October 5, 2005

WHEELAN VS. WHEELIN' (via John Resnick):

Want to End Traffic Jams? Raise the Prices (Charles Wheelan, Ph.D., October 3, 2005, The Naked Economist)

Why is traffic congestion so bad? Because, even after the recent run up in gas prices, driving is too cheap, particularly at peak hours.

Try this thought exercise: Imagine that we operated our public golf courses like we operate our public roads. We would charge all taxpayers to help build and operate the course, regardless of how often they play golf -- or even if they don't play at all. Then we would charge very little to play and, most important, all golfers could tee off whenever they showed up. Would it be a little too crowded at 9:00 a.m. on Saturday when 127 golfers tried to tee up their drivers? You bet. We'd soon be reading about "golf rage," which would be particularly dangerous given all the swinging clubs.

The way we operate our roads violates the same basic lesson of economics: If you underprice something relative to its true cost, people will use too much of it. Red Lobster learned this the hard way not long ago with its "endless crab promotion." For $20, customers could eat crab until they were full or the restaurant closed, whichever came first.

Red Lobster lost money. The president was fired. In a conference call with analysts -- I'm not making this up -- the chairman and the new president discussed whether it was the third or the fourth helping of crab that made the promotion financially ruinous.

True, driving in the U.S. is not free. A small proportion of roads have tolls. We have a federal gas tax of 18.4 cents a gallon; many states also have gas taxes and other auto-related taxes. But driving is still darn cheap relative to its true social cost.

The federal gas tax is not indexed to inflation; it's actually fallen steadily in real terms over the past decade. Our state and federal gas taxes make up roughly a quarter of the price of a gallon of gasoline; in Europe, that figure is closer to 75 percent. So while we were horrified to watch gas prices march steadily towards $3.00 a gallon earlier this year, the Brits, French, and Germans were paying about twice as much.

I'm no fan of taxes. But our gas taxes and other "user fees" do not even cover the full cost of road construction and maintenance, let alone the congestion costs that autos impose on other drivers, or the environmental impact of driving.


The Howard Johnson's down the road from my fraternity at Colgate had a $5-all-you-can-drink Monday Night Football special...once.

Posted by Orrin Judd at October 5, 2005 1:59 PM
Comments

Texas is now talking about tolling a new third lane for sections of Interstate 35 between San Antonio and the Oklahoma state line. How you'd toll it in certain areas without even additional widening to install plazas inside the Jersey barriers from the existing lanes remains to be seen (unless they give everyone in the state an E-Z Pass), but the days of the "pay later" construction of new highways appears to be over, even if people still are reluctant to switch back to trains or buses.

Posted by: John at October 5, 2005 2:17 PM

Good idea. Now let's start doubling the price of food until we can cure our obesity problem. $5 all you can drink nights are financially viable, if you charge $10 to pee.

Posted by: AllenS [TypeKey Profile Page] at October 5, 2005 2:26 PM

Allen:

we do indeed put sin taxes on alcohol, tobacco, etc.

Posted by: oj at October 5, 2005 2:32 PM

oj:

So what.

My point is this: If you think you can lessen the driving of cars by increasing the price of gas, then you should be able to lessen the amount of obesity by increasing the price of food.

Elsewhere in the article it states that the federal gas tax has actually fallen if indexing for inflation is considered. That is a good thing. Keep your hands out of my pockets.

Posted by: AllenS [TypeKey Profile Page] at October 5, 2005 3:31 PM

Allen:

Yes, there are certain foods it may well make sense to tax more heavily, but food in general is a necessity of life.

Gasoline use is detrimental to life.

Posted by: oj at October 5, 2005 3:37 PM

Actually, the internal combustion engine has been the most pro-life invention in history.

Posted by: David Cohen at October 5, 2005 3:50 PM

Thank you David. I farmed for almost 30 years. Guess what, you need gasoline for those tractors. Then you need more gas to deliver what you produce to the consumer. Then, because you sweated all day long producing, you need gas to go buy beer. It never ends.

Posted by: AllenS [TypeKey Profile Page] at October 5, 2005 3:56 PM

It's well known among economists that the $5 all you can drink price should be reserved for women, as their presence will get the Colgate boys to spend $80 each on drinks.

Posted by: pj at October 5, 2005 4:15 PM

Raising the price of gas would only be an effective way of reducing traffic if the cost of funding public transportation were cheaper than the rise in gas prices - which it never is - at least not for the right people.

Taking an extra thousand a year from me at the gas pump or taking it by taxing me (to fund a stupid electric train run by the morons at city hall) - whats the difference (other than loss of personal choice and freedom)?

Posted by: Shelton at October 5, 2005 4:21 PM

Shelton:

Taking away the choice is the point, or at least making it more expensive.

Posted by: oj at October 5, 2005 4:32 PM

pj:

No man worth his salt wenches while he's drinking.

Posted by: oj at October 5, 2005 4:32 PM

C'mon oj. Everyone who went to college has donned the beer goggles a time or two.

