The Blogosphere Puts It In Park

Tyler Cowen at NYT:

IN our society, cars receive considerable attention and study — whether the subject is buying and selling them, the traffic congestion they cause or the dangerous things we do in them, like texting and talking on cellphones while driving. 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, as presented in his 733-page book, “The High Cost of Free Parking.”

Many suburbanites take free parking for granted, whether it’s in the lot of a big-box store or at home in the driveway. Yet the presence of so many parking spaces is an artifact of regulation and serves as a powerful subsidy to cars and car trips. Legally mandated parking lowers the market price of parking spaces, often to zero. Zoning and development restrictions often require a large number of parking spaces attached to a store or a smaller number of spaces attached to a house or apartment block.

If developers were allowed to face directly the high land costs of providing so much parking, the number of spaces would be a result of a careful economic calculation rather than a matter of satisfying a legal requirement. Parking would be scarcer, and more likely to have a price — or a higher one than it does now — and people would be more careful about when and where they drove.

The subsidies are largely invisible to drivers who park their cars — and thus free or cheap parking spaces feel like natural outcomes of the market, or perhaps even an entitlement. Yet the law is allocating this land rather than letting market prices adjudicate whether we need more parking, and whether that parking should be free. We end up overusing land for cars — and overusing cars too. You don’t have to hate sprawl, or automobiles, to want to stop subsidizing that way of life.

As Professor Shoup wrote, “Minimum parking requirements act like a fertility drug for cars.”

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.

In densely populated cities like New York, people are accustomed to paying high prices for parking, which has helped to encourage a relatively efficient, high-density use of space. Yet even New York is reluctant to enact the full social cost of the automobile into policy. Proposals to impose congestion fees have failed politically, and on-street parking is priced artificially low.

Matthew Yglesias

Arnold Kling:

I am not sure that the argument is correct. I worry that there is a lot of confusion between fixed costs and marginal costs. Creating a parking place carries fixed costs. However, the marginal cost of using a parking space is often zero.

The marginal cost of using a cell phone network is often zero, so your cell phone company tries to offer you a plan that makes the marginal cost feel like zero to you. It could be that free parking emerges for the same reason.

If we abolished free parking, would parking spaces be scarcer? Keep in mind that if the price of parking went up, this would cause movement along the supply curve as well as along the demand curve. Maybe the total number of parking places would decline (it depends on elasticities), but the one result you can predict with certainty is that the number of unused parking places would go up. Is that necessarily welfare-improving?

Suppose I have a piece of land that could be used for parking or for other purposes. You might argue that having a price for parking would send me a clearer signal about the best use.

However, the cost of converting that land from one use to another is very high, so I have to choose one purpose or the other and stick with it. One exception to high conversion cost is lanes that change from parking lanes to traffic lanes during rush hour. There, the price of parking during rush hour is very high (you get ticketed and towed), and that seems to work.

Once I have decided to use land as a parking place (say, land in front of a store), then there is no reason for me to want to deter people from parking in empty spaces. That suggests charging a price of zero other than at peak times.

The problem is one of congestion pricing. You need paid lots to charge people to park at peak times, such as concerts or sporting events.

Cowen responds:

The key is not to “abolish” free parking, but to a) abolish minimum parking requirements, and b) put prices or higher prices on congested municipal-owned parking spaces.  Both a) and b) will lower the demand for parking and a) will lower the supply of parking, so why should the number of unused parking spaces necessarily go up?  If you treat something as an appropriately scarce resource, it should be used more effectively.

There are plenty of DC restaurants which don’t have their own parking lots, but they use paid valet parking and find ingenious ways to store cars more effectively.  The parking fee means that some people walk there or use the Metro, rather than driving and parking.  No one finds this arrangement especially objectionable and while valet parking is at a discount to market still it is priced.  At lunch time valet parking is less likely but still people pay to park, usually in nearby lots.  No one would suggest that these restaurants be forced to put in minimum parking.  Nor would anyone suggest that mandated minimums would be neutral with respect to parking efficiency.

I’m simply asking for the same switch in reverse, namely to do away with minimum parking requirements.  Very likely, such a change will have a bigger impact on future developments than on past developments (it can be hard to reconfigure a parking lot), although some malls might sell off or rent their now-liberated parking spots to other commercial ventures.

Mark Thoma:

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.

Robin Hanson:

Re Mark Thoma, if we were concerned about overall equity of utility, we’d just give the poor more money and let them buy what beach trips they wanted. If we paternalistically thought poor folk irrationally buy too few beach trips (why?!), we might give them beach travel vouchers. But surely the vast majority of free parking is not well explained by our thinking the poor irrationally take too few car trips.

Re Arnold Kling, I didn’t see Tyler saying to force prices above marginal cost; he just opposed laws requiring excess supply. Why should we treat parking spots much different than thousands of other familiar products whose average costs are often above marginal costs? Should we require every mall to have enough movie theaters seats to handle the premier of a record blockbuster, all because since theatres are rarely full their marginal cost is near zero?  How about similarly requiring a vast supply of restaurant tables which would then rarely be full?

