Capitol Hill in Denver has some pretty crappy parking for anyone experienced in the matter. If you get off work at 6pm or try to visit from out of town on the weekend, you are SOL and might spend 15-30 minutes or more looking for a spot. I personally don't know a single car-owning person in Denver who hasn't got at least 1 parking ticket. I've got 3, and I don't even own a car! SWIM got lucky and avoided being towed by sprinting at the speed of Usain Bolt after abusing an unused private parking spot. My neighbor wasn't so favored by the universe; she had to pay $300.
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| Denver General Fund Revenue Report |
Interestingly enough, parking fines are the 5th highest revenue stream for the Denver General Revenue Fund at $30 million, yet paid parking meters make up only one third of that amount at $10 million. That amounts to 10,000 tickets per parking agent in 2015!
Why is parking in Cap Hill so bad? It's basic economics, manifested by the unfortunately not so mythical tragedy of the commons; if you charge nothing for a public resource, everyone tends to overuse those resources. Yet, even the idea of paid parking elicits disgust. A single tear is shed for the beauty of free parking.
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| Green is all the space used for parking. Parking is bad downtown, but it is just as bad or worse in some of the surrounding parts. Credit Ryan Keeney |
Behavioral Economics 101 meets a Shakespearean Tragedy
The goal of traditional economics is to study the oh so mythical hyper-rational species, "homo economicus"; the goal of behavioral economics is to study an actual species, homo sapiens. One fundamental behavioral bias uncovered is the irrationality people face when something is free. There's a reason eBay sellers with free shipping fare better, 0% APR credit cards are so popular, and "teaser" (subprime) home mortgage rates may have contributed to the 2008 financial collapse.
Free Zombies
People become zombies for free stuff. We don't stop and rationally consider the opportunity cost or financial wisdom of waiting in line for a free shirt, that 0% APR now means 25% next year, that free lunch comes at the cost of listening to a boring speech, that free shipping means paying $120/year for a Prime membership, or ... do you really want to spend 10 minutes filling out a survey for a "free" taco supreme? Yes, time is almost literally money; perhaps the most hidden cost of all and one of the most scarce resources.
Side Note: Evolutionarily Irrational
Yet, why would we be rational about free things? For most of the millions of years of our evolutionary history, we never even traded, let alone had sophisticated price systems. Barter was invented within the past 10,000 years or so, and the Chinese invented the world's first paper currency within the past 2,000 years. If you struggle to think of parking in rational terms, don't worry you're in good company:
"Thinking about parking seems to take place in the reptilian cortex, the most primitive part of the brain responsible for making snap judgments about flight-or-flight issues, such as how to avoid being eaten. The reptilian cortex is said to govern instinctive behavior involved in aggression, territoriality, and ritual display—all important issues in parking."
-Donald Shoup
But the evolutionary roots of behavioral biases is a topic for another post.
This irrational behavior is strongly exhibited, and possibly enhanced, in the tragedy of the commons. Originally considered in the 1800s by a British economist, in 2009 the study of this issue also lead to the first (and currently only) female winner of the Nobel Prize in Economics, Elinor Ostrom.
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| Traffic is the epitome of the tragedy of the commons |
Externalities
The logic of this issue is straightforward: if you don't have to directly pay for something, it becomes easy to undervalue that resource. Economists explain this with a concept known as externalities: when two parties transact, if part of that transaction affects a third party without said party agreeing to it, an externality is created. The classic example of a negative externality is factory pollution, such as The Great Smog which killed an estimated 12,000 people in 1950's London, but there can be positive externalities as well. If someone gets a vaccine, that bestows positive externalities upon society (barring Donald Trump's autistic claims).
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| This wouldn't be an economics blog without a terrifying graph. Note: if the social cost is higher than the private cost, the actual equilibrium quantity is too high. Equilibrium Private Quantity Qp > Equilibrium Social Quantity Qs |
Competitive markets usually work well if there aren't externalities; but if there's a negative externality, businesses overproduce, and if there's a positive externality, they tend to underproduce. That's why governments often have to step in to subsidize vaccines or discourage pollution with regulatory fines.
The tragedy of the commons is a unique instance of a negative externality, explicit in as disparate issues as traffic, fisheries, climate change, overpopulation, and even voting. Since most roads are free, more people use them than toll roads, leading to overuse of free roads (hence traffic) during rush hour. Fisheries are quickly depleted without explicit and proactive conservation efforts. Climate change is perhaps the most egregious example: no one is charged for abusing the environment, so we get lots of abuse.
At least in these examples, some sort of pricing mechanism tends to improve the situation; strategically located tolls roads can reduce congestion, strictly enforced Marine Protected Areas reduce over-fishing, and many economists believe that a carbon tax will be necessary to prevent catastrophic climate change.
Side Notes:
Is Population an Over-Tragedy?
