Donald Shoup Takes San Francisco

(Donald Shoup, then and now / facebook)

Every so often during his tenure as mayor of New York, Michael Bloomberg tried to push through congestion pricing, in which drivers would have to pay to use city streets in Midtown and Lower Manhattan. That’s a popular solution to chronic overcrowding but, like drinking coffee to try to cure a hang over, it doesn’t really get to the heart of the matter. More intervention usually doesn’t solve the problems that were themselves the result of a prior intervention. Let me explain.

In 2011, I had the opportunity to participate in an online discussion over at Cato Unbound. It focused on Donald Shoup’s book The High Cost of Free Parking, which looks at the consequences of not charging for curbside parking.

If you’ve ever tried to find a parking spot on the street in a big city, especially on weekdays, you know how irritating and time-consuming it can be. It may not top your list of major social problems, except perhaps when you’re actually trying to do it. In fact, according to Shoup about 30 percent of all cars in congested traffic are just looking for a place to park. The problem though is not so much that there are too many cars, but that street parking is “free.”

Except, of course, it isn’t free. What people mean when they say that some scarce commodity is free is that it’s priced at zero. Some cities, such as London, Mayor Bloomberg’s inspiration, charge for entering certain zones during business hours — with some success. (As well as unintended consequences: People living in priced zones pay much less for parking and higher demand has driven central London’s real-estate prices, already sky high, even higher). But this doesn’t really address what may be the main source of the problem: the price doesn’t reflect supply and demand. The same kind of chronic congestion will occur with any fixed resource in high demand if the market doesn’t set its price.

Free Football

If seats at New York Giants home football games were priced at zero or something much lower than market levels, the same situation would arise: chronic shortages of seating. You’d see hundreds, probably thousands of people “cruising” around the stadium hours before and during the game hoping to jump into a seat should someone get up to buy a beer or whatever. Now, when prices better reflect market conditions, there might still be some people waiting outside the gate hoping to buy game-day tickets or, if the game is a sell-out, to perhaps pay a very high price for seats from scalpers. But it wouldn’t be anything near the chaos of the zero-price situation, nor as dangerous.

Thousands of disappointed fans, especially big and aggressive ones, might try to use force to get a seat, and a large number of “accidents” would probably occur as a matter of course. Moreover, it would be sheer luck if those who are actually the most ardent fans, able and willing to pay the market price of admission, would be the ones who get in. Now, if only there were some way people could signal their demand for tickets – but of course there is!

Under such circumstances I wouldn’t be surprised if fans as a group demanded that teams charge higher prices for tickets in order to minimize conflict.

Shoup to the Rescue?

Similarly, as things stand in most cities, curbside parking is acquired according to chance by those who have the time to drive around and look. Fortunately, Donald Shoup’s ideas about market-like pricing are having an impact on public policy. A 2012 article in the New York Times, “A Meter So Expensive, It Creates Parking Spots,” reported on how San Francisco has begun implementing some of them.

San Francisco is trying to shorten the hunt with an ambitious experiment that aims to make sure that there is always at least one empty spot available on every block with meters. The program, which uses new technology and the law of supply and demand, raises the price of parking on the city’s most crowded blocks and lowers it on its emptiest blocks. While the new prices are still being phased in — the most expensive spots have risen to $4.50 an hour but could reach $6 — preliminary data suggest that the change may be having a positive effect in some areas.

(San Francisco earlier tried a different system that signals via cell phone when a space opens up. I’m not sure how that worked out.)

As I said before, to do market pricing correctly, well, you need markets. What the San Francisco approach does is to try to mimic what it is thought a private market would do. But the standard of “at least one empty parking spot” is arbitrary – like mandating that every ice-cream cone have two and only two scoops of ice cream. The Shoup-inspired San Francisco solution is I think a step in the right direction, but only a step.

Street parking is zero-priced because those streets, and the curbs and sidewalks that abut them, are not privately owned.

The Dynamics of Interventionism Again

And that’s really the source of the congestion problem as well as other transport problems. Take mass transit. Most cities have gotten on the light-rail bandwagon, especially in recent years with federal “stimulus” funds available, despite the dismal economic record of such undertakings.

Professor Dan Klein has long advocated private jitneys – usually small buses or vans that “follow a route but not a schedule” – which are far less costly to implement and cheaper to run. The problem, however, is that because urban curbsides are not privately owned, it’s possible for rival jitney X to swoop in just before another and take away the customer base of jitney Y, which makes the whole enterprise much riskier than necessary. (You can read more about Dan’s analysis here and here.) If the curbsides and the streets they abut were privately owned – perhaps by the owner of the adjacent property or more practicably by the local neighborhood or business association – the jitney/transit problem, as well as the problem of pricing curbside parking, could be solved privately. Private owners would set the prices of parking or of curbside pick-up by selling (or not) those rights at whatever the market would bear. Modern technology would make this relatively easy, as the Times article indicates. The problem, of course, is political.

The curbside parking problems have gotten so bad in some places that many cities have off-street parking minimums that effectively mandate parking garages: an intervention occasioned by a prior intervention. The solution is not more regulation. The solution is to remove the nonmarket conditions that produced the parking problem, and a host of others, in the first place.

Sandy Ikeda

Sandy Ikeda is a professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism. He is a member of the FEE Faculty Network.

This article was originally published on FEE.org. Read the original article.