In the Times (£) Simon Wolfson advocates road pricing, claiming:
Behaviour would quickly adapt and this, in itself, would reduce congestion at the busiest times of the day.
Although I’m sympathetic to his argument, I’m not sure about this. A big reason why roads are congested is not that everyone freely chooses to drive in the same place at the same time, but rather that they have to do so in order to get to work. Would a worker at Next really get a sympathetic response if she told her boss: “I’ll in an hour later tomorrow to save money on congestion pricing”? This limits the extent to which behaviour can adapt to road pricing*.
I suspect Wolfson is exemplifying here a particular type of thought common on the right - a form of elasticity optimism, which says that price signals have large and quick behavioural effects. It’s the same idea we see in the claim that abolishing the minimum wage will significantly reduce unemployment, or that higher taxes will lead to large reductions in labour supply.
All these are examples of what I’ve called the “small truths, big errors”; a germ of truth is blown out of proportion.
What puzzles me, though, is why the right does this. It‘s not as if there is overwhelming empirical evidence to support such optimism.
In the case of taxes, I suspect the motive is simple self-interest - the desire to wish that our own interest, low tax, happens to coincide with the public interest. The right is, of course, not alone in doing this; public sector workers who believe in the virtues of big government do the same thing.
I suspect, though, that something else is going on.
One thing is that if price signals do have large effects, then behaviour can be regulated by the market alone and so there’s less need for state intervention. Efficiency and liberty then go hand-in-hand, so a potentially nasty trade-off is averted.
Also, and relatedly, there’s a blindness to failures in the private sector. Wolfson fails to see that bosses’ power to demand that workers be in a particular place at a particular time will prevent workers responding to congestion pricing. Likewise, opponents of the minimum wage fail to see that there can still be mass unemployment even in a free labour market.
In both respects, the right seems to be guilty of the sort of utopian thinking that the left used to be accused of**.
* I’m ignoring the issue of incidence here. If workers demand wage rises to compensate them for congestion prices, employers might become more flexible in an effort to reduce their costs. How likely is this?
** I say "used to be" because the left has to a large extent stopped having ideas for social or economic improvement, and become a mere oppositional force.