Sometimes good economic analysis says that the world should be different than it is. Yes you should wonder if such an analysis is missing something important. But you shouldn’t strain too much just to justify the status quo. We require the creation of way too much parking, and we’d be better off to coordinate to stop it.

Kling responds to Hanson:

So, there are two issues.

a. How much land should be devoted to parking spaces?
b. Given the answer to (a), what should be the price for parking?

I argue that for (b) the answer is often zero. A higher price would simply result in unused parking places, which does not increase welfare. Robin is falling back on issue (a), and here the thinking is that the state provides, either directly or through regulation, more parking spaces than are optimal.

Suppose there were no state provision of parking places. What would the equilibrium look like? Some possibilities:

1. You get Berlin, where the public transit is highly efficient and lots of people ride bicycles, even in the rain.

2. Individual housing developments and businesses undersupply parking. The thinking is that if parking runs out in front of your business, your customers will use the parking spaces in front of the business next door. This leads to stores putting up warning signs that say, “unless you patronize my store, your car will be towed.” Neighborhoods put up signs that say, “unless you have a residential permit, your car will be towed.” This imposes all sorts of enforcement costs as well as inefficient use of space. The warning signs often deter people from parking in places where they impose no cost at that particular time.

3. Land use responds, but not toward the Berlin scenario. On the contrary, businesses relocate farther away from cities, to locations where parking is cheap to supply and you don’t get into fights with other businesses about towing rules. Housing developments are built without street parking but instead with large driveways–in effect, each household requires its own oversized parking lot to accomodate its peak demand . As a result of these sorts of adaptations, it takes more parking places to accommodate the same number of cars.

4. After a lot of Coasian bargaining, businesses agree to each provide a minimum number of parking places and housing developers agree to provide streets wide enough to allow parking.

The point is, you don’t necessarily get (1). And you might get (4).

Thoma responds to Hanson:

In response to Robin Hanson, I think Arnold Kling makes some good points about why government intervention in parking may be necessary to resolve externality problems. Arnold doesn’t say that government intervention is necessary, and he would likely resist that interpretation, a Coasian bargaining solution is the outcome in his scenario. But the usual sorts of considerations, i.e. transactions costs, unclear property rights regarding street parking in front of residences — some people, for example, use cones and other devices to save parking spots — and other barriers may prevent the Coasian bargaining outcome. (Robin Hanson doesn’t like what I wrote either, though, again, I was trying to make a general point about equity versus efficiency and probably should have chosen another example besides parking near the ocean to make that point

Randal O’Toole at Cato:

I am disappointed that the distinguished George Mason University economist, Tyler Cowen, has fallen for the “high-cost-of-free-parking” arguments of UCLA urban planner Donald Shoup. Shoup is an excellent scholar, but like many scholars, he has the parochial view that the city that he lives in is a representative example of what is happening everywhere else.

Shoup’s work is biased by his residency in Los Angeles, the nation’s densest urban area. One way L.A. copes with that density is by requiring builders of offices, shopping malls, and multi-family residences to provide parking. Shoup assumes that every municipality in the country has such parking requirements, even though many do not, and that without such requirements there would be less free parking. This last assumption is extremely unlikely, as entrepreneurs everywhere know that (outside of New York City) 90 percent of all urban travel is by car, and businesses that don’t offer parking are going to lose customers to ones that do.

Shoup portrays such free parking as a “subsidy” because not all people drive and so the ones who don’t drive end up subsidizing the ones who do. But any business offers a variety of services to its customers and employees, and no one frets about subsidies just because they don’t take advantage of every single service. How often do you actually swim in the swimming pools or work out in the exercise rooms of the hotels you stay at?

Shoup also supposes (and Cowen accepts) that universal parking fees would greatly reduce the amount of driving people do. “Minimum parking requirements act like a fertility drug for cars,” Cowen quotes Shoup as saying. Metro, Portland’s regional planning agency, submitted this question to its transportation model and concluded that requiring all offices, shopping malls, and multi-family residences to charge for parking would reduce driving by about 2 percent. The model showed that charging for parking has a greater effect on driving than spending billions on light rail, building scores of transit-oriented developments, or increasing the urban area’s population density by 20 percent. But 2 percent still isn’t going to do much to relieve congestion or solve any of the other problems Cowen associates with driving. Plus he never really explains why he thinks reducing mobility is a good idea in the first place.

Tim Lee:

A key point to emphasize here is that parking mandates aren’t just a subsidy to car ownership, they’re also a burden on pedestrians, who must trek across parking lots to get to almost any building. So not only does walking mean giving up the state-mandated subsidy of free parking, but it also means walking significantly further than you’d have to in a city where the availability of parking was determined by market forces.

And this results in the opposite of the virtuous cycle I wrote about a few weeks ago: as density falls, you get fewer pedestrians, which depletes the market for small, pedestrian-friendly establishments. And fewer pedestrian-friendly businesses establishments means that even fewer people walk. The result is the situation in most cities in the Midwest and the Sun Belt, where even people who strongly prefer to live in a “walkable” neighborhood find there are few if any neighborhoods that cater to that preference.

