Austin Contrarian

My own rebuttal to O'Toole

Stephen Smith at Market Urbanism points to a debate at Cato Unbound where Donald Shoup and Randal O'Toole vie for the title of free market defender of parking policy.  Shoup contends, of course, that legal parking minimums distort urban property markets, encourage congestion and promote sprawl.

O'Toole makes a number of arguments but Smith responds to O'Toole's contention (more accurately, his insinuation) that parking minimums do not actually interfere with the market because they are not binding.  Stephen gives a detailed rebuttal to this passage in particular:

To find out what cities would be like without minimum-parking requirements, we must turn to Texas, where counties aren’t even allowed to zone, much less impose minimum-parking requirements. This means developers are free to build for the market, not for urban planners. While cities are allowed to zone, for the most part they maintain minimal restrictions so as not to lose potential tax-paying developments to areas outside their jurisdiction. The result, as anyone who as toured Dallas, Houston, or San Antonio knows, is large amounts of low-density development supported by plenty of off-street parking, all without minimum-parking requirements (at least outside of city limits).

 I'm firmly on Shoup's side here and so want to offer my own rebuttal to this argument:

1.  O'Toole says there's "plenty" of off-street parking in the unincorporated portions of Texas counties, which do not require parking.  (But perhaps they do.)  The specific issue, however, is whether cities generally require more parking than the market would provide.  Saying there's "plenty" in the unincorporated areas isn't good enough; he has to show that property owners there actually build as much or more than the neighboring city minimums.  He doesn't even make this claim -- which is the one relevant to his argument -- and anectodal impressions from a driving "tour" wouldn't be rigorous evidence anyway.

2.  Stephen makes this point, which I'll restate:  Even if rural property owners build more than city minimums, this does not imply that urban developers voluntarily build to the minimum.   A parking space in the city takes up as much land as a parking space in the countryside.  But urban land is more valuable and so that urban parking spot has a higher oppurtinty cost.  As urban land rises in value, developers working at the margin will choose less parking and more building; given fixed parking minimums, rising urban property values will eventually make the minimums binding. 

3.  We don't have to rely on basic microeconomic reasoning.  Three economists have conducted an empirical, econometric analysis of L.A.'s parking space.  They found that parking minimums are usually binding for commercial uses in L.A..  Indeed, they are binding for 99% of gas stations and restaurants.   One empirical study of one market is not conclusive evidence that parking minimums are binding everywhere, of course, but it is more persuasive than O'Toole's drive-by appraisal.

4.  Finally, but most obviously, parking minimums are contested by property owners all the time.  To wit.  What's O'Toole's message to these property owners?  "Come on, you know you want it"?

I don't want to unfairly characterize O'Toole's position.  The above passage was just one of a number of points he makes.  He says he fully supports eliminating minimum parking requirements for developers.  He does not contend that parking minimums are never binding.  But observing that developers build "plenty" of parking in the countryside is no evidence that they would build to the minimums in the city.

Wrong

I don't buy the theory that cities are prosperous because they are cool.  It's a pretty silly idea that confuses cause and effect -- rich cities are rich because they are innovative; their innovative residents tend to be innovative culturally as well; cultural innovation makes cool.

Bill Fulton at Newgeography doesn't buy the "coolness" theory of economic development either, but his explanation is equally silly:

It’s time to stop talking about whether towns should be cool or uncool.  What really matters is what they are producing.  If all they’re producing is some kind of experience that induces people to come to town and spend money, it doesn’t matter how cool the town is; it’s probably not sustainable economically.  If, on the other hand, the city is creating and exporting something the world needs – whether that product is cool or uncool – it’s a good bet that both the city and its people will do pretty well for a long time.

Here are some places built almost entirely on exports the world needs:

Dalton, Georgia ("the carpet capital of the world");

Belzoni, Mississippi (cotton and catfish);

Upstate South Carolina (textiles);

West Virginia (coal and interstate electricity).

