Sunday, August 15, 2010

A Massive Economic Distortion Caused By the Government: Free Parking

I may occasionally give the impression to my readers that I tend to favor pro-government policies.  In general it would be more accurate to say that I believe that government plays an essential role when it comes to social change, it both cushions the cost of change to the losers and provides the institutional framework necessary for change to happen at all.  Without government intervention, I believe the most likely case is generally stagnation. 

By contrast, I am extremely hostile to government intervention that favors the status quo.  I believe there are very significant institutional, economic, and cultural forces that favor inertia, we're doing the same thing today that we did yesterday and will continue doing it tomorrow without the intervention of some kind of outside force.  This is why government intervention is entirely unnecessary to preserve existing arrangements.  Other social forces are far more effective at preserving ways of doing things that are of value than government is, making government intervention unnecessary and a complete waste in these situations.  Of course, when existing arrangements begin to decay there is often pressure for the government to intervene to preserve them, which is a complete waste of resources since government is a very weak force in comparison to social, cultural, and economic inertia.

Of course, for rather obvious reasons the news is almost entirely about change and almost never about the status quo.  This results in a strong bias in favor of writing about newsworthy events that I favor intervention compared to ones where I think government functions solely as a wasteful parasite.  Which is why I'm rather happy to have an article to write about where I do think government is very clearly the problem.

I've written about the evils of free parking before, Tyler Cowen has a great article in today's NY Times that provides some hard numbers on the subject.  I can't say more than that I am in very powerful agreement with this.  More generally, I feel that one of the big challenges facing our country in regards to both oil shortages and pollution is how to direct the costs of adjustment more towards those that have the opportunity to make changes than those that will be forced to simply eat the costs of adjustment as a dead-weight welfare loss.  In the case of automobiles this is pretty easily conceived of as a mostly urban-rural divide, with the suburbs falling in between.

I encourage you to read the full article, to wet your appetite below are some of the key passages:

After discussing how zoning rules and mandates require developers to also build a certain number of parking spaces attached to a development Cowen claims:

Under a more sensible policy, a parking space that is currently free could cost at least $100 a month — and maybe much more — in many American cities and suburbs. At the bottom end of that estimate, if a commuter drives to work 20 days a month, current parking policy offers a subsidy of $5 a day — which is more than the gas and wear-and-tear costs of many round-trip commutes. In essence, the parking subsidy outweighs many of the other costs of driving, including the gasoline tax

These mandates also conceal the value of the land being built to park vehicles on.  This creates very significant distortions in land use and represents very significant losses to society by not allowing the market to function in these cases:

Many parking spaces are extremely valuable, even if that’s not reflected in current market prices. In fact, Professor Shoup estimates that many American parking spaces have a higher economic value than the cars sitting in them. For instance, after including construction and land costs, he measures the value of a Los Angeles parking space at over $31,000 — much more than the worth of many cars, especially when considering their rapid depreciation. If we don’t give away cars, why give away parking spaces?
Yet 99 percent of all automobile trips in the United States end in a free parking space, rather than a parking space with a market price. In his book, Professor Shoup estimated that the value of the free-parking subsidy to cars was at least $127 billion in 2002, and possibly much more.

I encourage you to read the full article, this is big government I don't believe in, that's $127 billion that could be put to much better use.  This is just one of many areas where I greatly desire to shrink government, too often our government is big and intrusive in areas where it has no function and imposes great costs on society, this is probably far more common than the areas that it needs to step into.  However, political debates being what they are, almost all the dialogue is over areas where I feel government needs to have a bigger role than it does have, there is too little discussion of the areas where the state clearly needs to shrink.

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