In addition, in a competitive market, a company can’t make too big a profit, or else its prices will be uncompetitive; if Wal-Mart were given monopoly over retail, it would not be low-price anymore. But at the same time, urban/regional transit is a natural monopoly (and I know it’s not treated this way in Japan and wasn’t in prewar America), because integrated fares can boost ridership in an initially small and fragmented market. So if the goal is to simulate a free market, then the fare union that helps both operators and riders should be encouraged, while setting the fare at collusion levels should be prohibited.

Let’s say that the roads cost $10 million per year to maintain. What I’m saying is that even if a congestion charge of $10/day/person (all numbers completely made up) earned the city $20 million a year, this still might be a market outcome, despite covering far more than the simple cost. Why? Because a profit-seeking entrepreneur doesn’t seek to just recoup costs – they try to get as much money as they can, period. So in fact if they could maximize profits by charging $20/day/person, even if the roads only cost $5/day/person to maintain, then charging $5 or $10 is a subsidy.

Of course in a real free market the price of land would rise such that the road operator (the gov’t in this case) wouldn’t be making much profit at all, but given that that’s completely politically untenable, the next best market approximation would be for the gov’t to just milk the roads for all their worth.

Did that make sense? Let me know, because I’m sort of trying this argument out on you before I dedicate a whole post to it (hopefully more eloquently written than this explanation…)

That’s only true if the fee is intended as “behavior modification” like any other sin tax – which is very likely exactly what will happen. This baffles me. Is it so hard to communicate the idea that roads should be supported by user fees…? Perhaps so – it’s not like transit is held to any such standard either (despite the occasional grumblings from various Republican opponents of Amtrak). Transit will always be plagued with gaping budget holes as long as no one is expected to pay any more than a tiny fraction of its cost. The same is of course true of driving but while the cost of driving is arguably more in line with market principles than transit, it has an even longer history of being publicly financed – so long that the notion of “pay as you go” driving, especially on local streets – sounds like crazy talk to most people. In comparison, framing the argument for congestion pricing in terms that amount to little more than class warfare is somehow easier for politicians.

Anyway… I do reluctantly agree that this “next best scenario”, while ugly and driven by politics over anything that could be considered market-oriented, is an improvement if only because I am just as susceptible to human nature as the next person – it might give me something for nothing 🙂

…of course, at this point my anarchist leanings would kick in and I’d prefer for the land under the roads to just be auctioned off with full development rights (i.e., let someone keep them as roads, convert them into transit, build buildings on top of them, or whatever the hell they want). But given how politically impossible that would be, the next best scenario would be for the state to just collect as much money as it can and keep the profits for general spending.

But I absolutely agree with you that the money should not be earmarked for transit. While *I* understand that money is fungible and money “earmarked” for transit is no more real than the social security lockbox, there are plenty of people who don’t get that.