conversableeconomist

Donald Shoup and the Economics of Parking

Los Angeles Magazine has a lively and well-informed article, \”Between the Lines\” written by Dave Gardetta about the history and present of parking in Los Angeles with frequent reference to one of my secret heroes, although I\’ve never met him,: the economist Donald Shoup. (Thanks to Alex Tabarrok at Marginal Revolution for the pointer here.) Here are a few excerpts:

\”In the United States hundreds of engineers make careers out of studying traffic. Entire freeway systems like L.A.’s have been hardwired with sensors connecting to computer banks that aggregate vehicle flow, monitor bottlenecks, explain congestion in complicated algorithms. Yet cars spend just 5 percent of their lives in motion, and until recently there was only one individual in the country devoting his academic career to studying parking lots and street meters: Donald Shoup.\”

\”Shoup is 73 years old. He drives a 1994 Infiniti but for the last three decades has steered a 1975 Raleigh bike two miles uphill daily in fair weather, from his home near the Mormon temple to the wooded highlands of UCLA’s north campus. … This year Shoup’s 765-page book, The High Cost of Free Parking, was rereleased to zero acclaim outside of the transportation monthlies, parking blogs, and corridor beyond his office door in UCLA’s School of Public Affairs building. He wasn’t surprised—“There’s not even a name for what I do,” he says. Shoup, however, does not lack for acolytes. His followers call themselves Shoupistas, like Sandinistas, and on a Facebook page they leave posts suggesting parking meters for prostitutes and equations that quantify the contradiction between time spent cruising for free parking versus the “assumed time-value” cited to justify expanding roadways. (The hooker stuff is more interesting.)\”

\”After 36 years, Shoup’s writings—usually found in obscure journals—can be reduced to a single question: What if the free and abundant parking drivers crave is about the worst thing for the life of cities? That sounds like a prescription for having the door slammed in your face; Shoup knows this too well. Parking makes people nuts. “I truly believe that when men and women think about parking, their mental capacity reverts to the reptilian cortex of the brain,” he says. “How to get food, ritual display, territorial dominance—all these things are part of parking, and we’ve assigned it to the most primitive part of the brain that makes snap fight-or-flight decisions. Our mental capacities just bottom out when we talk about parking. …”

\”L.A. has been a wellspring for a parking guru like Shoup to become self-realized. Our downtown contains more parking spaces per acre than any other city in the world and has been adding them at a rate of about 1,000 a year for a century. … Whereas a skyscraper of a million square feet in New York may be required to have 100 parking spaces, an equal-size structure in L.A., like the U.S. Bank Tower, is compelled by the city to provide closer to 1,300 spaces. The maxim is wrong: L.A. wasn’t built around the car. It was built around the parking lot….  L.A. sits on a mountain-size surplus of parking it doesn’t know what to do with. … San Francisco or New York might have ten times the parking each has now if they had buildings like 1100 Wilshire, where the first 15 floors are all garage. But the downtown areas of those cities won’t allow it.  L.A. mandates it. In Los Angeles we attend dinner parties and wish out loud for more pedestrian-friendly neighborhoods, increased urban density, more mass transportation, less congestion, less air pollution, less reliance on our cars—and cheap, abundant parking wherever we go.\” 

 For those who would like a taste of Shoup, but don\’t quite feel up to 765 pages on The High Cost of Free Parking, I recommend Shoup\’s lead essay in the April 2011 issue of Cato Unbound: Free Parking or Free Markets. Some excerpts follow, although for much more detail and vivid examples from specific cities you need to click through to the essay:

\”Cities should set the right price for curb parking, because the wrong prices produce bad results. Where curb parking is underpriced and overcrowded, a surprising share of traffic can be cruising in search of a place to park. Sixteen studies conducted between 1927 and 2001 found that, on average, 30 percent of the cars in congested traffic were cruising for parking. … Free curb parking in a congested city gives a small, temporary benefit to a few drivers who happen to be lucky on a particular day, but it creates large social costs for everyone else every day. To manage curb parking and avoid the problems caused by cruising, some cities have begun to adjust their curb parking prices by location and time of day to produce an 85 percent occupancy rate for curb parking, which corresponds to one vacant space on a typical block with eight curb spaces. …\”
\”Drivers want to park free, and that will never change. What can change, however, is that people can want to charge for curb parking. The simplest way to convince people to charge for curb parking in their neighborhood is to dedicate the resulting revenue to paying for added public services in the neighborhood, such as repairing sidewalks, planting street trees, and putting utility wires underground. That is, the city can offer each neighborhood a package that includes both performance-priced curb parking and the added public services financed by the meters. Performance pricing will improve the parking and the revenue will improve the neighborhood. …\”

