11 July 2006

Q&A on tackling urban congestion

I was asked to do a long radio interview in Malaysia on Friday and to prepare some talking points. I took the opportunity to try to think through how best to explain in simple terms some of the key arguments as I see them.

It was a rushed job, I have overdone it (the DJs may be horrified!) and I am probably oversimplifying outrageously.

But for what it is worth, I would like to share it here.

We have asked Paul to come in to the studio to chat about how can Malaysian cities solve their transport woes.

  1. Paul, thanks for coming in. First, how familiar are you with the urban transport problems in the Klang Valley and other Malaysian cities?

I lived in KL for five years before moving to Singapore and my research over the last 12 years or so has included comparing Malaysian cities’ urban transport with other cities around the region.

  1. As you know, many Malaysian cities seem to be facing nasty traffic problems and it just seems to get worse. Is there any hope?

Well the good news is that there IS hope for better urban transport. There are cities around the world that have made good progress. The bad news is that the obvious, popular solutions are not enough. Even worse, some of the obvious solutions actually make thing worse!

  1. What obvious, popular solutions are you talking about, Paul?

The key example is just expanding the roads and building more expressways. It can seem like a good idea but it only ever gives temporary relief (and sometimes not even that). In the long run traffic actually gets worse.

  1. Building bigger roads seems like it should work, a least a bit. What is going wrong?

Expanding roads does not address any of the underlying changes that are making traffic increase. These include the choices we all make about buying vehicles, about where to live, about where to build shops and offices.

In fact, bigger roads actually influence our choices in ways that create even MORE traffic. Some people stop riding public transport, they move to houses further away, developers build things further out, etc. All these changes make it even harder for alternatives to driving to compete, so we end up with even worse traffic problems than before.

  1. If it is so obvious that bigger and bigger roads do not solve the problem why do we seem to keep doing it?

I don't blame people for crying out for more road space. It SEEMS like a good idea.

We are getting into trouble by looking at the problem too narrowly.

I teach at a Public Policy School and our students are people who will be solving public policy problems when they leave. They are mostly civil servants, NGO workers, and policy consultants. One of the most important lessons that we try to get them to understand is to be careful how you frame a problem.

For example, someone who starts gaining weight COULD say, 'Oh the problem is my pants are too tight'. Of course it is true but it is not a useful way to look at the problem. You would probably not ever think of eating healthily or exercising if your focus is 'tight pants'.

That was a silly example, but people really do look at traffic jams and simply say, 'well obviously the roads are too small'. Just like the tight pants, it may be true, but it is not a very helpful way to look at the issue. If we look at the problem that way, then we will miss a lot of other possible solutions. We need to be careful how we 'frame the problem'.

  1. So saying the roads are too narrow is not a useful way to look at traffic congestion you say. But what is a better way?

A very good start is to stop focusing so much on the traffic jams themselves. Stop focusing so much on vehicles.

  1. That sounds pretty “zen”! Like, 'Grasshopper, let us solve congestion by not thinking about congestion' What do you mean?

Focus on people and goods instead of vehicles and traffic jams. Concentrate on how can we move people and goods in the most efficient ways.

When you think like that, you tend to think a lot more about public transport, which is much more space efficient.

You might be more willing to do things like (gasp!) take away lanes of traffic and devote the space to a Bus Rapid Transit busway that can carry more people in the same space than if they were in cars. By the way, Bus Rapid Transit busways are a growing trend around the world, with some wonderful success stories. For example, Bogota in South America has achieved an amazing transformation with BRT as a key part of it. Even Jakarta is starting to get really excited about busways.

  1. Here in KL we have been building lots of KTM komuter rail lines and LRT lines and monorail. And we have been shaking up the bus system. But the traffic seems to be as bad as ever. Improving public transport does not seem to be enough!

Let's go back to the gaining weight analogy. Imagine we bought some bigger pants but a few months later THEY are too tight as well! So we decide we really need to start eating healthier food. But you go to the hawker centre at lunch break and the healthy options are not so convenient. You really have to hunt for them, while the nasi lemak and fried kuay teow and deep fried treats seem to be everywhere. And when you are used to a salty, high fat diet, those healthy options just don't seem to taste so good. We have a real problem - will power is not enough and all the incentives seem to be in the wrong direction!

It is the same with cars and public transport. When you are used to driving everywhere, even good public transport seems inconvenient. It seems like a second best option. Just putting the healthy option on the table along with the tempting unhealthy ones, does not guarantee that people use the healthy one.

At the LKY School of Public Policy we also train our students to always think about the INCENTIVES in any policy situation. We drum it into them to ask themselves what incentives the actors in the situation are facing.

