A free market for traffic — September 14, 2010

A free market for traffic

Matt Yglesias has been making the point consistently for a long time, and he should keep drilling it in until its obviousness becomes apparent: traffic is caused by improperly priced roads.

As he’s said on a few occasions (can’t find the exact posts right now): when we see video of long bread lines in the former Soviet Union, we know why they exist. They exist because the price of bread has been set artificially low. Since the price is artificially low, more people go hunting for bread than would go if the price were allowed to find its level. Since the price is artificially low, companies produce less bread than they would if the price were allowed to find its level. There’s a mismatch between the number of people seeking bread and the number of loaves of bread available for sale.

But we never think of that when we see traffic, for some reason. Clearly, though, the same mechanism is at work: there’s a scarce resource (slots for cars on the road), there’s a fixed supply, and there’s a certain demand. If people had to pay more to ride on the roads, they’d presumably drive less. What you want is that the last person to get on the road is just willing to do so — if the price were just a tiny bit higher, he’d find other means of getting to work.

So the roads are clogged, and traffic is unbearable, because prices aren’t being set by the market. They’re being set artificially — at zero, in fact — by the government. As Jamie Galbraith put it in another context, “this process is so simple that the mind recoils from it.”

If libertarians should be shrieking about anything, it should be the artificially low price of driving. The environmental consequences of this are stark: more people get on the road than would otherwise, so more smoke goes in the air; more people drive than probably would otherwise, so development patterns change to accommodate cars; so the landscape gets scarred with new, wider highways, new subdivisions, new Wal-Marts, etc.

I can’t let my speculation run too rampant there. Suppose roads were privately run. Maybe people would have no problem paying more; as it is, they seem to tolerate longer and longer commutes, which impose a less-obvious but still great price on drivers (less time with their families, more frustration, road rage). Maybe private companies would build extremely wide roads, thereby incurring a large fixed cost but basically negligible marginal cost for each driver on the road. The cost of driving might then look like the fixed cost amortized over the expected number of drivers, plus some profit margin for the corporation. And maybe that cost wouldn’t be so high.

But the point is that we don’t know, and the continually worsening state of traffic gives us reason to believe that the price hasn’t been set appropriately. If it were any other commodity being allocated, the presence of long lines would indicate a failure of central planning. Somehow Americans don’t jump to that conclusion with their roads, and they should.

Yglesias seems to have taken up a [foreign: Carthago delenda est] approach with traffic pricing. I’ll join him in it.

The high cost of free parking — September 2, 2010

The high cost of free parking

The Cato Institute has been debating, bizarrely, with Donald Shoup over his book [book: The High Cost of Free Parking]. It’s bizarre because Cato is ostensibly libertarian, yet they’re trying to argue that government-mandated parking (in zoning laws and so forth) is okay because, essentially, the market would have arrived at the same solution on its own. They have no reason to think that.

The discussion started when Tyler Cowen, an economist at George Mason and contributor to the Marginal Revolution blog, took to the [newspaper: New York Times] to channel Stroup’s [book: High Cost of Free Parking]. Randal O’Toole came back with a bizarrely non-libertarian post that purports to be libertarian. (Might I suggest that the Cossacks work for the Czar?)

Shoup came back yesterday with what can only be described as an epic takedown. It is well worth your time. Short version: it helps to have the faintest idea what “evidence” means before you try arguing with someone who wrote a 700-page book on parking regulations. Shoup’s rejoinder is wonderfully well-written, too.