>I wrote the following on Greater Greater Washington, in response to a complaint that by proposing prices as a way to solve the parking shortage, parking will be reserved for the wealthy, while everyone else will lose the flexibility of driving and will have to take transit.
Let’s concentrate on the parking issue here, and more specifically the on-street residential permit parking issue.
Here’s the proposal that I would support, and the reasoning behind it.
Out in the suburbs or in the country, there is a lot of curb space, way more than there are people who would like to park their cars there. Short of the regulations needed to ensure people don’t abandon vehicles there on a semi-permanent basis (vehicle must have valid registration, must be in working condition, must move occasionally), I don’t see any reason to charge people or otherwise restrict how or when you use the street space.
In a city, it’s completely different. In the absence of restrictions, the number of people who would like to leave their car by the side of the road would overwhelm the amount of street space available. Economically, there’s a shortage. There are three principal ways of dealing with the shortage of on-street parking.
1. You can ration by inconvenience. This is how New York City does it. People can park for free, but you have to move your car three times a week, and when you park, you may have to drive quite a distance to find an empty space. All of the time that people spend on trying to park and move the car is wasted, and is not usable in the economy. There is little consumer surplus, because the time wasted trying to park tends to cancel out much of the user benefits of parking.
2. You could ration by fiat. The government could make a rule that states, first come first served, or only one permit per person, or some other rule, arbitrary or not, that dictates in a non-market fashion who gets to use the on-street space. We have a little of this in DC, in that only residents can use the on-street space. We have more of it in Arlington in that the number of permits available are limited per household. Economically speaking, the people obtaining parking below market rate get a large consumer surplus, especially if the restrictions are effective at ensuring a good balance between supply and demand.
3. You could ration by price. There are a number of ways to do this, but the simplest would be to reduce the size of the permit areas (Arlington uses 1/2 mile radius), and conduct periodic availability surveys to determine whether the spaces are generally full or empty. The price to purchase a new parking permit for an area would float based on availability. I would propose capping the price increase rate of existing permits for stability’s sake, and I would also make the permit price for the first car per household significantly lower, with additional cars being a premium over the first. The consumer surplus partially accrues to the consumer, because the price you pay is always lower than you would be willing to pay, but part of the consumer surplus accrues to the government, because the fee collected is greater than the cost of providing the parking service. That revenue could be used to improve public transit, subsidize shared cars, or reduce other taxes in the city, which would increase consumer surplus in other aspects of the economy.
I propose this not because I hate cars or that I think only rich people should have access to them, but because I recognize that city on-street parking is a scarcity, and allocating scarcity is what prices are for. It’s the most efficient way of allocating scarce goods and services. You can put some small amount of intervention in the market as described above, basically saying that everyone should have the opportunity to park one car less expensive than people can park the second, but in general the mechanism for allocating scarce services should be prices.
I think that this proposal strikes a balance between egalitarian (everyone gets one at reasonable cost) and economic reality (everyone cannot have as many as they want without costs).
The alternative is to say that people should be given valuable goods and services (on-street parking) for free or well below market value, and we’ll just have to deal with the costs of overuse (congestion, accidents, pollution, oil dependence).