The Toll of Economic Ignorance

by Don Boudreaux on December 17, 2005

in Myths and Fallacies, Prices

These letters in today’s Washington Post reflect a widespread, lamentable ignorance of the role of prices.  Many of these readers assume that only if and when drivers are charged tolls to access roads is there a price paid to use roads.  These readers ignore the fact that spending time on traffic-choked ‘free’ roads is itself a very real cost, and that tolls will reduce this cost.

The misunderstanding in these letters is evidence that economists are the last people who are obsessed with prices — the last people who believe that the only things that matter are money and costs expressed in money.  Rather, it’s non-economists who are obsessed with money measures and money prices; it’s non-economists who are most prone to overlook costs that aren’t pecuniary — to assume that only when people make monetary outlays do people incur costs.

……

Using a different tactic for making the case for toll roads — a tactic different than pointing out that ‘free’ roads are far from being free — Cafe Hayek’s colleague Vernon Smith points out that "providing free access subsidizes those able and willing to pay.  Why do they [opponents of toll roads] like subsidizing the rich?"  (This quotation is from a private e-mail that Vernon sent to me today.)

Great question!

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  • Theressa Smith

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  • I would have no problem with toll roads if we weren't being scammed already. There is a gas tax, and about 30% of it is wasted on stupid moving sidewalks, wasteful bus and rail systems that shouldn't exist in their current incarnations, and all sorts of other boondoggle projects.


    Once those items are removed, we'd find that most toll roads could be funded with that money. Of course, the better solution would be to lower the tax, but that would mean marginally more people would drive, which is contrary to the goals of a collectivist nation run by bureaucrats. (I forget, are we France, England, or the United States? I know we aren't Hong Kong.)


    Cheers, and merry Christmas!

    Warren

  • True_Liberal

    I think tools are a great way to get a job done - keep 'em sharp though!


    But seriously - if a toll road or bridge saves a driver's time - that will make sense for many. Only YOU can know what your time is worth.

  • I think tools are a big waste of Americans time and money!

  • JohnDewey

    "Hayek's colleague Vernon Smith points out that 'providing free access subsidizes those able and willing to pay. Why do they [opponents of toll roads] like subsidizing the rich?'"


    I agree that this is a great question. I think, though, that drivers who are able to pay are not always rich. Many will use the toll roads and pass on the costs to their employers. Even during rush hour, many wage-earners are already on the clock. It may be cheaper for their employers to pay a $6 toll than to have a delivery delayed and also pay a $12 an hour driver sit in traffic.


    I think the opportunity cost of time spent in traffic varies from person to person and from day to day. That opportunity cost is probably more important than income levels or wealth in determining who uses expensive toll roads.

  • jtdrake

    Correct me if I am wrong, but I thought that a significant portion of the taxes paid on gasoline went to road construction and associated infastructure. As a consumer of gasoline, I have always felt that I owned the road (or at least a tiny part of it.)

  • I live in Oklahoma, the only place with more toll roads is probably New York. Here in Oklahoma most of the toll roads are interstate freeway that people travel whether rich or poor because it is faster. It is purely a racket for the state and a private enterprise that administers the toll system to mutually make money. It is worse than insurance: it is a forced expense. In other states (like Washington State where I grew up)there are no toll roads. The roads were built faster and in better quality. This is why I has to be a racket at the expense of consumers.

  • Professor Smith's question assumes that "the rich" are the same population as "those able and willing to pay", and that changing the cost structure from a monetary one to one based on willingness to sit in traffic, etc., will not alter road usage patterns.


    Are those safe assumptions?


    It's a minor quibble, I know, but it would seem to me that the people who are being subsidized are those people least affected by the larger amount of traffic.


    None of this, mind you, is to argue against tolls and/or for taxation!

  • Don Boudreaux

    The presumption in the Post letters that I link to is that only when a monetary toll is charged do drivers pay a price for using a road.

  • I think most complaints about obsession with money have to do with the environment. Some are valid.


    Other complaints have to do with "consumerism", which can be defined as anytime somebody other than me buys something.

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