Time to move on from number coding

The author is the dean of the College of Business and Economics at De La Salle University.

Metro Manila Development Authority (MMDA) chairman and Public Works Secretary Bayani Fernando beat me to the draw.

Ever since he instituted the new traffic scheme that is now in force
along EDSA and undertook to sweep the vendors off the sidewalks of
Metro Manila, I had been considering writing a column calling for the
lifting of the Unified Vehicular Volume Reduction Program (UVVRP). But
while I was hemming and hawing about it, Mr. Fernando jumped the gun on
me and did it, even if only on a trial basis and with Makati City and,
later, Mandaluyong City exempted. He is getting flak for it, though.

Based on first principles, however, Mr. Fernando is at least on the
right track in suspending the “car-less day” policy, which by now has
served out its usefulness. The argument for this is as follows:

The streets of Metro Manila may be regarded as a common-property
resource by all residents with access to (private) vehicles. But
because the kilometers-of-road to population ratio of the metropolis is
low (and declining as population growth outstrips the rate of expansion
of the road network), the situation is ripe for a tragedy of the
commons phenomenon: we get a heavier volume of vehicular traffic than
is socially optimal. The reason: when motorists calculate the benefits
and costs of traveling, they fail to factor in the (external) cost of
congestion that each of them brings along with him into the traffic
equation.

A (regulatory) policy is therefore needed to lighten the traffic
volume. For the problem to be satisfactorily addressed, however,
economic theory requires that an intervention meet three conditions:

First, the traffic scheme must recognize the congestion costs so that
motorists are made to bear them explicitly. Second, to ensure economic
efficiency (assuming that motorists have heterogeneous preferences),
the traffic scheme must adopt an allocation rule such that motorists
with high valuations of time (at the margin) are those who are given
the right to road use. Third, the costs of the traffic scheme must be
distributionally progressive (preferably) or at least distributionally
neutral so that the poor do not unduly bear them.

Reality check 1: Does the UUVRP meet these conditions? By banning cars
from the streets one day a week from 7 am to 7 pm on the basis of the
last digit of their license plate numbers, the program imposes the
burden of congestion costs on owners of the prohibited cars, who are
forced either to use their cars before and after the hours of
restriction (in effect reallocating the time distribution of vehicular
traffic) or to take public transport. Thus, the UVVRP satisfies the
first condition.

In addition, in the early days of its implementation, the program was
distributionally neutral since road-use rights had not been a factor in
the determination of the number of cars owned by households.

The program, however, has been in place for at least five years now,
and in that time households with the capacity and the (marginal)
willingness to pay (i.e., to rearrange their expenditure patterns) have
acquired extra cars. Consequently, over time, the UVVRP has become an
anti-poor traffic scheme, inasmuch as only for one-car families have
the road-use rights remained restricted.

Moreover, as the rich have bought more and more cars, the volume of
traffic has correspondingly become heavier, thus defeating the very
purpose of the scheme.

In the end, because the UVVRP remained in effect for so long and no
restrictions were imposed on the sale of cars (to, say, replacement
levels plus a growth rate equal to the rate of expansion of road
density), both of which allowed richer families to get around the
burden of the scheme, the program ultimately did not reduce the volume
of traffic. It only effected a transfer of resources from car owners to
car dealers and manufacturers (due to car sales) as well as to drivers
and owners of public transportation.

Reality check 2: Does the lifting of the UVVRP improve the situation?
The answer here depends on the relative weights that one assigns to the
three conditions that a traffic scheme must address. The problem with
the UVVRP was that, ultimately, the burden of the congestion cost was
borne by the one-car families, which made the traffic scheme
regressive. The problem with suspending the program is that, while the
efficiency and equity criteria (i.e., conditions two and three) are now
met, congestion costs are once again not explicitly recognized. In
addition, MMDA now has to contend with the extra capacity in cars of
the wealthy households, which may have accounted for the “rebound
effect” (in the form of a very heavy volume of traffic) during the
first week of the UVVRP suspension. What households with extra cars
will do with them in the days ahead (when the novelty of the program
suspension fades) will determine whether congestion costs have
inexorably risen.

The question thus boils down to the following: With a no-restrictions
traffic scheme in place, is the level of congestion likely to exceed
that critical point beyond which Metro Manila residents, in general,
and the MMDA, in particular, would willingly give up the concomitant
benefits in efficiency and equity?

In any case, it is clear that, instead of a simple scheme, a
comprehensive plan is needed to reduce the volume and to ease the flow
of traffic in Metro Manila. Some components of this plan may include
the following:

  • Creating mechanisms to sell or bid off road-use rights, which
    take into account the optimal number of cars on the road. For instance,
    a limited number of day passes may be sold each day. (The merits of
    this scheme are that it addresses the congestion cost and the economic
    efficiency conditions and is distributionally neutral.)
  • Creating mechanisms to ensure the smooth flow of traffic (thus
    bringing down congestion costs). Examples include imposing strict
    compliance of traffic rules (such as not allowing cars to counterflow,
    beat the red light, block intersections, swerve, stay in the middle of
    a traffic line hence straddling two traffic lanes, park in the middle
    of roads), scheduling road works, particularly those involving heavy
    equipment, at night when there is less traffic, deploying roving cops
    on motorcycles and cars to impose discipline.
  • Building more roads to increase road density in the metropolis and improving the quality of existing roads.
  • Installing volume-sensitive traffic lights.
  • Rationalizing the public transportation system to take account of
    the LRT and MRT. Along EDSA these days, too many buses compete for too
    few passengers. Indeed, even during rush hours buses are unfilled,
    because passengers prefer the faster trips by rail. What may be needed
    is to change the bus and jeepney franchise routes, to be from railway
    stations to points not served by the LRT and MRT. (For example, it
    makes no sense to have a bus plying from Ayala Avenue in Makati City to
    Fairview. Instead, the bus route should be changed to, say, the
    Kamuning-GMA station to Fairview.)
  • Undertaking a public information campaign on how to ease the
    traffic situation. For instance, households could be taught to plan and
    schedule their trips so that fewer cars are deployed during rush hours,
    and drivers could be taught how to deal with road rage and develop a
    friendlier, less aggressive style of driving.
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