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The Toll of Economic Ignorance

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These letters [2] 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.

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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 [3] 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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