Posted by: Patrick H at October 5, 2005 5:09 PM

Patrick:

Nothing wronmg with stumbling into a serving, but it should be coincidental or accidental, not the goal.

Posted by: oj at October 5, 2005 7:02 PM

OJ, Taking away the choice ain't gonna happen. At least as long as there is a choice. You can't get anywhere here in the Midwest without a car, much less in the West. Keep wishing, but politics will prevail. You're not going to take away cars any more than guns.

Posted by: jdkelly at October 5, 2005 7:09 PM

You don't have to literally take them away, just make them prohibitively expensive to use except by necessity.

Posted by: oj at October 5, 2005 7:13 PM

Of course the internal combustion engine is the most pro-life invention.

Front seat, back seat, hood, trunk all the accessories made it so.

Clutch is hard to work around, tho.

Posted by: Sandy P at October 5, 2005 7:22 PM

oj,
Nothing wronmg with stumbling into a serving, but it should be coincidental or accidental...

Fair enough but you forgot two other (often regretted) exceptions: The Dare and The Challenge.

Posted by: Patrick H at October 5, 2005 8:28 PM

AllenS: "Thank you David. I farmed for almost 30 years. Guess what, you need gasoline for those tractors."

I thought tractors ran on diesel fuel, on which farmers pay a lower tax rate than drivers.

Posted by: Bill Woods at October 5, 2005 8:30 PM

I once had a discusion in a bar about the existence of God wirh a gearhead, My proof was the existence ot the internal combustion engine.(intelligent design, if you will) I stand by it. Some things are just there. See you on the train OJ, in the next incarnation. Central time zone, one hour west.

Posted by: jdkelly at October 5, 2005 9:01 PM

"No man worth his salt wenches while he's drinking."

Dateless in college, Huh OJ.

Posted by: Robert Schwartz at October 5, 2005 9:52 PM

oj,

I can't believe you would really like to see driving prohibitively expensive. Drive only by necessity you say. Please enlighted us all on what you consider necessity.

Posted by: jorzo at October 5, 2005 11:34 PM

Bill Woods:

Depends on how big the tractor is.
The big ones with eight tires that the corporate farms run day and night are indeed diesel.

Agricultural and marine diesel is taxed at a different rate, often not taxed at all.

Posted by: Michael Herdegen [TypeKey Profile Page] at October 5, 2005 11:46 PM

Diesel engines are internal combustion engines.

Posted by: David Cohen at October 5, 2005 11:52 PM

jorzo:

The ones you're willing to pay significantly more for.

Posted by: oj at October 6, 2005 7:41 AM

oj,

That's a partially good economic answer. Necessity is an individual decision based on cost. But that is only half the picture. Price bestows information on resources. You propose to artificially inflate price with price controls. You lose the information on supply. The state will benefit but not the supplier.

Posted by: jorzo at October 6, 2005 9:57 AM

Yes, the information we wish to bestow as a society is that we disfavor driving.

Posted by: oj at October 6, 2005 11:04 AM

oj-

You disfavor such mobility. Who cares what you favor as opposed to someone else. That's what markets are for: convey information regarding scarcity without resorting to violence and coercion. I know, you don't mind coercion as long as you are the one coercing. Most folks, Americans in particular, would prefer to be left alone from the meddling classes even if it means letting the 'messy' free market decide instead of you.

Posted by: Tom C., Stamford, Ct. at October 6, 2005 11:47 AM

Tom:

No they wouldn't. They favor measures like increasing fuel standards.

Posted by: oj at October 6, 2005 12:03 PM

oj,

I see its society that disfavors driving? What society are you talking about? I would say most people favor driving in our society, just by the numbers. Speak for society at your own peril. That's the trouble with socialism, a hubris minority speaking for a hostage majority for its own good and they better like it. Well, the like part is optional.

Posted by: jorzo at October 6, 2005 1:30 PM

Yes, Americans favor raising CAFE standards and would support a gas tax that replaces income taxes.

Posted by: oj at October 6, 2005 1:35 PM

oj,

Are you sure a gas tax and 'prohibitively expensive' mean the same? Again you say "Americans favor" like you speak for everyone.

Posted by: jorzo at October 6, 2005 1:50 PM

jorzo:

No, by prohibitive I don't mean that driving ends, just that it costs enough for people to reduce it.

Posted by: oj at October 6, 2005 1:59 PM

oj:

I misunderstood your use of the term. I take 'prohibitively expensive' as forbid, bar, ban, exclude. Just the $1 increase in gas prices since August has changed behavior. SUVs becoming less desirable. But to raise prices just to get rid of congestion? There are other ways to do that.

Posted by: jorzo at October 6, 2005 2:46 PM

Yes we should use them too--tolls, parking taxes, congestion fees.

Posted by: oj at October 6, 2005 3:18 PM

oj:

That's alot of fees. Congestion fee? You don't live in the UK, do you?

Posted by: jorzo at October 6, 2005 4:22 PM

There's no reason city-dwellers who own cars at fairly low rates shouldn't soak the suburbanites who insist on cluttering their roads.

Posted by: oj at October 6, 2005 5:33 PM
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