The Complexity of All Change

Today New York City introduced congestion pricing. The new toll of $9 per vehicle will be paid by drivers who drive into Manhattan anywhere below 60th Street.

The stated purpose of the toll is to decrease traffic and congestion in Manhattan, which is the most congested city in the United States. Proceeds generated by the toll are supposed to fund public transit improvements.

In theory, the improvements will make public transportation more appealing to residents and visitors, thus further reducing congestion from cars.

As one might expect, there’s a lot of hand-wringing and prognostication about the effects of congestion pricing.

Some people predict it will significantly reduce traffic into Manhattan, easing congestion on city streets. Others predict it won’t have much impact.

All the speculation is a waste of time, because the truth is: nobody knows.

In fact, it’s not even clear what is the desired outcome. What ranks higher?

Is the ultimate goal to raise money to fund improvements to public transportation, or is it to reduce congestion and the pollution that goes with it?

It might be that both are goals, but we can see how these might be at odds. If drivers stop driving into Manhattan, it might reduce congestion without raising money. If they just absorb the new cost without much thought, then the city won’t get the funds it needs for improving mass transit.

The analysis treats this issue as a binary:

• Drivers will drive into the city and pay the toll, which means greater revenue for the transit authority. OR
• Drivers will take public transportation.

But these aren’t the only options.

• Some drivers may skip entering the city altogether, not adding to the toll collection.
• Some may switch to ride hailing cars like Lyft and Uber, creating more congestion.

Ultimately, the change desired here is a change in human behavior, which is among the hardest to effect.

Humans like to think we’re rational actors, but we are not.

Human behavior isn’t predicated on just one input. It rests on many inputs, some of which we aren’t even aware of.

To undo a behavior you must identify as many inputs as possible. This is why changing habits is so hard.

It’s important to remember this principle when we discuss changes in markets.

Markets are driven by people, All the predictions go out the window when humans are involved.