“The High Cost of Free Parking.”

Tyler Cowen:

IN our society, cars receive considerable attention and study... 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.” 

That's right, a 733-page $60 book solely about parking policy!  There are two problems:
1. Governments force store owners, and real estate developers to build more parking than they want to build.  Businesspeople should be able to estimate the supply and demand for parking better than bureaucrats. This causes surplus parking and wasted resources.
2.  Governments provide Soviet-style parking at great taxpayer expense (or via expensive regulations) and price it too low which causes parking shortages and wasted resources looking for cheap, subsidized parking. 

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.
Manhattan streets are full of cars cruising around, looking for cheaper on-street parking, rather than pulling into a lot. The waste includes drivers’ lost time and the costs of running those engines. ...
Many parking spaces are extremely valuable, even if that’s not reflected in current market prices. In fact, Professor Shoup estimates that many American parking spaces have a higher economic value than the cars sitting in them. For instance, after including construction and land costs, he measures the value of a Los Angeles parking space at over $31,000 — much more than the worth of many cars, especially when considering their rapid depreciation. If we don’t give away cars, why give away parking spaces?
Yet 99 percent of all automobile trips in the United States end in a free parking space, rather than a parking space with a market price. In his book, Professor Shoup estimated that the value of the free-parking subsidy to cars was at least $127 billion in 2002, and possibly much more. ...As Professor Shoup puts it: “Who pays for free parking? Everyone but the motorist.”

 LA Times talks about how LA's fabulous Disney Concert Hall set its busy concert schedule:

Anyone scanning Disney Hall’s debut calendar in the fall of 2003 would have noticed the size of that first season’s schedule, 128 shows in all. That’s a weighty number for a new hall—one might have assumed it was chosen by venue management wanting the gravitas of a world-class chamber’s arrival or perhaps seeking a broad spectrum of music that could reflect the diverse city. Those guesses would have been wrong. Disney Hall had been built atop Parcel K, a county-owned square of land... Yet before an auditorium could be raised on K, a six-floor subterranean garage capable of holding 2,188 cars needed to be sunk below it at a cost of $110 million—money raised from county bonds. Parking spaces can be amazingly expensive to fabricate. In aboveground structures they cost as much as $40,000 apiece. Belowground, all that excavating and shoring may run a developer $140,000 per space. The debt on Disney Hall’s garage would have to be paid off for decades to come, and as it turned out, a minimum schedule of 128 annual shows would be enough to cover the bill. The figure “128” was even written into the L.A. Philharmonic’s lease. In 2003, Esa-Pekka Salonen opened Frank Gehry’s masterpiece to a packed house with Mahler’s Resurrection, and in the years since, concertgoers—who lay out $9 to enter the garage—have steadily funded performances that exist to cover the true price of their parking.  ...“L.A.,” says Shoup, “required 50 times more parking under Disney Hall than San Francisco would allow at their own hall.” Downtown already had an oversupply of garages and lots where music fans could leave their cars. “After a concert in San Francisco,” says Shoup, “the streets are full of people walking to their cars, eating in restaurants, stopping into bars and bookstores. In L.A.? The bar next door at Patina is a ghost town.” Receipts that should have gone to the philharmonic’s endowment instead are funding enough parking for nearly every ticket holder to park a car every night downtown. 

What environmental reasons justify sacrifice?

I can only think of four fundamental environmental rationales off hand.  Email or leave a comment if you think of more.  

1. Global warming 
1. This really just duplicates the following reasons, but is potentially so important that it deserves its own category.
2. Reduce resource extraction to preserve nonrenewables for future generations? 
3. Reduce toxic pollution (poisons by ingestion or breathing)? 
4. Wellbeing of other species?

