How Is Health Care Like Parking Spaces?
Both are basically free. And this mispricing leads to overuse in both sectors. This is from Tyler Cowan’s editorial in the New York Times:
Ninety-nine percent of all automobile trips in the United States end in a free parking space, rather than a parking space with a market price. In his book, [The High Cost of Free Parking,] Professor Shoup estimated that the value of the free-parking subsidy to cars was at least $127 billion in 2002, and possibly much more.
He measures the value of a Los Angeles parking space at over $31,000 — much more than the worth of many cars, especially when considering their rapid depreciation. If we don’t give away cars, why give away parking spaces?
By contrast, San Francisco has just instituted a pioneering program to connect parking meter prices to supply and demand, with prices being adjusted, over time, within a general range of 25 cent [an hour] to $6 an hour.
This makes perfect sense. We shouldn’t pay the same for different parking spaces.
Also, might we say that the “price” of parking is having to wait for a parking space to open up? Rationing by waiting strikes again.
Given a static demand for parking and bit of fiscal austerity, those earned parking fees alone could help with the deficit.
Although, I agree with Virginia’s rationing by waiting. This is no doubt terribly annoying in parking, but much worse in health care.
See Arnold Kling’s skeptical comments at econlog here:
http://econlog.econlib.org/archives/2010/08/parking_what_is.html
In both areas the ultimate source of the mispricing is the same: government.
I fear that Professor Cowan has the enemy exactly where the enemy wants Professor Cowan, i.e. he has misidentified San Francisco’s parking policy as an attempt to balance supply & demand. Nothing could be further from the truth: It is simply an anti-fossil fuel money-grab by a tax-hungry city government.
If the San Francisco Board of Supervisors actually wanted to approximate supply & demand for public services, they would never have launched the Healthy San Francisco Plan, a big expansion of the public-health bureaucracy (http://tinyurl.com/23gcfwm).
I share Arnold Kling’s criticism of Professor Cowan’s thesis. I have lived in two cities where they tried to banish cars from the downtown streets and make everyone walk from shop to shop (Vancouver & Ottawa). Both have failed: Panhandlers loiter and respectable people don’t come because they prefer to drive and park rather than take mass transit and walk down a “mall” with panhandlers hanging around.
Nowadays, central planners who propose these ideas are shut down immediately by the retailers, who are willing to pay assessments or taxes to subsidise parking. Even when parking is market-priced, retailers often “validate” the parking so you get it free or for a much cheaper rate than the posted rate. So, their behavior demonstrates that “shopping + parking” is an economically efficient bundle.
Plus, the bigger problem is that mass transit in Canadian and US cities is usually a local-government monopoly: “jitneys” and other choices of privately supplied mass transit are outlawed….but that is a whole other ball of wax.