These are poor places despite being export-driven.  And some cities famous for their exports did pretty well for a time but have declined and crashed despite their manufacturing base.  See Detroit, Cleveland and Pittsburgh.

Exports don't explain wealth.  Company towns are almost always exporting towns but they are rarely wealthy.  Making a bunch of stuff that yields zero economic profit (in the technical sense) won't make the townsfolk wealthy.  Exporting a bunch of high-profit stuff will make a city wealthy, but high profits require either (1) innovation (Silicon Valley, Hollywood, New York City's financial sector) or (2) a stable monopoly  (like D.C.'s stranglehold on government regulation).  We know an innovative city when we see one, but we don't know how to jump-start innovation.

Fulton makes another mistake worth noting, if only because I see others make it all the time.  Fulton thinks an "export" is something actually transmitted to another place (manufactured goods, services).  As a result, he thinks a city like Las Vegas merely imports money.

This is wrong, of course.  Las Vegas is the largest exporter of casino gambling in the country.  The fact that its customers have to travel to Las Vegas to "pick up" their purchase doesn't make gambling  any less of an export.   Las Vegas is based on trade between local businesses and residents (casinos, blackjack dealers) and out-of-towners.  It is another example of a one-industry, export-driven city that is not all that wealthy.

Parking bombs

The Overhead Wire on the destruction wrought by downtown parking.  The Houston photo is stunning.  

I don't believe, though, that the interstate highways share equal blame with parking for the destruction of American downtowns.

I suppose I should be careful with my definition here:  I mean "Given the construction of a large, nationwide network of interstate highways, the decision to route them through downtowns did not have a material impact on the health of downtowns."  

The typical large American downtown before the 1930s or so developed around a rail, harbor or port.  Manufacturing clumped together near the transportation hub to save the hefty cost of moving heavy things.  Service and government workers -- the only inhabitants of today's downtowns -- located downtown because that's where their customers were.

This model was doomed once the country decided to build a national network of high-speed highways.  It was just a matter of time before manufacturing decamped to cheaper, less congested greenfields.  It didn't matter whether the highways ran around, through or under downtown -- manufacturers weren't going to pay a premium to be down the street from a rail terminal they no longer used.  Downtowns were in for a radical restructuring.

Now downtowns are occupied mainly by service and government workers.  More to the point, they are occupied by service and government workers who purport to service the entire metropolitan area.  A downtown Houston law firm with a large oil-and-gas practice doesn't market itself just to downtown energy firms; it sells itself to firms in the Energy Corridor, too, even though they are a 10-mile drive down the Katy Freeway.  It is easy to run a metropolitan-wide law practice from downtown Houston if it is easy to get to downtown Houston from any point in the metropolis.  A rich network of highways (or of light rail or commuter rail lines -- nothing in this argument depends on the mode of trip) makes the central location more attractive, not less.

Note that this has nothing to do with the impact of highways on housing patterns.  Highways of course have facilitated sprawl.  By lowering the cost (in time) of commuting from land on the periphery of the metropolis, they make that land more attractive for residential development.  But this isn't the dynamic that causes businesses to disperse.  Service firms like to cluster near similar businesses, near their customers, and near their suppliers.  They will do all three if they can.  When they can't do all three, they must choose.  The trade offs are more acute when a downtown has poor access to the rest of the metropolitan area.  In the long run, downtown Austin will suffer for its inaccessibility.

Don't take any of this as an unqualified endorsement of slashing interstate highways through downtowns.  They hurt property values in their immediate vicinity.  They wreck the neighborhoods that are plowed under, barricaded or sundered to make room for them.   But American downtowns would have experienced wrenching change even if highways hadn't been run right through them.  And American downtowns would be more desolate than they are today without the highways.

Parking is another story . . . .

Streetsblog Capitol Hill

I have begun contributing to Streetsblog Capitol Hill.  My first piece is on the regressivity of our housing policy.  Check it out.