People like tax expenditures much better than explicit expenditures

The Monkey Cage:

We presented survey respondents with a description of a federal housing program, after which they were asked to rate their approval of the program on a seven-point scale.  About half of respondents received a description of the real-life Home Mortgage Interest Deduction:
“We’re going to ask you your opinion on a government program intended to help Americans afford to own homes. Under this program, individuals who take out a mortgage to buy a home are eligible to deduct the monthly mortgage interest from their taxable income, thereby reducing their tax burden. The total savings for individuals under this program are estimated to be $94 billion for fiscal year 2011.”
The other half of the respondents were shown a description that differed in two respects: first, the words “eligible to deduct the monthly mortgage interest from their taxable income, thereby reducing their tax burden” were replaced with “eligible for a grant from the federal government to help them afford the monthly payment;” second, the words “The total savings for individuals under this program…” are replaced with “The total government expenditures to individuals under this program…” We believe these contrasts in language were reasonable given the way these types of programs are often framed by elites. 
The effect of this manipulation of delivery mechanism is displayed in this bar graph, which displays the percentage of respondents in each treatment group who expressed at least some approval of the program.  The effect is considerable, as support drops by about 24% when the program is described as a grant.

The effect of this manipulation was especially pronounced for conservatives.  Conservatives appear to be just as willing as liberals to support a government program, provided that it is delivered through the tax code, but less willing to support this program when described as a “grant.”

Why the preference?  The authors hypothesize that it is partly due to "a lack of understanding about ... tax expenditures"  or " perhaps it’s about the beneficiaries; Americans may look more generously upon “taxpayers” than they do upon other potential recipients of policy benefits."

Age Dependent Taxation

Horizontal or vertical equity?  Matthew Weinzierl:

age-dependent taxes... the idea of making the tax rate contingent upon the age of the tax payer. ...the administratively simple reform of age dependence can make the tax system substantially more efficient and more equitable...:

• Age-dependent marginal tax rates are tailored to the distribution of income at each age. To see why, note that a 25-year-old earning $100,000 is higher in his or her age-specific income distribution than is a 45-year-old earning $100,000. Furthermore, these two workers are likely to have a different lifetime earnings path. We therefore ought to tax them differently.
• Age-dependent average tax rates can help individuals transfer earnings across the lifecycle when private borrowing and saving is restricted.
• Age dependence yields a large welfare gain by reducing distortions (lower marginal tax rates) and by making possible more redistribution.

See working paper (PDF)

When Privitization INCREASES Expenses!

Good Magazine highlights a new POGO study which finds that government outsourcing often increases costs rather than decreasing them. 

A new study by the Project On Government Oversight revealed that contractors earn 1.83 times more than public employees, and more than twice the compensation paid in the private sector for comparable services.
While the federal workforce has remained steady at about 2 million people since 1999, the contractor workforce increased from 4.4 million to 7.6 million in 2005, costing approximately $320 billion a year. In 33 of 35 occupational classifications, paying government employees would be cheaper than hiring a contractor.
POGO points to two main reasons for the huge waste. One is the steady drumbeat of small- and anti-government rhetoric from the right, which has resulted in the creation of a “shadow government” in which contractors perform services once handled by public employees at far greater cost—which, ironically enough, increases the size of the federal budget.
The second reason is that the government is ill-prepared to negotiate market-rate fees because it does not manage data about payments and processing or maintain clear standards about occupational specialties and justifying outsourcing. There’s also the issue of no-bid contracts and other shady paths for companies to find lucrative arrangements working for the government.

Intellectual Property

 Yglesias:

I think the right way to think about striking this balance is in terms of the capital-intensity of what you’re talking about. If you’re talking about a very capital-intensive field, then you won’t have any new products unless there are large financial incentives to innovate. But if you’re talking about a field with low needs for capital inputs, then creating the large incentives is less important and strong IP rights are mostly acting as an obstacle to innovation. The rise of digital technology has made it much cheaper than it was before to produce and distribute most kinds of media. The correct policy response is to adopt somewhat weaker intellectual property rights. Instead, we’ve moved in the opposite direction to shore up firms threatened by potentially disruptive technological change. It’s a mistake.