James Joyner:

To all this, I’d add a couple of points.

First, this is a very difficult conversation to have because of the radical differences in reference frames of the two sides.    Aside from economists, anti-free parking types are invariably urban dwellers where parking is difficult and the demand for every square foot of space is high.   People who live in suburbs, especially those that don’t regularly drive into the handful of dense urban centers where any of this matters, are befuddled.  Nobody would pay to park at the Hamilton Place mall on the outskirts of Chattanooga.   At the Pentagon City mall, nobody thinks twice.

Second, while ordinances requiring the allocation of parking spots for apartment buildings, storefronts, and the like are doubtless a boon to car owners, they are mostly an attempt to limit negative externalities.   If I build an apartment complex in a major downtown center and provide no parking, I’m obviously less competitive than those who do.   But, at the same time, those who live in my building who own cars are going to have to park somewhere, and they’ll therefore occupy spaces — often for hours and days on end — that could otherwise be used by short-term parkers who want to patronize the local merchants, taverns, and restaurants.   Similarly, if I run a downtown business that caters to clients who don’t need to come to my storefront, I’d never pay to construct parking spaces for my employees, as it’d be cheaper to subsidize their parking elsewhere.   But, again, that means my employees, who arrive before the shops open, are taking up spots that could be used by customers of service-oriented businesses.

Taking both of these into consideration, then, it seems to me that the key good to control is street parking in crowded downtown areas at peak hours.   We want residents of apartment buildings and houses and employees of businesses to be out of the way to accommodate short-term parking that allows commerce to take place.   So, in places where street parking is scarce, charge variable rates at meters and limit the number of hours that can be parked there.  (A tangentially related pet peeve: And delivery vehicles can’t be allowed to take up these spaces, much less double park, which means that those activities have to be time-shifted to the early morning or late evening hours.)

These regulations would be anathema in most of the United States, which simply isn’t crowded enough to have that kind of government intervention in the lives of citizens.   But it makes sense in New York, Boston, DC, San Francisco, and a handful of other metro areas long since accustomed to the need for state to smooth over daily interactions.

Ryan Avent:

But the main point is that it’s very difficult to make a positive case for government provision of parking spaces or mandated parking minimums. Given the existence of government provided spaces, it’s harder still to argue against market parking pricing. We have many examples of private firms building and operating parking lots or decks, charging positive prices, and doing a lovely business that seems to work well for operator and driver alike. How does one justify government intervention?

Now you might argue that there are public good considerations involved; that parking spots are like other bits of transportation infrastructure in that there is a role for government provision. Personally, I think parking spots are more like gas stations than roads, and meanwhile roads should be congestion priced (as many transit systems already are — and then some, in some cases). You’d think that libertarians making the public good argument would have no problem defending government provision of and subsidy for transit, but of course they don’t. They get around this by arguing that people want to drive and they don’t want to ride transit. This is strange in that in few other cases would a libertarian claim to know what markets want, and while they might refer to mode shares, those shares are themselves determined by decades of heavy subsidies for all things auto.

William Brafford at The League:

But the phrasing at the end of Cowen’s column is unfortunate, as it seems to imply that someone out there should be raising fees: “Imposing higher fees for parking may make further changes more palatable by helping to promote higher residential density and support for mass transit.” It’s clear from the beginning of the article that Cowen is speaking of removing the zoning laws and street parking procedures that keep the cost of parking artificially low in places, but I could see how a too-quick reader might wrongly infer that the column argues for high parking costs as a policy goal regardless of market prices.

Weirdly, several libertarians have taken issue with Cowen’s article. Randal O’Toole is pretty sure that “free parking is a free-market choice,” and thinks Cowen should support it. Well, I’m sure there are plenty of places where it will make a lot of sense for businesses to build large parking lots, but it’s strange to me that a libertarian would be all right with regulations that make this decision for the businessmen. Perhaps he sniffs out an urbanist agenda behind the argument…

Arnold Kling suspects that if we didn’t like state-mandated free parking, we won’t necessarily get the low-driving paradise we desire. Perhaps the American people, accustomed to driving, will simply embrace further sprawl as businesses relocate to exurbs where land is cheap. Or maybe local governments will be faced with skyrocketing enforcement costs as people cheat aggressively on parking. (Cowen thinks Kling’s microeconomic logic is a little bit off.)

Neither of Kling’s scenarios seems particularly likely to me, but then again I don’t study this stuff and I don’t really have the first clue what would happen if cities aimed at more robust markets for parking. All I can really provide is one lonely data point: having arranged my life so I can do most of what I want to do without having to drive, I can say for sure that if parking prices went up in Baltimore, I’d sell my car. At any rate, I am a huge fan of sidewalk cafes and not having to walk through parking lots to get to stores, so I’d love it if more city businesses were given the opportunity to do without parking lots.

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