\”Requiring ample parking does give us all the free parking we want, but it also distorts transportation choices, debases urban design, damages the economy, and degrades the environment. Some cities have begun to remove minimum parking requirements, at least in their downtowns, for two reasons. First, parking requirements prevent infill redevelopment on small lots, where fitting both a new building and the required parking is difficult and expensive. Second, parking requirements prevent new uses for many older buildings that lack the parking spaces required for the new uses. A search of newspaper articles about minimum parking requirements found 129 reports of cities that have removed off-street parking requirements in their downtowns since 2005. … Minimum parking requirements may be our most disastrous experiment ever in social engineering, and ceasing to require off-street parking is not social engineering…. If cities remove off-street parking requirements, they will have to charge performance prices for the curb spaces to prevent spillover, but this will produce another great benefit: All the money paid for curb parking will become a new revenue stream to pay for local public services. Curb parking will become too valuable not to meter. Removing the parking requirements for both housing and offices can produce a cascade of benefits: shorter commutes, less traffic, a healthier economy, a cleaner environment, and more affordable housing…. The upside of the mess we have made is that we have an accidental land bank readily available for job-adjacent housing. This land is now locked up in required parking, but if cities remove their unwise parking requirements we can reclaim land on a scale that will rival the Netherlands. … Some people assume that America has a freely chosen love affair with the car. I think it was really an arranged marriage. By recommending minimum parking requirements in zoning ordinances, the planning profession was both a matchmaker and a leading member of the wedding party.\”

conversableeconomist

Clean Energy Standard vs. Feebate vs. Carbon Tax vs. Cap and Trade

Alan J. Krupnick and Ian W.H. Parry of Resources for the Future have a nice short article on \”Decarbonizing the Power Sector: Are Feebates Better than a Clean Energy Standard?\” But if the policy goal is to reduce carbon emissions, there are at least four policies in play–all discussed in their article.

  • A clean energy standard. They write: \”Under this approach, electricity producers would be required to meet a rising fraction of their generation using zero-carbon sources or sources with lower carbon intensity (defined as CO2 emissions per kilowatt-hour [kWh]) than that of coal generation.\” In July, the Congressional Budget Office put out a report on \”The Effects of Renewable or Clean Electricity Standards:\” :
  • A \”feebate\” system, \”which involves fees for [electricity] generators with above-average emissions intensity and subsidies or rebates for those with below-average emissions intensity.\”
  • A cap-and-trade system, in which the government sets an overall cap on carbon emissions, and then allocates permits to emit this amount of carbon. These emission permits would have two important traits: 1) they would shrink over time, so a permit to emit amount of carbon in one year would gradually phase down to allow emitting only a certain percentage of that amount in future years; and 2) the permits could be bought and sold, so that those who could reduce emissions relatively cheaply would have an incentive to go ahead and do so, and to sell their excess permits to those who would find it more expensive to reduce emissions.
  • A carbon tax.  

I won\’t attempt to rank these options in any systematic way, but here are some of my thoughts about them.

1) A feebate system has some substantial advantages. Krupnick and Parry explain: \”The feebate approach has several potential advantages over a CES [clean energy standard]. For starters, the incremental costs of reducing CO2 are automatically equated across different generators, promoting a cost-effective allocation of emissions reductions within the power sector at a given point in time. Another attraction of the feebate is that it automatically handles changes in the future costs of different generation technologies or fuel prices. If, for example, the future expansion of nuclear power is temporarily held up, firms would be permitted a higher emissions intensity (at the expense of paying more fees or receiving fewer rebates); under a strict CES they would be required to meet a given emissions intensity standard, regardless of costs. Conversely, if the competitiveness of wind power improves, firms are rewarded for exploiting this opportunity and further cutting their emissions under a feebate system; with a CES, they have no incentive to do better than the emissions intensity standard. By establishing a fixed price on CO2 emissions, moreover, a feebate facilitates comparison of policy stringency across countries. This price could be set in line with estimates of the (global) environmental damages from CO2 (currently about $21 per ton, according to a recent review across U.S. agencies and subsequent use in U.S. regulatory impact analyses [U.S. Interagency Working Group on Social Cost of Carbon 2010]) or prices prevailing in the European Union’s Emissions Trading.\”

