Tuesday, April 22

Who pays for excessive driving?

It's Bike Walk Bus Week here in Missoula once again, and it looks like we may finally be getting enough of a break from the snow to encourage folks to get outside. As usual, I plan my week around a strategy to acquire as much free goodies from local businesses as possible. Stop by Great Harvest Bakery tomorrow morning, sans the car, and I'll give you a cinnamon roll on the house.

Sunday's Green issue of the NY Times Magazine included an eye-opening article by the writers of Freakonomics on why driving is such a socially damaging thing to do, and how the economic incentives of driving are so screwy. Here are the costs they find for three major externalities of driving (externalities are costs of a certain action that are not payed by the individuals performing the action, and thus tend to not figure into the rational market decision):

1. Congestion: $78 billion a year
2. Carbon Emissions: $20 billion a year
3. Accidents: $220 billion a year

And I would add the major externality of land use adjustments, which are quite a bit harder to quantify. Think not only of all the space needed for roads and parking, but for the setbacks we require to remove ourselves from automobiles. And there are other forms of pollution such as noise and air that do not figure in.

Anyway, their final tally,

"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."

Yikes! We thought gas prices we getting bad as it is. We really should be paying $2 more per gallon at the pump!

The writers highlight one economic reform that wouldn't be a political mess. Auto insurance policies currently charge, more or less, the same price regardless of how many miles you drive. That's entirely unfair. Why should someone who uses the car once a week for groceries have to pay the same amount as a person who commutes two hours a day, when she is much less of a risk to the insurance company? Not pricing for amount of vehicle miles traveled amounts to a subsidy for heavy drivers and ultimately encourages bad behavior.

It turns out that Progressive is unleashing a new policy this month that tracks your car usage and charges you accordingly. Those who feel that their time in the car should be an entirely private matter may balk at this intrusion, but those of us who would rather spend our money elsewhere could greatly benefit from being offered a fair price for driving less. I hope this works.


LH said...

Thanks for this link. I was busy this weekend and missed it. Good read and good analysis. Don't forget that what is in the price of gas is various funds to pay for highways and related infrastructure, and according to AASHTO, we're way underfunding that fund. So tack on another nickel per mile to fully pay for the wear and tear our driving imposes on our roads and bridges.

J.W. said...

I agree with lh, this is really wonderful analysis of a problem that libertarians and economic conservatives routinely refuse to acknowledge. The market manifestly does not respond to externalities like these. Provided, for instance, that a technological solution can be developed to adjust for the looming problem of Peak Oil, thereby allowing us to continue the massively consumptive lifestyle we have spawned in this nation and spread all over the world, the market will continue to ignore the costs you've listed here.

Also unaddressed by the article are the unquantifiable costs of a driving culture, such as the psychological and social costs of commuting and the suburban lifestyle and the destruction of livable environments in the name of "progress"--more roads built at a larger scale to accommodate more cars. These are real costs, even though we can't put a number on them, that consume the cultural capital of our civilization at a faster rate than we can reproduce it.

And how if we are unable to produce a better technological solution than oil to fuel our economy in time? Then the market WILL produce a solution to the sprawling mess that we have created, but the solution will complete devastation--massive poverty, civil unrest, and crumbling infrastructure. People will no longer drive because driving is not an option. So. Perhaps an economic disincentive to drive (couple with incentives to take public transit or carpool) in the short term is the best solution.