technological advance to help deal with a perpetual economic problem

From Larry Copeland at USA Today (with a hat tip to Linda Christiansen), the sort of article that gets an economist excited! ;-)

Roads are a modest example of what economists call a "public good"-- a good that is, to a significant degree, "non-rival" (your use doesn't affect my use) and "non-exclusive" (it is costly to prevent consumers from using your good or service without paying). The latter is especially important since it leads to the "free rider problem": people use it without paying-- a real problem if you're a producer! (For other examples, think about computer software, "services" provided by a church, contributing to an office gift, and national defense.)

As such, the market struggles to produce the optimal amount. And there are occasions when the government may struggle less than markets (ironically) to provide the good in question. (Along with public goods, markets "struggle" with externalities like pollution, macro instability, information problems, and monopoly power. Each of these are potential candidates for, ironically, efficiency-enhancing government intervention.)

Roads are only a modest example of a "public good" since they are somewhat rival (and quite rival during rush-hour traffic!) and somewhat exclusive (see: toll roads/bridges). Roads could become even less exclusive-- if low-cost technology were available to monitor road use (and to charge accordingly). Such technology has been used on a handful of highways over the last decade or so-- as people pay to use a private road with less traffic rather than using a public road for free.

The following article describes the continuing advance of the relevant technology-- and the expanding use of the technology. Although gas taxes are ok as a proxy for road use (and thus, as a user fee for roads), per-mile charges would be an improvement. (Beyond that, it would be even better to factor in weight [to deal with road damage] and pollution [damage to the environment]. Technology allows for both of these as well.)

Beginning early next year, drivers in six states will begin testing a new way to pay for roads and transit: Commuters will be charged for the miles they drive rather than paying taxes on gasoline purchased.

Researchers from the University of Iowa Public Policy Center will install computers and satellite equipment in the vehicles of 2,700 volunteers — 450 each from Austin, Baltimore, Boise, San Diego, eastern Iowa and the Research Triangle region of North Carolina.

Over the next two years, the drivers will get sample monthly bills for the number of miles they've driven. They can compare what they now pay in gasoline taxes with what they would have paid in per-mile fees.

"We want to assess the public's attitudes and acceptance toward a system like this," says Jon Kuhl, principal investigator on the $16.5 million Road User Charge Study and chairman of the University of Iowa Department of Electrical and Computer Engineering.

The nation is reassessing the way it pays for roads and transit. Since 1956, the Highway Trust Fund, financed by the federal tax on gasoline, has been a primary source of money for highway projects. But the National Governors Association and other groups and planners involved in road building have concluded that this method, supplemented by state gasoline taxes, no longer is adequate.

Americans are driving cars that get better mileage, and more are driving vehicles that use fuels taxed at lower rates than gasoline, such as ethanol, or making their own fuel and not being taxed. That means gas tax revenue isn't growing nearly as fast as the number of miles driven.

In addition, the costs of road construction materials have skyrocketed because of heavy demand from India and China. Congress and many state legislatures are reluctant to increase gas taxes, especially at a time of high prices at the pump. The federal gas tax of 18.4 cents a gallon has not been increased since 1993; 24 states have not raised their gas taxes since 1997, according to the American Road & Transportation Builders Association.

That has made a mileage fee more attractive to some agencies. The University of Iowa study is funded by the Federal Highway Administration and 15 state departments of transportation.

Elsewhere:

•Oregon this year finished a year-long experiment that tested a "virtual tollway" system that could eventually replace the state gas tax with a road-user fee. Volunteers drove vehicles equipped with state-installed Global Positioning System (GPS) devices and odometers that kept track of the miles they drove. When they gassed up, the drivers paid for their gas as well as 1.2 cents for each mile driven since their last fill-up; they did not pay the 24-cents-a-gallon state gas tax....

"It's not a question of if this is viable," says Iowa's Kuhl. "It's a question of when it becomes politically and socially viable to make such a large-scale shift."

FIND MORE STORIES IN: Oregon | Department of Transportation | University of Iowa