Vehemently anti-car? Or broken transport market?

Whenever anything gets built that makes life easier for people on foot, bike or bus, I inevitably hear people say things along the lines of transport engineers and planners not making sensible decisions and instead being driven by an irrational anti-car ideology.

For example this comment about reducing speed limits from 50 to 30km/h.

Needless to say I’ve never thought of it like this. I don’t think anyone in the industry has.

In a way I do see where he’s coming from. In recent years there has definitely been shifting consensus on the way we should be designing and operating our streets.

But this is not being caused by some inexplicable wave of irrationality. I think a more accurate description of why it’s happening is simply a growing understanding of economics and our transport system as a market. Specifically a growing recognition that transport is not a perfect market: it is riddled with “market distortions” that have not been dealt with.

Wikipedia defines market distortions as:

“any departure from the ideal of perfect competition that therefore interferes with economic agents maximizing social welfare when they maximize their own”

Some examples of these are given as:

1. almost all types of taxes and subsidies, but especially excise or ad valorem taxes/subsidies,
2. asymmetric information or uncertainty among market participants,
3. any policy or action that restricts information critical to the market,
4. monopoly, oligopoly, or monopsony powers of market participants,
5. criminal coercion or subversion of legal contracts,
6. illiquidity of the market (lack of buyers, sellers, product, or money),
7. collusion among market participants,
8. mass non-rational behavior by market participants,
9. price supports or subsidies,
10. failure of government to provide a stable currency,
11. failure of government to enforce the Rule of Law,
12. failure of government to protect property rights,
13. failure of government to regulate non-competitive market behavior,
14. stifling or corrupt government regulation.
15. nonconvex consumer preference sets
16. market externalities
17. natural factors that impede competition between firms, such as occurs in land markets

Number 16, market externalities, is especially relevant to transport. Wikipedia defines “market externalities” as:

“an indirect cost or benefit to an uninvolved third party that arises as an effect of another party’s (or parties’) activity. “

It then goes on to explain how exhaust fumes from motor vehicles are a textbook example of a market externality. One person chooses to drive: they pump fumes out their exhaust pipe that harm an uninvolved third party. Other well-documented externalities relating to cars include congestion, noise, vibration, amenity, public health and safety.

These costs are not just vague, hand-waving rhetoric: many have been quantified. We know that car fumes kill 3,300 NZ’ers and cost us $16 billion in healthcare every year, congestion costs about $1 billion per year (in Auckland alone), treating obesity-related diseases attributed to car-dependant lifestyles has been quantified at $2 billion a year, pedestrian delays on Auckland’s main street around $12 million per year.

These market externalities are real and significant.

The ideal theoretical solution to market externalities is to try and internalise the cost. That is, to require the motorist to pay some sort of compensation to everyone else whom they are imposing a cost onto. So every motorist giving a small payout to every cyclist who has to breathe in their fumes, every resident who has to endure their noise and vibration, every pedestrian who has to wait to cross the road, every kid who can no longer play in their neighbourhood street, and every hospital who subsequently has treat them.

Obviously if this was to be implemented, people would drive a lot less than they do now. But I think it is equally obvious that it’s impossible to ever implement a scheme like this.

There have been some attempts to implement certain components of such a scheme. For example we’ve been trying to implement congestion pricing for several decades now, but it’s never managed to make it past the political games. Te Manatu Waka Ministry of Transport recently asked the public if people thought road user charges should be broadened to recover the costs of all these externalities, rather than focussing on solely recovering a portion of the cost of maintenance & operations, which is how it is currently set up. But they gave no details on the mechanics of how this would work. We try to get motorists to pay for their safety externalities through ACC levies, but these only capture a fraction of the real cost. Greenhouse gas emissions are starting to be priced, albeit imperfectly.

I think we need to keep chipping away at implementing these “first-best” solutions to market externalities, but I’ve increasingly made peace with the fact that I’m probably not going to see any sort of comprehensive scheme implemented in my lifetime. It’s just too hard both technically and politically.

In the absence of a “first-best” fix we have to go looking for a “second-best”. An obvious one is using other policies to try to correct for this distortion. One such “second-best” solution that we’ve done since time immemorial is subsidising public transport. Likewise parking management. An increasingly popular one is making our streets safe, even if that means a few seconds inconvenience for those choosing to drive (e.g. the safe speed limits referred to above). Others being toyed with but not yet implemented in NZ include parking levies and bike subsidies.

In summary, there is a shift in the way we are designing and operating our streets. But the cause of this is not that every single transport planner in the country has inexplicably decided to start being “vehemently anti-car”. It’s just a natural response to a broken transport market: a series of “second-best” solutions implemented to try and fix a market distortion that we can no longer afford to keep ignoring.