 I don't think "capital-intensity" is the right term.  It is large size of investment that requires large financial incentives.  In most areas the cost of innovation has declined, but I'm not sure it has declined in drugs.  The cost of drug discovery may be down, but the cost of drug development and testing has suffered from Baumol's cost disease as well it should.  50 years ago, Americans were less concerned about the potential harms from drugs than we are today.  Heck, the Tuskegee syphilis experiment only ended in 1972 which shows how little regard the medical establishment had for the safety of human experimental subjects at that time.  That led to major medical experimentation regulation. 

Cost Benefit of Coal

Muller, Mendelsohn, and Nordhaus have a new paper in the American Economic Review that does CBA on coal and finds enormous externalities even without any global warming added into the mix.  This should be famous and shape public debate, but it is not. 

Externalities of Coal

Brad Johnson:

A new economic analysis of the costs of pollution to the United States finds that coal power is harming the economy. In the American Economic Review article “Environmental Accounting for Pollution in the United States Economy,” economists Nicholas Z. Muller, Robert Mendelsohn, and William Nordhaus model the physical and economic consequences of emissions of six major pollutants (sulfur dioxide, nitrogen oxides, volatile organic compounds, ammonia, fine particulate matter, and coarse particulate matter) from the country’s 10,000 pollution sources. They estimate the “gross external damages” (GED) from the sickness and death caused by the pollution, and compare that to the value added to the economy:

Solid waste combustion, sewage treatment, stone quarrying, marinas, and oil and coal-fired power plants have air pollution damages larger than their value added. . .
Coal plants are responsible for more than one-fourth of GED [gross external damages] from the entire US economy. The damages attributed to this industry are larger than the combined GED due to the three next most polluting industries: crop production, $15 billion/year, livestock production, $15 billion/year, and construction of roadways and bridges, $13 billion/ year.

“Five industries stand out as large air polluters,” the authors write, “coal-fired power plants, crop production, truck transportation, livestock production, and highway-street-bridge construction.”
When the authors add in highly conservative estimates of the cost of carbon dioxide pollution, they find that “the damages caused by oil- and coal-fired power plants are between 30 and 40 percent higher.” With an estimated social cost of carbon — a damage estimate of global warming pollution — of $65 (far less than other estimates), the GED for coal-fired generators is $0.21/kW.
In other words, instead of being “cheap” and “affordable,” coal is actually the costliest fuel for electricity.
“The findings show that, contrary to current political mythology, coal is underregulated,” Legal Planet’s Dan Farber comments. “On average, the harm produced by burning the coal is over twice as high as the market price of the electricity. In other words, some of the electricity production would flunk a cost-benefit analysis. This means that we’re either not using enough pollution controls or we’re just overusing coal as a fuel.”

Cost Benefit Analysis of Homeland Security

 John Mueller and Mark G. Stewart wrote a book about Terror, Security, and Money: Balancing the Risks, Benefits, and Costs of Homeland Security. Slate Magazine has a series that summarizes their findings.  Part 1:

At present rates (and including 9/11 in the count), the likelihood a resident of the United States will perish at the hands of a terrorist is 1 in 3.5 million per year. And the key question, one almost never broached, is this: How much should we be willing to pay to make that likelihood even lower?
We have, in fact, paid—or been willing to pay—a lot. In the years immediately following the terrorist attacks of Sept. 11, 2001 on Washington and New York, it was understandable that there was a tendency to fashion policy and to expend funds in haste and confusion, and maybe even hysteria, on homeland security. After all, intelligence was estimating at the time that there were as many as 5,000 al‑Qaeda operatives at large in the country, and as New York Mayor Rudy Giuliani reflected later, "Anybody, any one of these security experts, including myself, would have told you on September 11, 2001, we're looking at dozens and dozens and multi-years of attacks like this."  ...Tallying all these expenditures and adding in opportunity costs—but leaving out the costs of the terrorism-related (or terrorism-determined) wars in Iraq and Afghanistan and quite a few other items that might be included—the increase in expenditures on domestic homeland security over the decade exceeds $1 trillion. See the following table.

