[ExI] A Coasian analysis of driverless traffic

Rafal Smigrodzki rafal.smigrodzki at gmail.com
Mon Jan 30 01:45:39 UTC 2017

Analyses of the societal impact of driverless cars tend to concentrate on
their impact on employment but I feel that there is another aspect of the
driverless economy that is much more important.

Driverless cars will be highly standardized, at least regarding their
mutual interactions. They will be more law-abiding and extremely consistent
in responses to other vehicles. They will be able to process multiple
transactions with cars or other entities in a blink of a second. They will
be able to trade for slots in traffic with other cars. They will
automatically optimize their speed and route in the context of thousands of
interacting cars, potentially producing much more efficient patterns of

I expect that most cars will be owned by car companies similar to Uber and
the majority of non-rural traffic will carry customers paying by the mile
and hour. This means that the price signal generated by interacting cars
will be transmitted to humans in real time, leading to welfare-maximizing

As per Coase's theorem, bargaining leads to efficient outcomes regardless
of initial distribution of ownership claims, as long as transaction costs
are low enough. This implies that highly efficient automated trades
performed at the user's behest by driverless cars will greatly increase
efficiency compared to today's world, where trade in traffic is extremely

If roads were completely privatized (one can dream) and congestion-priced,
the system would become even more efficient.

Robin discussed the impact of driverless driving on the size of cities -
apparently modern cities are to a large extent constrained by the capacity
of their road systems. Driverless cars would significantly increase maximum
possible throughput of existing roads simply by reducing follow distances
in high speed driving. The added Coasian benefit of driverless traffic
trading would further increase effective road capacity, potentially leading
to further growth of megacities.

And of course, people not dying in car accidents caused by human stupidity
will be welfare-enhancing, too.

I don't know if driverless megacities will actually happen - one could
think of a countervailing influence, that is virtual and augmented reality
reducing the need for physical interaction in generating economic value.
One way or another though, I expect that the 2030s will be a time of
incredible economic change and most likely growth, even before the fully
robotized economy emerges.

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