Thursday, October 22, 2009

Economist's Notebook: Opportunity Cost, General Equilibrium and The Sellwood Bridge

Brent Wojahn/The Oregonian/2008

I have been meaning to write a post on this for a while. The latest news about the Sellwood bridge replacement project appeared in The Oregonian on October 8. Here is a excerpt of Dylan Rivera's story:

Multnomah County on Thursday came one step closer to imposing the state's first county vehicle registration fee, aimed at replacing the cracked Sellwood Bridge for $330 million.

County Chairman Ted Wheeler and commissioners gave a mostly favorable review to a plan that calls for the county to pay for about a third of the project with the new fee.

In the next two weeks, the county board expects to approve a vehicle registration fee that would cost $19 a year per car in Multnomah County. Next year, Clackamas County will consider a fee of $5 a year for its motorists.

The plan puts Multnomah County drivers in the position of paying more than triple the rate of Clackamas County residents for a bridge that is mostly used by Clackamas County drivers. The situation shows the political difficulty of paying for a regional asset that is owned locally.

So what is the problem with the last statement? Nothing factually, but it echoes a common theme that will, without a doubt, become a rallying cry for opponents: "why should Multnomah County drivers pay for a bridge that is used more by Clackamas County drivers?" And this logic is wrong.

Why? The answer lies in the equilibrium effect of cross river traffic. Eventually the bridge will become unusable. Fine say MultCo drivers, it is ClackCo drivers' problem. Not at all, without a Sellwood bridge traffic will push up to the Ross Island. When the Ross Island bridge gets too crowded, traffic that used to use the Ross Island will use the Hawthorne. And then Hawthorne traffic will go to the Morrison, and on and on and on. So you see, the fact that Clackamas county drivers are a majority on the Sellwood is not really the point. Perhaps a better way to think about it is how big a percentage of all Portland bridge traffic is made up of Clackamas county drivers.

So the true opportunity cost calculation of the Sellwood bridge is not what it would be like to have to use another bridge under current traffic conditions (as most are implicitly assuming when they say things like, 'I live in Irvington, why should I have to pay much for the Sellwood bridge?'), but what will it be like to have to use the other Portland bridges and feeder roads without a Sellwood bridge? I submit it would be quite a lot.

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