Having kids is a tragedy (... of the commons) only if your kids are going to be a negative externality on the world. (Of course, your kids would never be that). On the one hand, lots of people means lots of diversity and innovation (positive), but also leads to more tragedies in other areas (such as pollution, competition for resources, and less damn parking for the rest of us). For the more common view that overpopulation is an issue, see here; for the opposite view that population increases are a positive externality, see here.
To Plainness Honor's Bound when Majesty Falls to Folly
Finally, the political system is in many ways a tragedy of the commons, and voting is almost certainly economically irrational. If I spend hours and hours every day researching the best candidates who advocate for intelligent policy positions, that not only helps me, it helps my fellow citizens, much like a vaccine. Conversely, if I have the attention span of a goldfish and only watch the political punch lines, there's no cost to me... so we collectively elect a reality TV star demagogue as president.
Irrationality Sucks... Mostly
Even if people were rational about the tragedy of the commons (i.e. screw my fellow citizens, I'm going to take advantage of X), these issues would be bad enough. But it is amplified by the aforementioned behavioral economics of free. Not only are the incentives in place for me not to care, I irrationally over-consume free goods. But... biases need not all be tragic.
Surprisingly (to only an economist), Elinor Ostrom's research indicated that there may be behavioral factors working in the opposite direction. Namely, people aren't always completely selfish and sometimes care about how their actions affect their communities and the environment. Her research indicates that markets can efficiently organize optimal behavior but only with the help of community and social norms, neither a purely liberal or conservative conclusion. Maybe the hyper rational neoclassical tragedy of the commons model is wrong...
The Horror: Paid Parking
Call me a pessimist on human nature, but in the case of Denver parking I think the best solution is by far to increase the amount of paid parking. Some behavioral norms could certainly in theory improve the situation, but I've seen too many pictures like this to think that altruism alone will solve this affair. And while we wait for Elon's self-driving cars to reduce some on-street parking congestion, don't hold your breath when we could do something sooner and simpler.
With population increasing yearly and density reaching max capacity, we need to face the underlying economics of the situation. Limited space and high population density results in a need to allocate scare resources more efficiently by charging for parking usage. Street parkers are fairly sensitive to price, which means even a small rate could significantly reduce congestion and improve overall welfare.
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| Source: JusticeMap.Org |
Let's keep in mind the basic economics of the situation; since parking is free, this means that the supply of parking is less than the demand for parking, resulting in a shortage of parking spaces, increases in "cruising" or searching for a spot, and even consequently congestion.
We can either increase the supply or reduce the demand to reach a more desirable equilibrium. But increasing the supply of parking, i.e. building more parking lots, is one of the most inefficient uses of land and detrimental to the environment. This is likely why the Downtown Denver Partnership has indicated they do not have plans to expand parking downtown. So the better option is to reduce demand via paid parking. Additionally, this paid parking results in literally millions of dollars in revenue for the government, which can in turn be used for public transportation or other local investments.
The Hidden Costs of "Free" Parking
As any economist will tell you, there's no free lunch; free parking isn't actually free. In general, "free" parking actually means paying parking tickets or spending time looking for a spot. So, while we may individually at times prefer not to pay for a monthly or hourly parking spot, collectively we are paying a lot more for parking tickets or our time, which end up being quite crude enforcement mechanisms for shared resources.
Tickets
As mentioned above, parking tickets make up $30 million in Denver government revenue compared to $10 million for paid parking meters. Part of this is for violations of paid parking closer to downtown, but no doubt a significant amount includes tickets for free parking in high population neighborhoods like Capitol Hill.
People obviously don't like having to pay for parking, but they really don't want to pay for tickets. Denver has $14 million in unpaid parking tickets over 2015-2016, corresponding to ~15% of total tickets going unpaid. Curiously, paid parking increased 30% from 2011 to 2016, but parking fees only increased by 13% (comparable to population growth). This likely shows that it is more politically feasible to add paid parking options than continue handing out tickets. Hopefully this discrepancy means the city of Denver is playing paid parking catch-up (it's a really fun game).
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| Denver population increased about 13%, similar to the increase in parking tickets, but much less than the 30% increase in paid parking. Hopefully, this means the city of Denver is playing catch-up. |
Time
Another hidden cost is the time spent searching or "cruising" for parking. This actually imposes a very real economic cost. For example, in a 15 block business district near UCLA, every year drivers cumulatively lose over 11 years of time searching for parking! On average up to 30% or more of cars on the road in a given city are cruising. "The record is held by the German city of Freiburg- in one study 74% of cars were on the prowl."
Economic Activity
Inevitably, there are times when someone would rather stay in their apartment than go across town and try to find parking in Cap Hill. That means lost economic activity from restaurants, bars, etc. I know I have friends who refuse to come over to avoid finding parking some nights. At least, that's ostensibly their reason...
