Value Pricing

Background

The use of motorways, rail, air, or water for transportation has certain costs. Roads, bridges, runways, locks, ports, and other transportation infrastructure undergo wear and tear as a result of usage. Each trip or journey causes congestion and [Page 1690]pollution. When vehicles or ships are kept in one place, land is consumed for parking, which harms the environment by removing wildlife habitats or wetlands from the ecosystem. Paved roads and runways divert rainfall, causing erosion and flooding.

A congestion pricing notice in London, England, in 2012. London's fee for drivers to enter the city center reduced congestion within the designated zone by more than 25 percent and led to an increase in bus ridership.

While these costs are constant, government agencies and legislative bodies often defer maintenance on needed work, driving up the ultimate cost of repair or replacement. Additionally, costs of building and maintaining transportation infrastructure have traditionally been masked, as taxpayer monies subsidize roadways, airports, waterways, and other modes of transportation, making the cost of travel or transport appear less expensive than it really is.

Government subsidies offset many of the costs of transportation. The interstate highway system, for example, was begun in 1955 as a means of better facilitating travel and transportation throughout the United States. Construction of the original network took over 35 years to complete and cost nearly $500 billion in 2013 dollars, making it one of the largest public works projects ever undertaken. The interstate highway system was financed through a variety of sources, including tolls, bond issues, property taxes, and fuel taxes.

Nearly 40 percent of the funds that support the maintenance of the interstate highways are unrelated to users of the system. This subsidy makes it less expensive, for example, for trucks to deliver goods cross-country, but that is because of a hidden subsidy that provides an advantage over competition such as railroads, which own and maintain their own trains and railways.

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