Germany currently has no speed limit on the autobahns. It is the only country in Europe not to have a speed limit on highways, which makes it a significant outlier. There is a recommended maximum speed of 130 kilometres per hour, but it is not a legal limit. Should there be a legal limit? This is an empirical question that economics can help with - would the benefits of a speed limit outweigh the costs?
That is the question addressed in this recent article by Stefan Gössling, Jessica Kees (both Linnaeus University), Todd Litman (Victoria Transport Policy Institute, Canada), and Andreas Humpe (Munich University of Applied Sciences), published in the journal Ecological Economics (ungated earlier version here). The particular speed limit they evaluate is 130 kilometres per hour, and the paper outlines in some detail the costs and benefits that are included (bearing in mind these are the costs and benefits of introducing a speed limit, where one does not already exist).
On the costs side, they consider time losses due to slower speeds, estimating a total private cost to German drivers of €1052.6 million. On the benefits side, they estimate fuel savings (€765.7 million), and fewer traffic jams (€0.1 million), for a total private benefit of €765.8 million. However, there are also social benefits, including supply chain costs avoided (€284.8 million), lower maintenance and infrastructure costs for roads (€247.6 million), decreased land fragmentation (€30.1 million), decreased air pollution from tire wear (€62.4 million), lower CO2 emissions (€292.5 million), decreased fuel subsidies (€37.6 million), and decreased vehicle accident costs (€283.0 million), for a total of €983.3 million. So, while the private benefits of the introduction of the speed limit are lower than the private costs by €32.2 million, when the social benefits are included, the overall benefits outweigh the costs by €951.1 million.
However, it doesn't seem to me to be so clear-cut. A couple of the social benefits strike me as arguable. The supply chain costs (which are the costs associated with the supply chain for infrastructure and vehicles) may be double-counted with the value of the lower CO2 emissions, while the cost of land fragmentation may be included within the infrastructure costs for roads. It isn't clear. Nevertheless, excluding the costs that are double-counted would still leave the benefits greater than the costs. Even without a sensitivity analysis (which would test how sensitive the results are to changes in the underlying assumptions), the clear conclusion is that Germany should implement a speed limit on the autobahns.
The real question, though, is whether that speed limit should be 130kph, or some other speed. Unfortunately, Gössling et al. don't address that question at all (perhaps they have some follow-up work coming?). Earlier work (which I blogged about here) suggested that the optimal speed limit might be close to 55mph (or 89kph) in California, Oregon and Washington states in the US. The analysis there was similar (in terms of the costs and benefits considered), but the analysis was better because it considered the marginal impact of speed limit changes.
As I note in my ECONS102 class, the optimal quantity of something is best determined by thinking about marginal benefits and marginal costs. Hopefully we'll see some analysis along those lines for Germany in the future.
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I tend to share your suspicion of double-counting when it comes to supply chain costs and the cost of land fragmentation. Allow me two additional remarks:
ReplyDelete- taxation of fuel in Germany is a multiple of taxation in the US. It is set to rise further to fully compensate for CO2 emission. At this point counting the reduction in CO2 emission among the social benefits of the speed limit would be another example of double-counting, would not it?
- the hedonic approach to demand would dictate including the loss of welfare of driver enjoying high-speed driving (that is, over and above the loss of time spent on the road), shouldn’t it?
To the extent that fuel costs have already internalised the cost of CO2 emissions (through Pigovian taxes, as you note), then including the fuel costs and the cost of the carbon emissions would be double-counting.
DeleteThe problem with the welfare of driver enjoyment is the difficulty of measuring it. And, likely some drivers feel anxious when there are speeding drivers around them, so a lower speed limit would have offsetting welfare benefits for those drivers. Tricky stuff.