"No road we built in Texas paid for itself."

From Streetsblog Capitol Hill:

Over the past two days at the Congress for the New Urbanism Project for Transportation Reform conference, attendees have called for reform at local, regional, and national levels. In a panel debate about the future of transportation funding and the role of regional planning through MPOs, several speakers argued that the foundation of transportation and development funding had to be systematically overhauled.

Mike Krusee, [AC: former] chairman of the Texas House of Representatives Transportation Committee, said that financial problems were more significant than environmental, though they should be tied together in the same discussion.

"The reason there's not a new transportation bill is because there is no money. We've hit the wall of unsustainability on how we finance the transportation system," he said.

Krusee asserted it was urgent and necessary to understand the nature of this broken financial apparatus and to develop solutions to fix it. In Texas, he said that, on average, it cost the state 20-30 cents per person per mile to build and maintain a road to the suburbs, yet drivers only pay on average 2-3 cents per mile through the gas tax, vehicles fees, etc.

"What we found was that no road that we built in Texas paid for itself," said Krusee. "None."

The expense to build roads and utilities further and further from the urban cores not only drove costs to unsustainable levels, it created an imbalance in who paid for growth. Over the past 50 years, Krusee argued, the federal government used tax money that came by and large from cities to subsidize roads to areas without access otherwise.

"City dwellers have subsidized the land purchases and the development costs out in the suburbs," said Krusee. What's more, the gas tax, which city dwellers pay when driving on city roads, but which goes to freeways largely outside of urban cores, is "a huge transfer of wealth from the cities to the suburbs to build these rings."

Krusee said building the interstate system was initially a good thing, because if facilitated interstate commerce and increased the productivity of cities. Now however, because of congestion caused by ever longer commute patterns, system productivity is in peril. "What's happened is the federal government has basically reneged on the deal. By subsidizing highways out to the suburbs, it's no longer efficient for truck traffic, for goods and services and people to move between cities in the United States because those roads have been hijacked by all the commuters."

Krusee, by the way, represented suburban Williamson County.

Krusee's assessment matches TxDOT's own internal assessment.  (This actually should be no surprise since Krusee's committee relied on TxDOT for data.)   TxDOT, for example, concluded that the 15 miles of SH 99 from I-10 to US 290 will cost $1 billion to build and maintain over its lifetime, while only generating $162 million in gas taxes -- just 16% of the total cost.

Some of us get swept up in the rhetoric sometimes, but roads aren't unmitigated evils.   Obviously, we need roads.  Just as obviously, I think, we will continue to need new roads.   But new roads should be built only where drivers are willing to pay for the new capacity.   And the only way to gauge that demand is to price existing roads properly; the revenue they generate will tell us when it is time to add to add that capacity.

No

I agree with Ryan Avent that this WSJ piece makes a bizarre argument against congestion pricing:

By requiring car drivers to pay a fee to drive in a city at peak hours, congestion pricing reduces traffic and raises money that can be used to support public transit—both worthy goals.

Yet congestion pricing has dubious environmental value. Traffic jams, if they're managed well, can actually be good for the environment. They maintain a level of frustration that turns drivers into subway riders or pedestrians.

The author contends that by improving traffic flow, congestion pricing induces more driving, which in turn increases environmental damage:  "If reducing it merely makes life easier for those who drive, then the improved traffic flow can actually increase the environmental damage done by cars, by raising overall traffic volume, encouraging sprawl and long car commutes."

Ryan makes the right arguments.  I think Owen's got the economics flat wrong, which I'll elaborate in another entry.  He's wrong because congestion pricing does not induce more traffic and because congestion pricing encourages more compact cities rather than sprawl.

But Owen's also got the environmental impact wrong.  He ignores that traffic jams impose a cost -- a significant cost -- not imposed by free-flow traffic.  That's health.  Traffic jams concentrate particulate emissions in one location.  High levels of particulate emissions are bad for people.  They cause all kinds of health problems -- asthma and other respiratory illness, obviously -- but also higher risks of infant mortality.