By the way, we also have a cooperation problem here (another public policy concept). Everyone would be better off if some of us switched from cars to other ways of moving. But none of us wants to be the one to change. And none of us has any strong incentives to change.

AND we still haven’t really tackled the underlying incentives that are encouraging more and more people to drive more and more. Even when the trains are full, traffic keeps getting worse.

  1. I can smell where you are going with this! That word, incentives, is code for pricing right? Are you going to say we are just going to have to pay more for driving to stop us being tempted? That would make a lot of people very angry! Give us one good reason why we shouldn’t just kick you out of the studio right now?!

Not so fast! First, we can consider come other kinds of incentives.

And by the way, we only need to tempt at least SOME people not to use cars at least SOME of the time OR to use them in less congested places or at less congested times. We don't need everyone to change their ways. Even a few less cars on the road at the crucial times can make a big difference.

Some of the incentives are about convenience and not money.

Just improving public transport is not enough but we should certainly make sure that we get the best out of those big investments by making sure they link up seamlessly together and can use one ticket and easily get information about how to plan a trip. This is starting to happen in KL i believe.

Car parking is another big opportunity for incentives, both money and non-money. Deliberately making parking a little less convenient and more expensive helps people think twice before jumping in their car.

  1. But if you ask Malaysian drivers about prices and convenience they will tell you that they are already slugged with high and rising fuel prices, road tolls, and lots of inconvenience! Are you suggesting more price slugs? Are you SURE we shouldn't kick you out now?

Wait!! What I am suggesting is cleverer and better targeted prices and careful changes in incentives

Just increasing motoring prices willy-nilly is not the answer either. It is not just about the total price.

My bet is that we could reduce congestion without increasing the typical total costs for Malaysian drivers. We need to reduce some but increase other.

By the way, Singapore has been actually reducing car-related costs over recent years, without congestion getting out of control. The price signals have been getting cleverer and better targeted.

  1. NOW you're talking, Paul. But how can we do that?

We need to make sure that whatever we do pay makes sense in terms of the incentives that the payments send us.

We need prices that encourage us to do the right thing in the most efficient way, so that we don't need to be slugged unnecessarily.

Right now, the way we pay for urban transport mostly does NOT help us make the right choices. For example, road tax and registration fees do nothing to help us choose to drive any less. Paying for a season ticket for parking does not make you think twice about driving each morning. Even though the risk of a crash increases the more you drive, insurance is the same, whether you drive a lot or a little.

  1. So you are saying that it is not HIGHER prices but DIFFERENT price schemes that could help? So what exactly do you suggest?

One example is peak pricing: road tolls should be higher during rush hour and lower during off-peak times. (the average price could stay the same) This would tempt a few people to change their trip time. Of course, if you really have to travel at peak hour you will pay a little more, but at least you will get less delay. And the buses, which have no choice, will move better at peak period with fewer cars getting in their way. Singapore’s Electronic Road Pricing works that way. You pay more at peak times, and often pay nothing at off-peak time.

  1. It might be tricky to get the toll road companies to do that. Any other examples?

Here is a second example. Let’s focus on the costs that you CAN’T save even if you don’t use your car. They are fixed costs. You already paid for the import taxes, road tax, the registration fee, insurance, and you may have paid a monthly season parking fee. Not only do these fees not go down if you drive less, they actually make you think to yourself, “well I paid all that, so I should get my money’s worth”.

So it would be much better if we shifted all these costs so that you pay them as a small fee per kilometer. The name for this is PAY AS YOU DRIVE. So you can have ‘pay as you drive insurance’, ‘pay as you drive road tax’, etc.

Don’t forget that for most people the total cost does not go up, because we reduced or eliminated the old fixed taxes and fees.

In fact, if you can find ways to drive less then you can now SAVE money. You would now have a better incentive to try to drive less.

The catch is that we need better and affordable technology to keep track of distance driven and send bills accordingly. The technology is just about here.

  1. I can see that Pay As You Drive can apply to fees like road tax and insurance. But what about the car itself? I paid a lot of money for my nice car. So now I want to use the thing right? Why would I want to leave it at home to rust?

You are quite right! In fact, you have hit the nail on the head. Actually, once people have a car, it is very hard to persuade them to use it less. Not impossible! The suggestions earlier do help. BUT the best way to stop traffic from getting worse is to catch people BEFORE they buy their car (or before they buy their second or third car for the household) and try very hard to persuade them that there are alternatives.

  1. But you said earlier that the alternative, public transport, is never as attractive as cars. So how are you going to convince anyone not to buy cars?

Yes, public transport on its own is not enough. Bicycles are not the solution on their own. Pay as you Drive or Road pricing reforms are not enough on their own.

They need to gang together. Public transport needs ALLIES to help it.

