"Free Parking Comes at a Price"
Free Parking Comes at a Price, by Tyler Cowen, Commentary, NY Times: In our society, cars receive considerable attention and study... But we haven’t devoted nearly enough thought to how cars are usually deployed — namely, by sitting in parking spaces.
Is this a serious economic issue? In fact, it’s a classic tale of how subsidies, use restrictions, and price controls can steer an economy in wrong directions. Car owners may not want to hear this, but we have way too much free parking.
Higher charges for parking spaces would limit our trips by car. That would cut emissions, alleviate congestion and, as a side effect, improve land use. Donald C. Shoup, professor of urban planning at the University of California, Los Angeles, has made this idea a cause... [...continue reading...]
I don't have much to say about this in particular, just a general point about moving to market based allocations of some goods and services, particularly those controlled by government.
As the price of a good or service rises, it begins to price some people out of the market. I don't mean that they choose to consume other things instead, I mean that no matter how much they want it, they can never have it. It's not a matter of desire, or willingness to pay, they simply cannot raise the needed funds -- it's just not possible to afford the good or service in question.
Because of this there are some goods and services controlled by government, national parks come to mind, where we choose to allocate goods by other means than the price system, lotteries, waiting time, random draws, that sort of thing. It generally occurs when we think equity is a primary consideration, i.e. that everyone should have a relatively equal shot at consuming a good or service.
For example, suppose we believe that everyone should at least have a chance to swim in the ocean. Willingness to wait indicates desire for the good in the same way that willingness to pay does, and this can be used to allocate the good or service. That is, willingness to circle for a period of time looking for a parking place so you can go to the beach -- which varies with demand for parking in that area -- indicates the depth of desire to do this activity and thus has desirable allocative properties -- and we can eliminate the externalities Tyler is worried about through a tax on carbon and congestion at the pump. The supply of parking, which is controlled by government, could be determined by the carrying capacity of the beach, which is itself influenced by considerations such as habitat protection that private markets may not handle well in any case. And, of course, public transportation could be provided as an alternative, but that's not available to everyone so some parking would likely be needed. Perhaps parking wouldn't be all that expensive, or maybe it would given the prices Tyler cites in the article for places like California, but the example is intended mainly to illustrate that prices aren't the only allocation mechanism available, and that sometimes other alternatives are desirable. There are certainly cases where price is a barrier and we choose to allocate goods by other means.
As we begin to price public areas with market based mechanisms -- places owned by all of us -- we need to think hard about equity and make sure we don't exclude certain segments of the population from access to these goods, services, and places. Sometimes market based allocations are fine, but not always.
Posted by Mark Thoma on Sunday, August 15, 2010 at 01:06 AM in Economics, Market Failure, Regulation |
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