Markets for Road Use—Eliminating Congestion through Scheduling, Routing, and Real-Time Road Pricing

Wednesday, February 26, 2025 Hoover Institution, Stanford University Rick Geddes, professor in the Jeb E. Brooks School of Public Policy and professor of economics at Cornell University, discussed “Markets for Road Use—Eliminating Congestion through Scheduling, Routing, and Real-Time Road Pricing,” a paper coauthored with Peter Cramton (University of Cologne and University of Maryland) and Axel Ockenfels (University of Cologne). PARTICIPANTS Rick Geddes, John Taylor, John Cochrane, Hoyt Bleakley, Valentin Bolotnyy, Michael Boskin, Pedro Carvalho, Sami Diaf, Michael Farren, David Figlio, Nick Gebbia, Laurie Hodrick, Robert Hodrick, Morris Kleiner, Steven Koonin, David Laidler, Charles Leung, Jim Mattis, Ellen McGrattan, Ilian Mihov, Paul Peterson, Korok Ray, Stephen Redding, Jack Tatom, Harald Uhlig, Shelby Winkler ISSUES DISCUSSED Rick Geddes, professor in the Jeb E. Brooks School of Public Policy and professor of economics at Cornell University, discussed “Markets for Road Use—Eliminating Congestion through Scheduling, Routing, and Real-Time Road Pricing,” a paper coauthored with Peter Cramton (University of Cologne and University of Maryland) and Axel Ockenfels (University of Cologne). John Taylor, the Mary and Robert Raymond Professor of Economics at Stanford University and the George P. Shultz Senior Fellow in Economics at the Hoover Institution, was the moderator. PAPER SUMMARY Traffic congestion is a global problem with annual costs approaching $1 trillion. In 2024, INRIX estimated that traffic congestion cost the United States over $74 billion, or $771 per driver, according to their Global Traffic Scorecard. This was a 1.7% increase from the previous year. The health and environmental costs are severe in urban centers worldwide. With the right policies those high social costs can be avoided. Advances in mobile communications and computer technology now make it possible to efficiently schedule, route, and price the use of roads. Efficient real-time pricing of road use can eliminate traffic congestion, enhance safety, improve the environment, and increase vehicle throughput. It also raises reliable, much-needed revenue to modernize decaying infrastructure while improving long-term investment in transport. We describe the design of a market for road use that is based on efficient scheduling, routing, and pricing. Under our design, road use is priced dynamically by marginal demand during constrained times and locations. In unconstrained times and locations, a nominal fee is paid for road use to recover costs, as in other utilities. Transport is scheduled based on forward prices and then routed in real time based on real-time road-use prices. Real-time, network-wide road prices maximize the value of road infrastructure. The optimization of road use eliminates congestion, making our roads safer, faster, cleaner and more enjoyable to use. The road-use market also provides essential funding for the roads network as well as valuable price information to evaluate road enhancements. The market is complementary with and indeed promotes rapid innovation in the transport sector. To read the paper, click the following link http://www.cramton.umd.edu/papers2015... To read the slides, click the following link https://www.hoover.org/sites/default/...