This has not been enough to move the country into bankruptcy, Osama Bin Laden's stated goal after 9/11, but it clearly adds up to real money, even by Washington standards.

There have been numerous calls for cost benefit analysis by RAND, the Congressional Research Service, The Government Accountability Office, The National Academy of Science, and many others, but none have been done.  For example:

In 2010, the department began deploying full-body scanners at airports, a technology that will cost $1.2 billion per year. The Government Accountability Office specifically declared conducting a cost-benefit analysis of this new technology to be "important." As far as we can see, no such study was conducted. 

Part 2

 A recent book by Gregory Treverton, a risk analyst at the RAND Corporation whose work we have found highly valuable, contains a curious reflection:

When I spoke about the terrorist threat, especially in the first years after 2001, I was often asked what people could do to protect their family and home. I usually responded by giving the analyst's answer, what I labeled "the RAND answer." Anyone's probability of being killed by a terrorist today was essentially zero and would be tomorrow, barring a major discontinuity. So, they should do nothing. It is not surprising that the answer was hardly satisfying, and I did not regard it as such.

From this experience, he concluded, "People want information, but the challenge for government is to warn without terrifying."
It is not clear why anyone should find his observation unsatisfying since it simply puts the terrorist threat in general and in personal context, suggesting that excessive alarm about the issue is scarcely called for. It is, one might suspect, exactly the kind of accurate, reassuring, adult, and nonterrifying information people have been yearning for. And it deals frontally with a key issue in risk assessment: evaluating the likelihood of a terrorist attack.
Treverton's "RAND answer," calmly (and accurately) detailing the likelihood of the terrorist hazard and putting it in reasonable context, has scarcely ever been duplicated by politicians and officials in charge of providing public safety.

...There is also a tendency to inflate the importance of potential terrorist targets. Thus, nearly half of American federal homeland security expenditure is devoted to protecting what the Department of Homeland Security and various presidential and congressional reports and directives rather extravagantly call "critical infrastructure" and "key resources"— assets whose loss would have a "debilitating effect on security, national economic security, public health or safety, or any combination thereof" or are "essential to the minimal operations of the economy or government." It is difficult to imagine what a terrorist group armed with anything less than a massive thermonuclear arsenal could do to hamper such "minimal operations." The terrorist attacks of 9/11 were by far the most damaging in history, yet, even though several major commercial buildings were demolished, both the economy and government continued to function at considerably above the "minimal" level.
 ...Assessing the threat from homegrown Islamist terrorists, Brian Jenkins stresses that their number is "tiny," representing one out of every 30,000 Muslims in the United States. ...Given this situation, concludes Jenkins, what is to be anticipated is "tiny conspiracies, lone gunmen, one-off attacks rather than sustained terrorist campaigns." In the meantime, note other researchers, Muslim extremists have been responsible for 1/50th of 1 percent of the homicides committed in the United States since 9/11.
...Three publications from think tanks have independently provided lists or tallies of [Muslim extremist] violence committed in the several years after the 9/11 attacks. The lists include not only attacks by al‑Qaeda but also those by its imitators, enthusiasts, look‑alikes, and wannabes, as well as ones by groups with no apparent connection to it whatever.
Although these tallies make for grim reading, the total number of people killed in the years after 9/11 by Muslim extremists outside of war zones comes to some 200 to 300 per year [worldwide]. That, of course, is 200 to 300 too many, but it hardly suggests that the destructive capacities of the terrorists are monumental. For comparison, during the same period more people—320 per year—drowned in bathtubs in the United States alone. Or there is another, rather unpleasant comparison. Increased delays and added costs at U.S. airports due to new security procedures provide incentive for many short‑haul passengers to drive to their destination rather than flying, and, since driving is far riskier than air travel, the extra automobile traffic generated has been estimated in one study to result in 500 or more extra road fatalities per year.

