Toward a Comprehensive Assessment of Road Pricing Accounting for Land Use

Abstract

Congestion on U.S. highways is a well-known social and economic prob lem that becomes progressively worse every year.1 Travel delays impose large costs, currently approaching some $40 billion annually, on motorists, truckers, and shippers.2 Economists have repeatedly attributed the problem to policy makers' failure to implement marginal cost congestion tolls to charge road users efficiently for their contribution to delays. By undercharging vehicles for using the nation's roadways, policymakers have also reduced the per-mile cost of commuting (including out-of-pocket and travel time costs) for most motorists and distorted the development of metro politan areas by inducing households to live in more distant, lower-density locations, thereby contributing to urban sprawl. Precise definitions of sprawl and estimates of its costs are elusive, because it is difficult to characterize an optimal pattern of land use.3 At the same time, it is likely that households' deci sions regarding residential location?while maximizing households' utility?have resulted in socially inefficient outcomes because they reduce economies of agglomeration. For instance, according to the U.S. census, between 1970 and 2000 the met ropolitan population in the United States grew approximately 60 percent. We