April 19, 2008
MAKE DRIVERS PAY THEIR COSTS AND THEY'LL STOP:
Not-So-Free Ride (STEPHEN J. DUBNER and STEVEN D. LEVITT, 4/19/08, NY Times Magazine)
Americans drive too much. This isn’t a political or moral argument; it’s an economic one. How so?Because there are all sorts of costs associated with driving that the actual driver doesn’t pay. Such a condition is known to economists as a negative externality: the behavior of Person A (we’ll call him Arthur) damages the welfare of Person Z (Zelda), but Zelda has no control over Arthur’s actions. If Arthur feels like driving an extra 50 miles today, he doesn’t need to ask Zelda; he just hops in the car and goes. And because Arthur doesn’t pay the true costs of his driving, he drives too much.
What are the negative externalities of driving? To name just three: congestion, carbon emissions and traffic accidents. Every time Arthur gets in a car, it becomes more likely that Zelda — and millions of others — will suffer in each of those areas.
Which of these externalities is the most costly to U.S. society? According to current estimates, carbon emissions from driving impose a societal cost of about $20 billion a year. That sounds like an awful lot until you consider congestion: a Texas Transportation Institute study found that wasted fuel and lost productivity due to congestion cost us $78 billion a year. The damage to people and property from auto accidents, meanwhile, is by far the worst. In a 2006 paper, the economists Aaron Edlin and Pinar Karaca-Mandic argued that accidents impose a true unpaid cost of about $220 billion a year. (And that’s even though the accident rate has fallen significantly over the past 10 years, from 2.72 accidents per million miles driven to 1.98 per million; overall miles driven, however, keep rising.) So, with roughly three trillion miles driven each year producing more than $300 billion in externality costs, drivers should probably be taxed at least an extra 10 cents per mile if we want them to pay the full societal cost of their driving.
How can this be achieved? Higher tolls, especially variable tolls like congestion pricing, are one option. This seems to have worked well in London but was recently quashed in New York City, where the political hurdles proved too high.
A higher gas tax might also work. If a typical car gets 20 miles to the gallon, then the proper tax would be about $2 per gallon. But with the current high market price for gas and the political hysterics attached to it — well, good luck with that one.
This brings us to automobile insurance.
It's one thing to Reform welfare, but go after the middle class entitlements and you really set the pigs squealing. Posted by Orrin Judd at April 19, 2008 7:52 AM
As the article implies, the problem of automobile insurance pricing is one that the free market can certainly solve. The problem of congestion is one that the market generally does not, but that's because roads are government provided instead of privately.
The fact that congestion costs are so much higher than emissions costs by themselves (and congestion causes idle emissions, which are really worthless) argues that congestion costs are a higher priority than a gas tax, since the latter would fall on people who do not drive in congested areas.
Posted by: John Thacker at April 19, 2008 9:06 AMI suspect that Arthur's decision to buy a $300,000 house that he certainly cannot afford has had a much more negative impact on Zelda than any amount of driving he has done or could do.
Ditto for Arthur's decisions (made every day) to live beyond his means, running his credit card balances up into the (tens of) thousands.
And ditto for Arthur's decision (made every day) not to fund any type of retirement account, either through his job or on his own.
One of the engines of the US economy is the interstate highway system. A seamless shift to alternatives is a fantasy. Trains are useful, and indeed carry more cargo than ever. But would the authors acknowledge the terrible 'negative external' cost to be paid if the railroad system suddenly had to go everywhere the highway system currently does (think "bridge to nowhere").
Note how disingenuous they are in 'computing' an "additional tax of $0.10 per mile". No tax is currently determined based on mileage. And raising the federal gas tax 11-fold (as they mildly suggest) is insane, for every possible reason.
Surely there is lots and lots of waste associated with the macro view of automobile transportation in the US. Heck, NASCAR and the whole racing industry is a "waste". But it is a choice we make. It may be a negative externality to the NYT magazine, but so are a lot of other things.
Posted by: jim hamlen at April 19, 2008 9:40 AMCars, like guns, are spirit, song and power. We really do not want to give these things up.
Posted by: Lou Gots at April 19, 2008 10:28 AMtwo words: RATION GAS!
Just like during WWII - people would be forced to be more efficient with their gas consumption.
Posted by: buckeyebabe at April 19, 2008 11:18 AMObama supports high taxes - Orrin supports high taxes!
Obama supports dismantling the military - Orrin supports dismantling the military!
A ticket made in Heaven.
Obama/Judd 2008: Give McCain the 50-0 victory Orrin's always going on about.
With two Northeastern intellectual liberals on the Democrat ticket this'll be a slam dunk for the GOP.
You don't need to raise taxes, just tax consumption instead of income.
He's too timid about how much the military should be cut.
Posted by: oj at April 19, 2008 2:10 PMReturn to a 55 MPH highway limit to reduce highway traffic down to 65MPH from the current 75MPH just for starters.
Posted by: Genecis at April 19, 2008 5:46 PMZelda isn't bothered by congestion unless she too is on the road at the same time, in which Arthur and Zelda have contributed equally. Personally I wish they'd get off the road so I could get where I want to go.
It reminds me of an old Onion poll: 98% of drivers favor public transportation for everyone else.
Trains are a chimera. Our country is too big to make continental train service work, too spread out to make regional train service work, and too entrenched with public employee unions to make intra-city trains work. Advocates who suggest otherwise are encouraged to move to Manhattan (or at least Newark) to help with the needed population density. This includes you, Orrin.
We drive cars and fly in planes and do all the other things we do because, simply, we can, and we've figured out in our bitter, clingy ways that it's the best way for us, personally, to get from point A to point B. I'm not about to change my behavior so that I can share a rotten, government-operated train (e.g., the Chicago Transit Authority) with a bunch of other people who would also prefer to drive if only they could get the do-gooders off their backs.
P.S. to Genecis: make the speed limit 35 mph if you want. Won't matter. People drive the speed at which they are most comfortable given weather, road conditions and traffic. To make the speed limit anything else is to encourage cynicism and disrespect for the law.
Posted by: Steve White at April 19, 2008 7:35 PMYes, the train lines need to be private. They'll be more than sufficient.
Posted by: oj at April 19, 2008 9:01 PMAn eleven-fold increase in gas taxes would have an interesting effect on the costs of goods shipped by interstate, consumed by more than just those middle-class pigs. Anyone want to see what Corn Riots look like in 21st Century America?
Posted by: Chris at April 19, 2008 11:13 PM