Arnold Kling  

Parking Spaces: What is the Free-Market Equilibrium?

Extraterritoriality... Leamer on the Current Recessio...

Robin Hanson writes,

I didn't see Tyler favoring forcing prices above marginal cost, just opposing laws requiring excess supply.

So, there are two issues.

a. How much land should be devoted to parking spaces?
b. Given the answer to (a), what should be the price for parking?

I argue that for (b) the answer is often zero. A higher price would simply result in unused parking places, which does not increase welfare. Robin is falling back on issue (a), and here the thinking is that the state provides, either directly or through regulation, more parking spaces than are optimal.

Suppose there were no state provision of parking places. What would the equilibrium look like? Some possibilities:

1. You get Berlin, where the public transit is highly efficient and lots of people ride bicycles, even in the rain.

2. Individual housing developments and businesses undersupply parking. The thinking is that if parking runs out in front of your business, your customers will use the parking spaces in front of the business next door. This leads to stores putting up warning signs that say, "unless you patronize my store, your car will be towed." Neighborhoods put up signs that say, "unless you have a residential permit, your car will be towed." This imposes all sorts of enforcement costs as well as inefficient use of space. The warning signs often deter people from parking in places where they impose no cost at that particular time.

3. Land use responds, but not toward the Berlin scenario. On the contrary, businesses relocate farther away from cities, to locations where parking is cheap to supply and you don't get into fights with other businesses about towing rules. Housing developments are built without street parking but instead with large driveways--in effect, each household requires its own oversized parking lot to accomodate its peak demand . As a result of these sorts of adaptations, it takes more parking places to accommodate the same number of cars.

4. After a lot of Coasian bargaining, businesses agree to each provide a minimum number of parking places and housing developers agree to provide streets wide enough to allow parking.

The point is, you don't necessarily get (1). And you might get (4).

[UPDATE: Tyler's response to my earlier post. I still don't think he does enough to distinguish marginal cost from fixed cost. He also points to Randal O'toole, who questions whether minimum-parking ordinances are such a big factor.

Much to planners' annoyance, many developers elsewhere routinely provide more parking than zoning codes demand.

Yes, I am inclined to doubt that the amount of parking spaces we observe reflects a huge government-caused distortion. I worry that Shoup's goal is a huge government-caused distortion to limit parking availability.]

Comments and Sharing

COMMENTS (8 to date)
hhoran writes:

Arnold, as Robin points out, you have been unwilling to engage the points Tyler actually made in his article, and you seem utterly uninterested in the actual economic arguments made in Shoup's book. Two key problems:

a) Of course you don't necessarily get (1) or (4). Its up to the market. The more that investors can built stores/houses/worksites unconstrained by arbitrary bureaucratic rules mandating very high levels of free parking before any investment can proceed, the closer we'll come to a more optimal ratio of parking to other urban land uses. The more individual employment/consumer/leisure decisions factor in the actual land use and transport costs, the closer we'll come to a better allocation of resources. Investors can figure out workable ratios, and consumers can make those choices. Bureaucratic rules shouldn't be imposing one set of preferences/biases on land use and transport arrangements across wildly divergent industries and communities. It shouldn't be up to you or me to demand rules that bias communities to look more like Houston (or more like Berlin).
b) Owners of private land (stores, housing, offices) should be free to allocate that property to parking for customers/tenants/employees in whatever way they see fit. But they have no property right to claim the use of taxpayer provided public streets for their private parking use. There is no Coasian bargaining over wider streets with readily available curbside parking. Nor do they have no right to block other landowners from more intensive use of their land because their customers/tenants might increase traffic on those taxpayer provided streets.

People who prefer Berlin-like land use patterns have no right to use command and control rules forbidding private land uses that don't fit their preferred pattern. Just because you don't like Berlin-like land use patterns gives you no right to demand command-and-control rules on private landowners making denser usage illegal or highly uneconomic.

MattYoung writes:

Legalize private parking meters. If the household pays the government costs of curbside parking, then the household can put up its own parking meter.

The government did the equivalent with telephone equipment, gave ownership of that to the property owner rather than the phone company.

Doc Merlin writes:

It is perfectly legal in most places to charge for parking.

All this talk of parking reminds me of my experience at Rice University. They asked a consultant to come to the school on election day (the most parking heavy day of the year on campus) and the consultant clearly, "you clearly have a parking problem." The school put up parking gates, and how it has a large number of half empty lots that no one can park in and a massive underground parking garage that almost no one uses.

Anyway, I am in Texas and it seems that parking SEEMS oversupplied, not because of mandate, but rather because parking demand is fat tailed and parking spaces are a durable asset.

Anyway, look at any city in the US where public transportation isn't really heavily subsidized and you will find plenty of parking.

Hyena writes:

Los Angeles is a mix of these. There are numerous tow threats and larger businesses always supply ample cheap-to-free parking. Otherwise we'd refuse to shop there.

No one is going to ride the bus or take a bicycle in America. A bicycle doesn't have the required range and the bus is a hot, sweaty box that reeks of shame and failure.

So the equilibrium is likely that businesses, fed up with each other, petition their local planning boards for an ordinance. That seems to be how that goes down out here.

Robin Hanson writes:

You again note that when average costs are above marginal costs, free market prices may inefficiently deter usage. But you don't at all address my question: "Why should we treat parking spots much different than thousands of other familiar products whose average costs are often above marginal costs?"

Ryan Gleason writes:


What about the effects of Government mandates? For example, the federal Gov't mandates that for any new Gov't office buildings, parking spaces may only be built to accomodate 60% of the workforce. However, the public transporttation system in Northern Va, where many new Gov't office buildings are being built, does not offer Germany style public transport options. So, instead we get gridlock, people fighting for parking spaces, and people parking miles away and hiking to their office building. A market pricing system for Gov't parking spaces would be a huge improvement over the current regs.


Mark Thoma wrote in response to this post:

"a Coasian bargaining solution is the outcome in his scenario. But the usual sorts of considerations, i.e. transactions costs, unclear property rights regarding street parking in front of residences -- some people, for example, use cones and other devices to save parking spots -- and other barriers may prevent the Coasian bargaining outcome."

I'll add that even aside from these problems, often you just don't want a standard Coasian outcome; it can be grossly inefficient and result in far lower total societal utils. Here's the great growth economist, and Nobel shortlister, Paul Romer of Stanford on this:

As just one example, recall that the increasing returns to scale that is implied by nonrivalry leads to the failure of Adam Smith’s famous invisible hand result. The institutions of complete property rights and perfect competition that work so well in a world consisting solely of rival goods no longer deliver the optimal allocation of resources in a world containing ideas.

– Forthcoming American Economic Journal paper, page 8, at:


"Think about the basic science that led to the discovery of the structure of DNA. There are some kinds of ideas where, once those ideas are uncovered, you'd like to make them as broadly available as possible, so everybody in the world can put them to good use. There we find it efficient to give those ideas away for free and encourage everybody to use them. If you're going to be giving things away for free, you're going to have to find some system to finance them, and that's where government support typically comes in... Because everybody can use the idea at the same time, there's no tragedy of the commons in the intellectual sphere. There's no problem of overuse or overgrazing or overfishing an idea. If you give an idea away for free, you don't get any of the problems when you try and give objects away for free. So the efficient thing for society is to offer really big rewards for some scientist who discovers an oral rehydration therapy. But then as soon as we discover it, we give the idea away for free to everybody throughout the world"

-- From an interview with Reason magazine at:

mattmc writes:
I worry that Shoup's goal is a huge government-caused distortion to limit parking availability.

You are exactly right, that's what this whole thing is about.

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