To deal with congestion in its streets, New York implemented congestion pricing. According to the Associated Press, beginning last Sunday, January 5, drivers have been paying:
$9 to enter Manhattan south of Central Park on weekdays between 5 a.m. and 9 p.m and on weekends between 9 a.m. and 9 p.m.
For times outside of that window, most drivers are being charged $2.25.
Less than a week in, the data shows indeed that making drivers pay to use certain streets is reducing driving. Here is a look at Thursday’s data from the Congestion Traffic Tracker for Route 6. The red (after congestion pricing) is significantly down from the blue (before congestion pricing) between 10 am and 9 pm. Results, however, vary for different routes, with some experiencing only minor changes.
Whether congestion pricing will, on net, improve New York is hard to say. It is clear from the preliminary data, however, that the laws of demand and supply reign supreme. That is, raising the price of something makes people do less of that thing.
Generally, politicians often cherry-pick when to apply demand and supply to do their bidding, for instance, using toll pricing to reduce driving yet denying that minimum wage hikes could reduce hiring.
The science of demand and supply, however, is in constant operation. The fact that well-intentioned (sometimes) policies, such as rent control and minimum wage hikes create bad results can be fully explained by demand and supply. Even seemingly non-economical concepts such as varying dating experiences in different locations can boil down to demand and supply.
New York congestion pricing is yet just another lesson in economics, particularly that raising prices lowers demand. If raising prices for driving makes people drive less, it must also be true then, that:
- Policies that raise the price of labor, such as minimum wage hikes, will make companies hire fewer people or that
- Raising taxes reduces the incentive for people to work, invest, and innovate, and
- Stringent regulations on housing will likely lead to less housing construction
So on and so forth.