating the demand for anything that’s free. Roads are expensive to build and valuable to use, yet American motorists seem to think that a right to drive for free was promised them by the Bill of Rights. Soviet Russia used to charge artificially low prices for consumer goods, and the result was empty shelves and long lines. That is basically what happens when people are allowed to drive on city streets for free.
The best way to reduce traffic congestion was dreamed up by a Nobel Prize-winning Canadian-born economist, William Vickrey. Vickrey first pondered the puzzles of public transportation when, in 1951, he joined a mayor’s committee to improve New York’s finances. He was assigned the problem of pricing subways, and he noted that “users of private cars and taxis, and perhaps also of buses, do not, by and large, bear costs commensurate with the increment of costs that their use imposes.” When we drive, we consider the private costs to ourselves of the time, gas, and automobile depreciation, but we don’t usually consider the costs—the lost time—we impose on every other driver. We don’t consider the congestion we create, and as a result, we overuse the highways. 
The natural economists’ solution to this problem is to charge drivers for the full cost of their commute—which means adding a fee that charges drivers for the impact that their car imposes on the rest of the road. Vickrey followed up his core insight in the late 1950s in a report on the Washington, D.C., bus system, in which he first advocated charging driven for the congestion they create. Vickrey’s insight, inspired by the city around him, is another example of self-protecting urban innovation. Decades before E-ZPass Vickrey recommended an electronic system for imposing these congestion charges, and he suggested that charges rise during rush hours, when congestion is worse. 
Decades of experience have proven Vickrey right. Building more roads almost never eliminates traffic delays, but congestion pricing does. In 1975, Singapore adopted a simple form of congestion pricing charging motorists more for driving in the central city. Now the system is electronic and sophisticated and keeps that city traffic-jam free. In 2003, London adopted its own congestion charge and also saw traffic drop significantly. 
So why is congestion pricing so rare in the United States? Because politics trumps economics. Imposing a new fee on thousands of motorists is unpopular, and as a result, millions of hours of valuable time are needlessly lost by drivers stalled in traffic. Vickrey himself died of a heart attack, slumped over the wheel of his car, traveling late at night. I’ve always imagined that he was driving at that hour to avoid congestion. 
In America, congestion wastes billions of dollars’ worth of lost time, but its consequences can seem even more severe in the cities of the developing world, where crowding is more extreme and where alternative traffic options, like subways, are typically underdeveloped. Buildings are shorter and consequently more spread out, and that, along with terrible sidewalks, makes to pedestrian option less practical. In cities like Mumbai, congestion can bring the business of urban life to a standstill, which is why fighting congestion is not about convenience; it is a fight to ensure that the city can fulfill its most basic function of bringing people together. 
[Emphasis mine.]


The Evolution of the Cooperative Vehicle

Cooperative Vehicle Highway Systems focus on sensors, telemetrics, intelligent driver override, roadside computation, telecommunications, emergency technologies and so on. The stress is on technological solutions that address a problem with a large social and human component—e.g., human safety, congestion, efficiency, and reliable automobility.

CVHS’ goals form a virtuous circle: reduce accident counts and severity and improve the performance and efficiency of existing transportation infrastructure while reducing fuel use, emissions, and congestion. These are a lot of wins.
In general, when thinking about CVHS, we see two components: vehicle and roadside infrastructure. Also key are intelligent communications between car and roadside, many-to-many pair-wise communications between proximate cars, and of course communication among all of these and the cloud. But there is another critical and elusive component—the driver. I’ll return to this.

CVHS is highly related to the Connected Vehicle, and sometimes the distinction get blurred in discussion. I see them as two adjacent phases on a continuum as we equip vehicles, roadways, and communication networks for the Connected Age of Automobility already underway. The Cooperative Vehicle is focused on safety and driver assistance including driver override, while the Connected Vehicle is focused more on driver information and trip assistance, including infotainment and payment services. But, a portion of the enabling fabric can be shared.

A key distinction is that many Cooperative functions involve intrusive control—generally braking and steering—when the driver is perhaps distracted or not responding appropriately. Meanwhile, some Connected functions have the potential to contribute to the distraction problem that is one of the motivators for the Cooperative functions in the first place.

All of  this makes the human a mystery component. Will the net benefit make us safer? Will automation make our species’ driving skills atrophy? Will anyone be able to parallel park in 30 years?

A well-reported phenomena called risk compensation tells us that drivers tend to invest a perceived increment in safety by driving a bit faster or a bit more aggressively. Humans seem to have a risk budget they are eager to spend. The problem is more than 50% of the people in accidents are victims. If you count all immediate family members to people actually in the cars the percentage of innocents is much higher.

Surely, if one begins to trust that their vehicle can handle breaking and steering, the use of infotainment systems and gadgets (Connected or not) will be perceived as safer. And that may not be a problem in most cases—we hope. But how good does Cooperative technology have to be before Connected technology will not make us less safe?

There are liability reasons ensuring that Cooperative technology will likely never by installed as an aftermarket upgrade, unless by the original manufacturer. And there will clearly be resistance to letting the car “take control” from a driver. Could aftermarket warning systems that beep rather than brake or whistle rather than steer, be the way to erode that resistance? Could aftermarket Connected Vehicle platforms be the Trojan Horse to get fledgling Cooperative Vehicle functionality past first base? I think so.

We also know from experience that mandatory safety equipment requires user acceptance, which in turn implies slow introduction and consumer-led market penetration prior to mandate. This may be the best reason that aftermarket Connected Vehicle technology that has at least some Cooperative-like functions will the best accelerator to Cooperative Vehicle evolution.