WHITE-KNUCKLE EXTERNALITIES

I. INTRODUCTION Urban motorists are well acquainted with the frustrations of traffic congestion. As Calfee and Winston (1998) put it, "Everyone knows the toll congestion can take on drivers' nerves. And everyone knows how costly it can be in terms of wasted time and lost productivity." This statement illustrates two distinct externalities that are generated during a typical rush-hour commute. First, congested travel is simply unpleasant. (1) Second, congested travel means delayed travel. Economists have devoted considerable attention to estimating travel delay externalities, and the marginal value of travel time savings--often referred to as the "value of time" (VOT)--typically dominates the estimation of highway improvement benefits (Small 1992). The sheer unpleasantness of congestion, however, has received little attention presumably because it is difficult to quantify or even observe. Yet, it may represent a substantial portion of the wedge between the social and the private costs of highway travel. For example, consider this familiar scenario: a ball game or concert lets out, spectators flock to their vehicles, and parking lot gridlock ensues. Several motorists decide to stay put, turn on the radio, and "wait it out." For these motorists, the cost of delayed travel is dominated by another distinct cost--one that is difficult to observe but is certainly palpable. For rush-hour commuters, schedule delay costs are too large for most motorists to wait it out and this additional congestion cost must be incurred. There is no conventional label for such costs, so the term "white-knuckle costs" is introduced here to describe them. (2) The existence of white-knuckle costs helps to explain a recurring finding that the value of time increases with the severity of congestion (Hensher 2001; Small et al. 1999; Wardman 2001). For instance, Wardman's (2001) meta-analysis of several VOT studies finds that time spent in congested traffic is valued 48% more highly than time spent in free-flowing conditions, suggesting that "more difficult driving conditions linked with greater stress, frustration, and perhaps travel-time uncertainty, lead to higher time valuations." The finding provides an initial gauge on the size of these white-knuckle costs and suggests that traditional VOT estimates may reflect them to some extent. How successfully these VOT estimates capture white-knuckle costs, however, depends on the degree to which they are correlated with travel delay costs. Unfortunately, in such studies, no precise method has been offered for disentangling travel delay and white-knuckle influences. As such, there has been no way to determine how closely VOT estimates approximate the value of both reduced travel time and relief from other knuckle-whitening factors. Moreover, separate estimates would allow for a more thorough understanding of how the "stress and frustration" of congestion compare to the travel delays it causes. This paper exploits a unique set of toll road data to obtain separate estimates for travel delay and white-knuckle costs so that their magnitudes can be compared. This is accomplished by analyzing the real-world trade-offs that rush-hour commuters make between congested travel and uncongested travel for a fee, holding constant the influence of travel times on this choice. (3) The basic idea is that both travel times and unobservable influences such as stress and frustration naturally increase with congestion. By simultaneously estimating the influences of congestion and travel time on route choice, the resulting value of reduced congestion is purified of travel time influences, thus revealing the value of nontime factors that cause white knuckles. Likewise, the value of time is purified of white-knuckle influences, revealing the pure opportunity cost of motorists' time. Applying these valuations to a suitable travel cost framework yields separate estimates of travel delay externalities and white-knuckle externalities, where the latter measures the unobservable externalities that motorists generate during congested travel. …