Why is there Free Parking?
By Arnold Kling
Tyler Cowen’s latest column is on the anomaly of free parking.
If developers were allowed to face directly the high land costs of providing so much parking, the number of spaces would be a result of a careful economic calculation rather than a matter of satisfying a legal requirement. Parking would be scarcer, and more likely to have a price — or a higher one than it does now — and people would be more careful about when and where they drove.
Read the whole column. I am not sure that the argument is correct. I worry that there is a lot of confusion between fixed costs and marginal costs. Creating a parking place carries fixed costs. However, the marginal cost of using a parking space is often zero.
The marginal cost of using a cell phone network is often zero, so your cell phone company tries to offer you a plan that makes the marginal cost feel like zero to you. It could be that free parking emerges for the same reason.
If we abolished free parking, would parking spaces be scarcer? Keep in mind that if the price of parking went up, this would cause movement along the supply curve as well as along the demand curve. Maybe the total number of parking places would decline (it depends on elasticities), but the one result you can predict with certainty is that the number of unused parking places would go up. Is that necessarily welfare-improving?
Suppose I have a piece of land that could be used for parking or for other purposes. You might argue that having a price for parking would send me a clearer signal about the best use.
However, the cost of converting that land from one use to another is very high, so I have to choose one purpose or the other and stick with it. One exception to high conversion cost is lanes that change from parking lanes to traffic lanes during rush hour. There, the price of parking during rush hour is very high (you get ticketed and towed), and that seems to work.
Once I have decided to use land as a parking place (say, land in front of a store), then there is no reason for me to want to deter people from parking in empty spaces. That suggests charging a price of zero other than at peak times.
The problem is one of congestion pricing. You need paid lots to charge people to park at peak times, such as concerts or sporting events.
I confess that I have not read Shoup’s book, to which Cowen refers. Meanwhile, I am not sold on its main thesis.