Published in the Laissez Faire Electronic Times, March 24, 2003
The Case Against the London Congestion Charge
Surveillance Powers and the
State
by
Pierre Lemieux
Since February 17, the City of London has imposed a daily £5 "congestion charge" on most motorists entering an eight-square-mile downtown zone. Some 700 cameras catch license plate numbers, and non-payers face heavy fines. The charge has reduced traffic by 20%. The economic argument seems straightforward. Motorists imposing congestion on others should pay for the space they use, just as they do when they pay parking charges. Those for whom the benefits of driving downtown is lower than the congestion charge will choose not to go, or to use other means of transportation than their private cars; the others will reimburse the cost they impose, instead of being subsidized by the general taxpayers. The level of congestion will decrease to its optimal level.
Shortly after the charge came into force, a friend wrote to me, arguing that the system allows the state to know who comes into central London every day, and that this surveillance system can be used for other purposes than congestion pricing. It is already proposed that the London scheme be extended to other areas and other cities, and that trucks be monitored by GPS devices and charged according road usage. Imposing these devices on cars will eventually "close the loop," and enable the state to continually monitor its subjects. This danger, suggested my friend, points to a conflict between economic efficiency and individual liberty.
For an economist, there can be no such conflict, because the concept of economic efficiency is entirely based on individual preferences – on the preferences of all individuals – and fears of Big Brother's surveillance powers are a cost that must be taken into account in measuring (at least conceptually) the efficiency of toll pricing. Of course, different individuals have different preferences, and what is a cost for some is a benefit for others. Reconciling these preferences is the business of social institutions, of which the market is one of the most efficient. An economic discussion of congestion charges must start with individual preferences, and inquire how they can best be reconciled.
When one follows this route, the benefits of congestion charges become less obvious. I am one of the few heretic libertarians who are suspicious of state tolls.
A standard economic objection resides in the public-good aspect of roads and streets. However, the problem of public goods has been much exaggerated, as the real, pure public goods either are not goods because they are not scarce (the night sky), or else they are only "public" for a specific group (the sister of two brothers is only a public good for them). Roads can be, and have often historically been, private. Yet, the more you get down to urban street grids, the more 'publicness' creeps in: a group of individuals may express a demand for open, non-excludable streets.
The problem of public goods is efficient pricing. Travel speed (i.e., non-congestion) is a "public good" in the sense that each individual cannot purchase his own quantity, like when one buys, say, TV programs or land. Each individual has his own demand curve for travel speed, and if individuals are different, their demand curves will be different. Once a congestion charge has been set, an individual must either accept the travel speed that follows from the charge, or choose not to travel by car. Perhaps different tolls can be charged for different speeds on multi-lane highways, but it remains true that one does not buy non-congestion as one buys units of tomatoes or haircuts.
Now, the fixed travel speed determined by the congestion charge has a different value for each individual (assuming that individuals are different), which can be read on his own demand curve, and which gives the maximum congestion charge he is willing to pay. So, given a certain travel time, efficiency requires a different congestion charge for each individual (such ideally differentiated tolls or taxes are called "Lindhal prices" by economists [1]). Otherwise, some individuals will not get their money's worth, while others will get bargains. In other words, any unique congestion charge forces some individuals to subsidize others; it is necessarily redistributive. So much for tolls as efficient prices.
It is true that a zero congestion charge also favors some individuals (the ones against congestion charges) at the expense of others (those who prefer a money price to higher congestion). But it does not follow that a positive congestion charge is preferable. Since there is no way to make interpersonal comparisons of utility (i.e., to measure one individual's increased satisfaction against another individual's loss of satisfaction), the best course is to minimize coercive state intervention. And there may be less coercion in general taxes than in the tight surveillance system required to make the user pay a price that, anyway, does not correspond to his benefits. I am not only saying that a congestion charge will favor bicycle lovers and die-hard pedestrians at the expense of car lovers or, say, of individuals who like to smoke in their private cars when they travel. I am also pointing out that a large number of individuals will find that the congestion charge they are forced to pay is too high for the reduction in their travel time — even if they still prefer this alternative to no car travel.
And this is not all: there is a more general problem in the very notion of public good, and of non-congestion as a public good. What we have said thus far assumes that all individuals value reduced travel time in central London. This conjecture is false or, at least, unprovable. Outdoor advertisers, public parking owners, little old people on their balconies, five-to-seven bar owners, perhaps women walking alone at night, etc., may well prefer congestion. Then, the public good argument is only an excuse for certain groups to impose their preferences on others, be they in the minority. Efficient reconciliation of preferences is not a question of majority bullying, but of contractual unanimity.
If, on the one hand, road and street access can be offered privately, and charged market prices, then the public domain should be denationalized. But we cannot just assume that combining public ownership with private-like pricing is the second best. If, on the other hand, there is something "public" in streets and roads that prevents their private provision, then market-like prices may be a mirage. In case of doubt, we should perhaps rely on evolved ways of doing things: not charging anything on the King's roads.
I am not persuaded that nothing justifies a public domain (public streets, roads, parks, or other spaces) in servicing private properties. Perhaps there is a need – i.e., a demand – for a public domain as little regulated as the private domain is tightly regulated (by private property owners). The public domain can be viewed an escape route from control and surveillance. Perhaps one can argue that regulating the public domain like private property is a recipe for tyranny – like "running the government like a business" is.
Some individuals are fearful of state surveillance, and I think they have good theoretical and historical reasons. At any rate, their preferences are as worthy of consideration as the preferences of individuals who want to get downtown fast. Unfortunately, there is no way for individuals who want liberty to buy off those who don't mind a little tyranny. Thus, a general context of liberty where individuals who like surveillance can get some privately is preferable to a global monitored environment where getting privacy and liberty is impossible (or extremely costly).
If we were living under small, non-intrusive, relatively powerless states, perhaps combining public ownership of the public domain with user monitoring and charges would be a relatively efficient solution. But we are living in societies ruled by powerful, intrusive Surveillance States. In this context, giving the state more surveillance tools is the last thing we want to do. Individual liberty is more important than the little inefficiencies generated by zero pricing on the public domain, especially when one considers that there is no obvious way to set up efficient congestion charges in a world where individual preferences differ.
In a world of godly politicians and angel bureaucrats whose only purpose was to "maximize social welfare," as we used to say in welfare economics, and where all individuals were identical (so that the expression "social welfare" was unambiguous) and none liked congestion, yes, of course, I would approve of tolls "whose sole purpose is to reduce congestion" (as another friend argued against my position). In an ideal world of angel statocrats, technology would be used to solve the privacy issue. In fact, in this ideal world, there may be no privacy issue at all. In the real world, the Surveillance State will be quite trigger-happy with its network of video cameras, transponders, and satellites, and we should resist giving it more power. The more a toll system reduces the cost of surveillance and monitoring of citizens by the state, the less desirable it is.
At any rate, there are better libertarian battles to wage than reducing small inefficiencies by granting the state large powers.
[1] For instance, see Tevfik F. Nas, Cost-Benefit Analysis: Theory and Applications (Sage Publications, 1996), p. 35 ff.