Congestion pricing: how to mitigate its impact on the poor?

Remember the congestion pricing proposal in New York City? Robert Frank finds an interesting similarity between the current debate on congestion pricing and another such episode in the 1970s, and proposes some practical changes to make the congestion pricing program more viable. So, what happened in the 1970s?

In a reform effort, ... the agency that regulates New York’s public utilities took aim at the now quaint-seeming practice of providing directory assistance free. The commission argued that a 10-cent charge for directory assistance calls would give consumers an incentive to look up telephone numbers on their own whenever convenient, which would free up operators and equipment for more valuable tasks.

Although the commission’s proposal promised net benefits for the average telephone subscriber, it was greeted by a firestorm of protest. And when social scientists testified gravely, albeit absurdly, that it threatened to disrupt vital networks of communication in the community, its defeat appeared certain.

Commission officials then introduced a simple amendment that saved it. In addition to charging 10 cents for each directory assistance call, they proposed a 30-cent credit on each consumer’s monthly phone bill, a reduction made possible by the additional revenue from the charge and the savings from reduced volumes of directory assistance calls. Because this amendment promised to reduce the monthly bill of customers willing to use their phone books, political opposition vanished overnight.

Thanks to Mark Thoma for the pointer.