Minor Accidents
A friend of mine had to pay nearly $1000 for barely tapping another car while parking. (... Should she have left her phone number?) It's quite possible that with painted lines and more clearly delineated paid parking this wouldn't have happened. Bare minimum we should have painted lines to reduce the inefficiency of selfish parking and reduce the risk of petty accidents. I heard some people concerned that we wouldn't know the sizes of varying car models to properly paint the distance between cars; oh come on, its Colorado, everyone drives a damn Subaru SUV.
Viagra for Cars
As urban planning economist Donald Shoup has pointed out, free parking leads to more cars on the road, effectively acting like a "fertility drug for cars." Free parking can subsidize the cost of car ownership by $150/ month, canceling out the tax revenues from gasoline taxes. This hidden subsidy could be costing $150 billion dollars per year in the US alone. Just as one example, the opportunity cost of a single parking space in LA is estimated at over $31k per year, more than the value of many cars on the road!
Side Note: Since reducing car ownership will likely increase ride-sharing and public transportation, Lyft should lobby for paid parking just out of their own self-interest! I had no problem living in Cap Hill without a car, using a combination of biking, ride-sharing, and public transportation; if the cost of parking increased sufficiently, I'm sure lots of people would join my non-committal lifestyle. Also, I recently read in The Economist that the ROI on lobbying is 22000%, which is insane and a problem in and of itself, but also strongly reinforces my point.
Precision without Accuracy
Shoup also points out that most cities require a minimum amount of parking built per construction foot. This is usually a terrible idea, since it encourages more parking to be built than is necessary. Plus it forces a precise solution when every business and building has very different parking needs.
Instead, it is better to implement a market price for parking. As Shoup argues, you ideally want the price high enough that there is always a little bit of excess parking spaces available. In other words, you would never have to look for parking again; there would always be a couple of spaces available every block! Shoup recommends pricing such that 85% of parking spots are taken and 15% are vacant.
Models
Georgia Tech
While it may seem like it would be inconvenient to install parking meters all across Denver, this is actually unnecessary. I was recently on Georgia Tech's campus and parked using an app called ParkMobile where all I needed to do was type a 4 digit code based on area and add my license plate. Everything worked out great, other than they don't have an option to update your license after you paid. Since I put my license incorrectly as Georgia instead of Kentucky, I had to pay for parking twice; 3 (6) dollars for 3 hours, so I almost over-drafted my checking account.
Update: Philadelphia also uses this approach!
San Francisco
San Francisco follows Shoup's rules better than almost any US city after completing their rollout of hourly and location based pricing (temporal-spacial pricing for the nerds). Sensors detect the amount of parking available on a block and charge variable rates, from .25 cents per hour to $6. This leads to increased revenue for the city, as well as minimized time spent searching for parking.
The Georgia Tech approach doesn't require the smart meters to accept credit cards, since all payment is done via mobile. In this sense, that model has a lower upfront cost and maintenance making it preferable.
Distributional Concerns
One obvious concern is that eliminating free parking can disproportionally affect lower income individuals. Having to pay $150/ month for parking can really hurt budgeting. I believe these concerns are legitimate, yet they are misguided for a few reasons.
First, helping poor people by a policy of free parking is like using a Federal Reserve interest rates to encourage home ownership. In the words of former chairman Ben Bernanke, that is like using a sledgehammer to kill a mosquito. Since interest rates affect so many other parts of the economy, it's better to use a fine tuned fiscal policy to encourage home ownership. Likewise, universal basic income or negative income tax credits are more likely to help poor people than allowing all the other distortions resulting from free parking.
Second, Denver residents, especially closer to downtown and Cap Hill, are generally higher income than the average across the country. See Justice Map's income map below.
Finally, the increased revenues from these policies can be used to subsidize public transportation or otherwise directly aid lower income individuals.
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| Source: JusticeMap.Org |
Solutions
Things that would ameliorate Cap Hill's parking issue in increasing complexity/ benefit:
1. Paint lines so that there is less inefficiency in parking usage.
-Cost: <$350k for city of Denver based on $2 per line and the fact that only part of the city would need this. For example, further out on Colfax, parking is not nearly as problematic, meaning painted lines may not be necessary.
2. Initiate partial paid parking of 25% of parking spaces to test elasticity, revenue, response, etc.
-Cost: <$2 million for software, installation. Following the Georgia Tech model and using a third party solution like ParkMobile would likely cut this number by 75% or more.
-Revenue: ~$1.5 million/ year for 1000 parking spots x $100-$150/ parking spot / month
3. Scale to virtually all paid street parking implementing Shoup's optimal rule of 85% usage
-Cost: <$1 million
-Cost: Likely loss of parking ticket revenue, but almost certainly less than the corresponding revenue gain from paid parking
-Revenue: >$5 million/ year
-Revenue: >$5 million/ year
4. Fully implement a San Francisco style (Temporal-Spacial Pricing) model, with hourly changing pricing based on supply and demand
-Cost: <$1 million in software costs
-Benefit: As close to an economically optimal situation as possible
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