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.