If you need evidence, read this spanking new paper (h/t Matthew Kahn).  It compares infant mortality rates near toll plazas to infant mortality rates after the toll plazas were replaced with an EZ pass system.  They found that the EZ pass system "reduced the incidence of prematurity and low birth weight among mothers within 2km of a toll plaza by 10.8% and 11.8% respectively."  Because toll plazas are notoriously congested and highways with an EZ pass system are not, this is a good proxy for the health effects of traffic bottlenecks.

Environmentalism is not only about carbon emissions.  The wellspring of the movement was Rachel Carson's crusade against environmental contaminants that (allegedly) made people sick.  Any calculation of environmental cost that omits the costs of making people sick is not just a bad cost-benefit analysis, it's bad environmentalism.

Bag fees

I hate airlines' practice of charging to check bags even though I rarely check bags.  But I understand the economics.  Strangely, Matthew Yglesias does not:

I have to say I’m not really very sympathetic to this sentiment, or with the current Southwest Airlines ad campaign slamming bag fees.  If you figure an airline is going to believe it can acquire a given amount of revenue per passenger from a given route, the bag fee doesn’t actually alter this level, it simply redistributes it from those traveling with no checked bags to those traveling with multiple bags.  Nobody is made worse off on average by this.  But at the margin bag fees do encourage people to pack less stuff which reduces the weight of the plane and thus reduced fuel consumption and carbon emissions.

The economics of charging checked bag fees is pretty simple.   The fees lighten plane load but encourage passengers to carry on more luggage.   That means a longer boarding time as more passengers stop to load bags in the overhead bins and hunt around for empty bin space.   Charging for checked bags thus can make everyone worse off:   those traveling light (usually business passengers) must spend more time boarding the plane and waiting for take off in cramped seats; those traveling with checked bags must pay more to fly.

Once one understands this, it's easy to see why legacy carriers charge bag fees and Southwest does not.  Southwest's business model relies on quick turnaround.   Its planes may stop at a gate for just  25-30 minutes.  Southwest has determined this is worth more than the marginal savings in fuel cost and handling costs.   So Southwest does not charge bag fees and trumpets this policy as a concern for its customers.

The legacy carriers don't even attempt Southwest's quick turnaround; they allow 30-40 minutes just to board, which usually isn't a big deal to them because their planes sit at the gate for so long.    The legacy carriers charge bag fees because the fees save them money on bag handlers, save some fuel, don't hurt their turnaround times and -- one presumes -- are actually passed on to their customers rather than being absorbed in the ticket price.  This means, of course, that bag-checking passengers actually pay a higher net price.  But even if business travelers see a corresponding reduction in their ticket prices, this does not mean that the bag fees are cost-neutral, as opposed to revenue-neutral.  They pay an off-the-books cost by having to endure more congestion.  The bag fees are cost-neutral only if the business ticket prices fall enough to compensate business travelers for that extra congestion.  I doubt that's the case.

The bag fees are analogous to charging tolls on a lightly-traveled road in order to force drivers onto a congested road.   That evidently makes sense in the bizarro world of airline pricing, but it doesn't make the policy cost-neutral.

Yet another entry about high-speed rail

The national bloggers continue to debate the feasibility of a high-speed rail link between Houston and Dallas.  Up to bat:  Megan McArdle.

I think reasonable people can disagree about the feasibility of HSR, especially since we're just trading  back-of-the-envelope calculations of HSR's costs and benefits.  Although I've argued HSR opponents underestimate the benefits to business-class passengers, in the interest of fair and balanced coverage, let me point to Richard Green's discussion of a more rigorous effort to tote up the costs and benefits.  The authors of that particular study give HSR the thumbs down.

And while I'm in a contrary mood, let me suggest one other potential cost of a Houston-Dallas line.