2) Anti-tax sentiment is a political constraint. I suspect that the clean energy standard is popular because, at least to politicians, it appears to have no costs. Similarly, cap-and-trade may appear to impose no costs either. In contrast, a carbon tax clearly looks like a charge. A feebate proposal does require collecting revenue and passing it to other actors–but there is no actual revenue retained by the government, so it may not look like a tax

3) The clean energy standard and feebate approaches both focus only on electricity generation, and for that reason would have less effect on carbon emissions than a broader-based cap and trade or carbon tax approach. This may also be a political selling point, because drivers using gasoline and firms that are heavy users of coal or oil or natural gas would be less affected by an approach that focused only on electricity generation. However, the feebate idea might have broader applicability. I have in the past seen feebate proposals in the past that focuses on automobile fuel efficiency: that is, those driving cars with below some level of miles-per-gallon pay a fee, and those driving cars above that level of miles-per-gallon get a rebate.

4) A clean energy standard is a pure regulatory approach, specifying what is \”clean\” and what is not, and thus is likely to be less effective than a cap-and-trade or a carbon tax approach. Here\’s how the CBO makes this point in its report: \”Even with a wide variety of compliance options, neither an RES [renewable electricity standard] nor a CES [clean electricity standard] would be as cost-effective in cutting CO2 emissions as a “cap-and-trade” program. Such a program would involve setting an overall cap on emissions and letting large sellers of emission-creating products (such as electricity generators, oil producers and importers, and natural gas processors) trade rights to those limited emissions. In that way, a cap-and-trade program would create a direct incentive to cut emissions; in contrast, an RES or CES would create a direct incentive to use more renewable or other types of clean electricity but would have only an indirect effect on emissions.\”

5) A carbon tax and auctioning of cap-and-trade permits would raise revenue that could be used to lower tax rates in other areas, in ways that could enhance efficiency–but it is difficult to guarantee that the revenues would be used in this way.

6) One great advantage of a carbon tax is that it reduces the incentives for political tinkering. A cap-and-trade proposal, for example, is likely to have extensive grandfathering of those who currently emit carbon, probably along with a parade of special rules and exemptions. Defining what is \”clean energy\” or even how the feebates would be structured are likely to be more highly political decisions. 

conversableeconomist

The Accumulation of Regulations

In the Summer 2011 issue of Regulation magazine, Bruce Yandle offers some bracing concerns about the federal regulatory process in \”Forty Years on the Regulatory Commons.\” Here is a sampling:

\”Inspired by statutes directing action, our 60-plus federal regulatory agencies are somewhat like sheep with legislative guiding shepherds grazing on a regulatory commons, a resource space where there are no systematic limits on the number of rules that can be produced, the time required to read and abide by them, or the economic resources consumed in meeting the rules. Fed by growing budgets and expanded duties, the regulators write more rules. While budgets, congressional directives, executive orders, and benevolent forbearance partially constrain the commons, there is always room for one more bite by the sheep, one more regulation. …\”

\”What is it like on the regulatory commons? When one puts on a pair of externality-visualizing glasses, one sees endless opportunities opportunities to internalize external costs and maybe even render the world Pareto safe. Whether it be dealing with lead paint, mandatory inspection of catfish, energy efficiency for refrigerators and furnaces, minimum standards for drivers licenses, diesel engine emissions, advertising over-the-counter drugs, marketing practices of funeral homes, or ridding the market of noisy Hickory Dickory Dock pounding toys, the world is full of unhappy and dangerous situations that need fixing. But with externality glasses, it is much easier to see the flaws than to determine if all people taken together are made better off after the regulatory repairs are in place. And who has time to check? …\”

\”Years ago, when regulation was young, before we had published those 2.5 million pages of rules, economists spoke knowingly in tones of certainty about market failure and intervention to correct difficulties from such problems as market power, information asymmetries, failed institutions, and unspecified property rights. We spoke as though government and regulation were exogenous to the market process, that on occasions regulators would open a window, examine features of the economy, make some efficiency enhancing
adjustments, and then quickly close the window to leave the economy to operate in a more glorious way. Indeed, we used the word “intervention” and we referred sometimes to Michael Lantz’s 1937 FTC statuary metaphor where a powerful free market horse is being bridled by a benevolent plowman who
presumably serves the public interest.\”

\”But as regulatory windows opened and closed daily and agencies pumped out more rules, firms and industries became intertwined with government. Government was no longer exogenous to the behavior of firms in the marketplace; government became endogenous. While major regulations may have reduced some perceived market failure, they also cartelized industries and reduced competition. The strong horses and other special interests came seeking the plowman.\”

Via a post by Arnold Kling at EconLog.