A tale of two tolls (behavioural economics and ethics edition)
Why do we happily pay some tolls, and not others? And how ethical is it to encourage people to take the toll option?
On the way back from a few days at the seaside, Google informed us that traffic ahead was getting worse, so we swapped the A road for the B-roads. The trade-off seemed straightforward enough: we would be saving an estimated 20 minutes by getting off the main road. But in general the trade-off is more complex.
As Wikiman Rory Sutherland eloquently argues, taking the rural road, even if the main road is clear and faster, may make sense. When you find yourself unexpectedly in heavy traffic on the motorway, unless you have an exit just ahead, you’re really stuck. If you need to catch a flight, opting for a route that is nominally slower, but which has less risk of catastrophic delays is a clever move.
And of course, the duration of your journey may not be your main concern. B-roads can be a much more pleasant and relaxing drive. You’re generally in more interesting surroundings, and you may even make unexpected, quirky discoveries. So it was during our unplanned detour.
It is not unusual to come across unusual little octagonal buildings along England’s roads. These are former tollhouses, located at roads and bridges up and down the country where the land owner was allowed, by law, to collect a fee from users. Almost all of them are now quirky dwellings, but England wouldn’t be England if it didn’t still have some active tollhouses. One of them (which has a more conventional shape) is that at Swinford Bridge, a crossing over the river Thames near Oxford.
Pedestrians and cyclists can cross free of charge, but for cars there is a charge of 5p. (That may sound a laughably small amount, but Oxfordshire County Council estimates about 10,000 vehicles use the bridge every day. That generates a revenue of more than £500 per day — ample to leave a nice, tax-free profit after paying two people to collect the money.)
The toll bridge is popular because the nearest free bridges upstream or downstream are about 7 miles away. 5p (even if you need to queues for a minute at the toll gate) is a small price to pay to avoid the diversion. But are we always this rational with such choices?
Aside from historical relics like this, there are other tolls in the UK, including the relatively recent toll road North of Birmingham, built to relieve one of the most congested motorway stretches in the country. The original M6 was designed for 72,000 vehicles per day, but by the late 1990s had to cope with peaks of up to 180,000.
It’s hard to say whether that is an appropriate ratio. But the toll road also has a capacity of 72,000 vehicles per day, so it is well underutilized. And despite having since gained a fourth lane, the M6 is still congested during rush hour, while the M6T is always clear. Why are not more people diverting to the toll road? Is it because the economics don’t stack up?
For sure, the M6T toll, at £5.50 for a car, is over 100 times that of little Swindon Bridge. How much time would one need to save for this to make sense? The 27 miles typically takes 24 mins on the M6T. On a busy M6 that can easily take half an hour more, and if there’s an accident at Spaghetti Junction it could be even more.
Time stuck in stop-start traffic is pretty much totally wasted. Is that half hour worth £5.50?
That depends on how you frame it. The headline price is very salient — the signs along the M6 advertise it in big print. That may put people off. Nothing or £5.50? Easy choice — especially if what you get in return is not clear. At Swinford bridge you know you’re certain to avoid a 15 minute, 7 mile detour. Here it’s much more speculative.
If you consider the actual cost of driving 27 miles, that looks a bit different though. In the UK the tax people consider a reimbursement of 45p/mile fair compensation for all the driving costs that does not constitute a taxable benefit. On that basis the comparison now looks like this: pay £12.15, or pay £17.65 and (maybe) save half an hour. That seems a better deal than £5.50 versus nothing.
But few people make that kind of calculation. We are more likely that to construct a narrative on a foundation of optimism bias: it will be fine today. Or it won’t be that bad, really. Even if the messages on the overhead gantries try to influence us, they’re hardly persuasive.
Just knowing that there is congestion is not enough to make most of us reconsider — optimism bias is a very powerful force. But what if the duration of the journey either way was shown? Imagine the sign said something like these two signs?
The first one gives drivers the facts — much better than ‘congestion’ and ‘clear’. The second one goes even further, and shows how much time you would lose, swapping the loss frame from the payment to the lost time. Behavioural economics would suggest that this might get more people to take the T-road.
What about the ethics?
Some people might question the ethics of these hypothetical signs. Clearly they would benefit the operator of the (currently actually loss-making) M6 Toll road. But does that make it unethical? A driver opting to go down the M6T also benefits.
We generally don’t see anything unscrupulous in salesperson highlighting the benefits of what she is selling to the prospective buyer. And that is precisely what the fictitious overhead signs would be doing. Nobody is surreptitiously lured into something they don’t want to do — they simply point out the difference.
And yet, somehow that phraseology seems manipulative.
But before we condemn the trickery of behavioural economics, perhaps there is something else to consider. Both Swinford bridge and the M6T save their users time, and both provide additional societal benefits: lower pollution through shorter journeys or less congestion.
But despite its low toll, Swinford bridge is very profitable (it sold for over £1 million in 2009 and brings in a gross revenue of nearly £200,000 each year). And that is mostly economic rent — simply exploiting the ownership of the piece of land on which the bridge sits.
So maybe the ethics of the little bridge at Swinford and its tax free profit are actually more questionable than the hypothetical use of behavioural economics to invite people to use the M6T.
In (behavioural) economics, things are not always what they seem.
Originally published at koenfucius.wordpress.com on June 9, 2017.
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