Part 3:

Is it possible to measure the risk of terrorism? Measuring risk can be difficult, but it is done as a matter of course in such highly charged areas as nuclear power plant safety, airplane safety, and environmental protection. There is adequate information about terrorism: There is plenty of data on how much damage terrorists have been able to do over the decades and about how frequently they attack. The insurance industry has a distinct financial imperative to understand terrorism risks to write policies for it. If the private sector can estimate terrorism risks and is willing to risk its own money on the validity of the estimate, why can't the Department of Homeland Security?
A conventional approach to cost-effectiveness compares the costs of security measures with the benefits as tallied in lives saved and damages averted. The benefit of a security measure is a multiplicative composite of three considerations: the probability of a successful attack, the losses sustained in a successful attack, and the reduction in risk furnished by security measures. This product, the benefit, is then compared to the cost of the security measure instituted to attain the benefit. A security measure is cost-effective when the benefit of the measure outweighs the costs of providing the security measures.
The interaction of these variables can perhaps be seen in an example. Suppose there is a dangerous curve on a road that results in an accident from time to time. To evaluate measures designed to deal with this problem, the analyst would need to estimate 1) the probability of an accident each year under present conditions, 2) the costs of the consequences of the accident (death, injury, property damage), and 3) the degree to which a proposed safety measure lowers the probability of an accident (erecting warning signs) and/or the losses sustained in the accident (erecting a crash barrier). If the benefits of the risk-reduction measures—these three items multiplied together—outweigh their costs, the measures would be deemed cost-effective.
These considerations can be usefully wrinkled around a bit in a procedure known as "break-even analysis" to calculate how many attacks would have to take place to justify a security expenditure.
We apply this approach to the overall increase in domestic homeland security spending by the federal government (including for national intelligence) and by state and local governments. ...we find that, in order for the $75 billion in enhanced expenditures on homeland security to be deemed cost-effective under our approach—which substantially biases the consideration toward finding them effective—they would have to deter, prevent, foil, or protect each year against 1,667 otherwise successful attacks of something like the one attempted in Times Square in 2010. In other words, we'd have to foil more than four major attacks every day to justify the spending.
... We have done [estimates] for several specific measures. It appears, for example, that the protection of a standard office-type building would be cost-effective only if the likelihood of a sizable terrorist attack on the building is 1,000 times greater than it is at present. Something similar holds for the protection of bridges. On the other hand, hardening cockpit doors may be cost-effective, though the provision for air marshals on the planes decidedly is not. The cost-effectiveness of full-body scanners is questionable at best. Overall, by far the most cost-effective counterterrorism measure is to refrain from overreacting.
...It is possible, of course, that any relaxation in these measures will increase the terrorism hazard, that the counterterrorism effort is the reason for the low-hazard terrorism currently present. However, in order for the terrorism risk to border on becoming "unacceptable" by established risk conventions, the number of fatalities from all forms of terrorism in the United States would have to increase 35-fold, equivalent to experiencing attacks as devastating as those on 9/11 at least once a year or 18 Oklahoma City bombings every year. Even if all the (mostly embryonic and in many cases moronic) terrorist plots exposed since 9/11 in the United States had been successfully carried out, their likely consequences would have been much lower. Indeed, as noted earlier, the number of people killed by terrorists throughout the world outside (and sometimes within) war zones both before and after 2001 generally registers at far below that number.
...Risk reduction measures that produce little or no net benefit to society or produce it at a very high cost cannot be justified on rational life-safety and economic grounds: They are not only irresponsible, but, essentially, immoral. When we spend resources to save lives at a high cost, we forgo the opportunity to spend those same resources on regulations and processes that can save more lives at the same cost, or even at a lower one. Homeland security expenditure invested in a wide range of more cost-effective risk reduction programs like flood protection, vaccination and screening, vehicle and road safety, health care, nutritional programs, and occupational health and safety would likely result in far more significant benefits to society.