THE SAN FRANCISCO BAY BRIDGE
When commuters in Berkeley want to get to San Francisco
(across the bay), they generally choose one of two options. The first is
to drive across the Bay Bridge. The second is to ride on BART -- short
for Bay Area Rapid Transit, the public transportation system.
When there is no traffic, driving the Bay Bridge is the quickest option,
taking about 20 minutes. However, as traffic gets heavier, the narrow bridge
becomes congested, and travel time increases. For calculation purposes,
let's suppose that each additional 2,000 cars adds another 10 minutes to
the trip. Therefore, 2,000 cars lengthen travel time to 30 minutes; 4,000
cars to 40 minutes, and 6,000 cars to 50 minutes.
BART, on the other hand, always makes the trip in 40 minutes, no matter
how many people are riding along. During rush hours, BART simply adds more
passenger cars to each train.
Of course, we can expect each commuter to act selfishly in the search
for the shortest trip possible. If traffic on the Bay Bridge becomes too
heavy, and travel time is extended to 50 minutes, a certain percentage
of drivers are going to switch to BART and its faster, 40-minute ride.
However, if too many people switch to BART, then congestion on the Bridge
falls, and so does travel time -- to, say, 30 minutes. This will then attract
others back to the Bridge. In time, an equilibrium is established, in which
everyone makes the trip in 40 minutes. With 10,000 commuters, this equilibrium
is reached when 4,000 drive over the bridge and 6,000 ride on BART.
But is the group really saving the most time in this solution? Not
at all. Another arrangement saves the group much more time, but it requires
group agreement and cooperation. Suppose they agree to reduce the drivers
on the bridge from 4,000 to 2,000, cutting their travel time from 40 to
30 minutes. The other 2,000 would-be drivers agree to take BART, since
its 40-minute commute is the same they would have faced on the Bridge anyway.
In a single morning commute, the group would collectively save 20,000 minutes
-- or almost two weeks -- of travel time.
So, how can the group arrive at this solution? One way would be to
issue 2,000 licenses for the Bridge, with a way of rotating them among
the 10,000 commuters to ensure fairness.
But for those who are opposed to government intervention in our lives,
a more market-based solution suggests itself. A toll could be established
on the bridge, essentially making drivers pay for their saved time. The
toll could be raised or lowered until the desired number of drivers were
taking the bridge. And the toll funds could be saved for the construction
of a second bridge, alleviating the problem in the first place.
There are a few problems with this approach, however. Toll booths themselves
are primary causes of congestion. If the city collected the toll, conservatives
would lambaste this as another tax. A private owner could collect it, but
the group has no incentive to allow this. Why? Because he could collect
tolls indefinitely, even after a second bridge was built. (Compare that
to city ownership, where the people can vote on how long the toll should
be collected, and how the money should be spent on themselves.) Nor would
a private owner have much of a financial incentive to build the second
bridge. He could build it, but then he would have to cut his tolls to attract
more drivers to drive it. Why bother in the first place?
Several points emerge from this example. First, the invisible hand
does not always work; self-interest does not always result in group benefit.
Second, the invisible hand works (after a fashion) only when a monetary
price is added to a previously free commodity -- in this case, commuter
time. Third, many fortuitous and complex factors can distort an equilibrium,
such as the fact that BART's commuting time is always 40 minutes, or that
toll booths help snarl traffic. Consequently, group action is sometimes
needed to ensure maximum individual benefit.
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