The Big Apple is finally putting some ancient economic theory to good use. A new $9 fee on almost everyone driving into the busiest parts of Manhattan represents a welcome, albeit belated and inadvertent, homage to British scholar Arthur Pigou, who argued a century ago that activities harmful to others should be taxed, and to William Vickrey, the Canadian-born Nobel laureate who proposed congestion charges in 1952. And contrary to Milton Friedman’s popular dictum, it’s practically a free lunch.
Vehicles keep jamming up the biggest US metropolis. The average speed in midtown was 4.8 miles per hour last year, according to City Hall. Early fee results are promising, though.
In the first week of implementation, some 220,000 fewer vehicles entered the central business district and wait times at the Holland Tunnel to New Jersey decreased 65%. Gridlock costs are significant. The typical New York area automotive commuter lost 102 otherwise productive hours inching down Broadway and other thoroughfares in 2024, traffic consultancy Inrix estimates. Valued at nearly $18 an hour, more than 5 million drivers squander $9.5 billion annually.
Total costs are even higher. Stuck motorists waste fuel and generate pollution. Emergency vehicles respond slower, and shipping expenses rise. These factors add about another third to the tab, according to a 2009 US Department of Transportation study.
Less obvious savings come from other places. When London started charging drivers in 2003, the standard deviation for travel times decreased by about 30%, during peak stretches, helping anyone trying to get to a meeting or catch a flight.
There are understandable concerns. The charges can put an extra burden on poorer commuters, but other cities have found that richer people pay the most. Working classes tend to use mass transit more often, and New York is aping Singapore and Stockholm by earmarking most fee revenue for such budgets. Fewer cars also mean faster bus trips and additional fares lead to more frequent service. In the days after the congestion fee rollout, ridership jumped on Gotham’s subway and trains traveling to and from surrounding suburbs.
Despite encouraging signs, moving people is a Sisyphean task. Even after tripling its fee over two decades, congestion in the British capital last year was about as bad as New York’s, per Inrix.
Car trips have declined, but more people are traveling through the designated zone and road portions have been converted into bike lanes and sidewalks. Of course, a more easily navigable city also attracts more residents, calling for different economic thinking.
New York City’s congestion fee went into effect on Jan. 5 for nearly all of Manhattan south of 60th Street, with a peak period charge of $9 for cars. Trucks and buses pay more. Most of the revenue raised will be used to upgrade the city’s buses and subways.
The Metropolitan Transportation Authority said traffic in the zone had declined an estimated 7.5% during the first week, with the largest decreases in travel time occurring at bridges, tunnels and in cross-town traffic.
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