Everyone agrees that in order for such a line to succeed, it must draw airline passengers to rail.  Lots and lots of airline passengers.  If the airlines lose, say, half of their Houston-to-Dallas traffic, they will have to cut the number of flights between Houston and Dallas.  Obviously.  Many consider that a feature, not a bug.

But what about the effect on other routes?  American is able to offer service from Dallas to virtually every American city because of the huge number of passengers flowing into DFW every day.  Cutting that inflow will reduce the economies of scale that support so many flights.  Ditto with Southwest out of Hobby.    Houston is a huge feeder for DFW, if the number of Bush-to-DFW flights is any indication.  Similarly, Love is a huge feeder for Hobby, judging by the 24+ daily flights.  Networks can be delicate things.  Shrinking one route could sicken other segments. 

HSR could very well make it easier to get from Houston to Dallas and vice versa.  But it could very well make it harder to get anywhere else.   

Path dependence

Ryan Avent has had some back and forth with Tyler Cowen and Will Wilkinson over roads and rail.  Tyler and Will acknowledge that, yes, our reliance on roads rather than rail has been influenced by long-standing government subsidies.  But by now we have sunk so much into roads, and have built up so much road infrastructure, that the marginal cost of adding to our road network is much lower than creating a viable rail network from scratch.  In other words, our past investments have had a lock-in effect, and there's no wishing it away.  

Ryan responds that Tyler and Will are committing the "sunk costs" fallacy, but I'm not sure that's right.  Past investments matter a lot because they have generated network externalities.   One million dollars spent extending an already extensive network is often worth more than one million sunk to build a network from scratch.  

But Ryan is right that past investments in suburban infrastructure do not require us continue throwing up barriers to denser developments:  

In practice, the US is far from done building.  Tens of millions of new homes will be built in the coming decades.  Hundreds of billions of dollars will be spent on transportation infrastructure.  The current built environment has, as a result of decades of government policy, taken on a rather suburban, auto-centric tilt.  So what?  No one is suggesting that we tear down all of that and replace it with something entirely new.  I, and others, are suggesting that making it easier (or, you know, legal) to build in a denser, more walkable fashion would be advantageous.  Similarly, given the burden of maintaining such a large and costly road infrastructure, it might be wise to devote a larger share of dollars for new construction to substitute technologies.

And bear in mind that a technology's lock on the market is not always as secure as it seems.  A small initial advantage allowed VHS to dominate the videotape market, all but squeezing out Betamax.  But it did not save VHS from the DVD, even though a vast infrastructure had been created to support VHS:  video players, Blockbuster, video cameras and a complete library of titles.  All wiped out by a superior technology.   

Now imagine the government had subsidized VHS to help it fend off insurgencies from new technologies.  At best, many of us would still be stuck with an inferior technology.  At worst, there would be no DVD.  The government should let these things work themselves out in the marketplace; that's the true libertarian position.

All of this means that the government should let denser development happen.  Stop the  subsidies and tax policies -- including subsidies to new highways -- that encourage shifts to the suburbs.  There are perfectly sound economic arguments for investing in rail lines in some situations; make those investments.  Many home buyers, probably most, will continue to settle in the 'burbs.   But we can't anticipate shifts in technology.  Nor shifts in preferences or energy costs.  We think we can.  But we really, really can't.   If the housing market would continue down today's path anyway, fine, but the government shouldn't lead it by the nose.  

Urbanism South

A promising new blog by local planner Jonathan Law, covering Austin and the Southeast.  (H/t M1EK and Keep Austin Wonky.)

Query:  Why are blogs about cities written either by urbanists or free-marketeers?  (I consider myself somewhere in the blurry intersection of the two.)  Where are the blogs by Austin's traditional neighborhood activists -- i.e., the anti-density, status-quo-at-all-costs crowd?  I want to say the reason is they tend to be older and less comfortable with blogging, but I'm 42 and much older than the typical blogger, who is 27.9 years old.

Or do they blog and I just don't know it?