To make not owning a car attractive, we would need to make it much easier for people to use a combination of various kinds of transport. We need better public transport, better taxi service, safer cycling, safer walking.

  1. Sorry to sound skeptical Paul, but even that package doesn’t sound like it could be as convenient as my car

That’s right! There is a missing link there. Many people would want to able to use a car sometimes, when they really need it. Taxis can help but they are not enough either.

This is where the rise of car-sharing comes in. It is an exciting new industry that has been taking off just in the last few years. You could think of car-sharing as short term car rental (or maybe as ‘self-drive taxi’).

But it is more than that. It aims to let people sign up to a kind of ‘club’ which gives them access to a car whenever they want one, but without much up front cost and hassle of actually owning a car. For people who don’t drive much but who do occasionally need a car, this is very attractive.

Car-sharing is Pay As You Drive for the actual capital cost of the car too! With car-sharing, ALL of the cost of driving is paid for when you drive. You don’t drive you don’t pay. You drive a lot, you pay a lot.

Only a COMBINATION of really good options (better public transport, improved taxi service, affordable car rentals, car-sharing, and please don’t forget walking and bicycling) just MIGHT tempt at least some people not to buy a car in the first place or tempt them to use these options instead of getting that second or third car.

  1. Have many places done what you are suggesting?

Several places have taken some steps in this direction but there is a long way to go.

Change is still a little slow. Part of the reason is that the technology to make vehicle-related pricing cleverer has not been good enough until very recently.

But Switzerland, Austria and Germany have started to charge lorries by distance. In return they reduced their fixed taxes.

Oregon in the USA is now doing a trial of charging every car a fee per kilometer driven.

Singapore has realized that making cars expensive to buy might have been a mistake, because then those who do have cars in Singapore drive them a lot! So they are shifting more costs to usage costs, like parking and Electronic Road Pricing.

Car-sharing is gradually getting more and more popular but it is still small. Switzerland is the place it has grown most. Singapore has a thriving car-sharing industry. And I believe it is coming to KL very soon!

Switzerland and several cities in Germany, like Bremen and Hannover, have been trying very hard to promote the kind of cooperation between car-sharing, public transport and the others to make not owning a car at all a really good option. There are some signs that they are onto something important.

Many European cities also have very attractive season tickets for public transport, so that you save a lot by committing yourself to being a regular public transport user. This makes it very tempting not to use (or buy) a car. I am glad that the LRT system here has started to offer interesting season passes.

  1. The government has been reducing the subsidy for fuels and raised petrol and diesel prices twice in the last two years. What do you think about that?

The short answer is that it would have been much better to never have started to subsidise fuel in the first place.

Subsidies are not always bad but you need to be wise about what you subsidise. Fuel is certainly not something that is wise to subsidise. A key reason is that it gives everyone an incentive to waste fuel (to use it more than is efficient).

Another key reason relates to the concept in public policy (and economics) of OPPORTUNITY COST. The real cost of what you spend money on is what you therefore cannot spend that money on. If you buy something it means you have less money to buy something else. Money spent subsidizing fuel is money not spent on education or health or whatever.

Thirdly, it is crazy to subsidise something that the rich use much more than the poor. Fuel is exactly like that. Every step up the income ladder, people use more and more fuel, driving bigger vehicles further and further. And of course the really poor don’t have a vehicle at all. Some may have a motorcycle and use it sparingly.

  1. But doesn’t raising the fuel prices hurt the poor?

Remember, the richer people are getting a lot more of that subsidy than the poor.

BUT once you start subsidizing something, then it is hard to stop! And if you stop SUDDENLY then YES you will hurt people (directly and indirectly because prices will go up slightly). And the poorest people always have less ability to cope with sudden changes.

This suggests that that there should be a very explicit effort to help the poorest groups to cope with the price increases. This is exactly what Indonesia did last year when they raised fuel prices.

The Malaysian government has said they will use the money to improve public transport. This sounds good and is probably well intentioned. But the benefits do not necessarily help the poor folks who are really suffering in real ways from the change. It is a poorly targeted effort to compensate for the change.

  1. So your short answer on fuel prices, Paul?

Of coursed, fuel price reform is just a small part of the transport policy story as we have been talking about.

But I think fuel should be TAXED not subsidized

This is because would be fairer than handing wads of money to the rich and a few shillings to the poor, which is what subsidizing fuel does. Taxing fuel by contrast involves taking wads of money from the rich (who can afford it), but only shillings from the poor. Governments need to get revenue from somewhere. Fuel tax is among the better options. If not fuel, they will still have to tax something.

BUT when ending the subsidy a SIGNIFICANT ASSISTANCE PACKAGE (probably as CASH) should be provided for everyone below median income.

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