Price Away Congestion

From the New York Sun:

What if Mayor Bloomberg were to announce that on-street parking in New York City would be free, with no time limits? Initially New Yorkers might be pleased. But they would soon discover that no spaces were available, because cars would stay parked for long periods of time.

That's what happens with free goods, in this case, curbside parking places: People consume too much of them, far more than if they would pay for them. Similarly, in much of Manhattan and on some streets in other boroughs, traffic is a nightmare because motorists don't pay the full cost of road use.

I highly recommend reading the whole thing, as it gives the outlines of the argument for market based roads.

One of the principles of the Free Market System is that a market is the best way to distribute a resource. It discourages waste and encourages new supplies of that resource to be brought to the market. Because parking space is a resource, and there is a market for it, people are willing to invest millions of dollars building garages to allow others to park, and those that do park do so in a more efficient manner, for short periods, rather than hording a space for fear of losing.

If we allow roads to become a market, charging for their use, they will be used more efficiently, and investors will seek to create profits by meeting the needs of those who drive.

Update: TCS has another take on the matter, looking at it from a more political angle.