The Cost of Traffic Congestion

INRIX, Inc., a world leader in transportation analysis, found that in 2021, the average American driver lost 36 hours due to traffic congestion. The most time lost to congestion in 2021 was in Chicago (104 hours), New York City (102 hours), and Philadelphia (90 hours).

What is the marginal private cost of an hour lost to traffic congestion?

The marginal private cost of an hour lost to traffic congestion is the value of the best forgone alternative use of that hour. A driver could have used that hour to earn a larger income or to enjoy more leisure time.

The Bureau of Labor Statistics reports that in 2021, using a broad measure of wages and salaries that includes supplements, the average hourly wage rate was $45.60. Using this rate as the value of time, an average American driver lost $1,642 to traffic congestion in 2021, and an average Chicago driver lost $4,742.

What is the marginal social cost of an hour lost to traffic congestion?

The marginal social cost of an hour lost to traffic congestion is the marginal private cost plus the additional cost imposed on other drivers when one more vehicle joins the stream of traffic. Each additional vehicle slows the flow and imposes costs on other drivers.

Is the time lost to traffic congestion a deadweight loss?

Some of the time lost to traffic congestion is a deadweight loss, but not all of it is. Click here to watch a short video that explains why.

What could be done to achieve an efficient use of roads?

Click here to watch a short video that explains the answer.

Work these questions to check your understanding and get instant feedback.

Answer the following questions to check your understanding of the story.

Consider the figure.

Calculate the deadweight loss that arises from the market equilibrium.

a) $2 per hour

b) $2.50 per hour

c) $0 per hour

d) $5 per hour

Wrong! - The efficient quantity is the quantity at which MB = MSC. What is the efficient quantity? What is the market equilibrium quantity? Sketch the deadweight loss triangle using this information and calculate its area.

Correct! - DWL = ($15 per unit – $10 per unit) × (5 units per hour – 4 units per hour) ÷ 2 = $2.50 per hour.

Again, consider the figure.

A toll of _______________ per vehicle would achieve an efficient use of roads.

a) $12

b) $4

c) $5

d) $2

Wrong! - What quantity is the efficient quantity? Find the MSC and the MC at this quantity. What toll could be added to the MC so that the sum equals the MSC?

Well Done! - At the efficient quantity, MSC exceeds MC by $4 per vehicle, so a toll of $4 per vehicle would achieve an efficient use of roads.

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