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"All you can eat" driving promotes vehicular gluttony

Yesterday, we discussed how "all you can eat" pricing can incentivize transit ridership. What about driving?


From the Sydney Museum of Modern Art. Photo by Charlie Brewer.

Traditionally, cars' pricing is almost purely unlimited use. You buy the car up front, or have a fixed monthly loan or lease payment. You pay registration, property taxes, inspections, and insurance regardless of how much you use the car. Parking is usually free, whether you are a tenant, employee or customer. Your only costs per trip are gas and maintenance, and those you don't even pay at the time you take the trip, but later, when your gas tank is empty or your tires are worn. There's a good summary of the per-mile costs of driving here. Insurance, registration, residential parking and car purchase costs about 50¢ per mile, and gas, maintenance, and tires cost about 14¢ per mile.

When you hop in the car, it's easy to not even think about these costs. Psychologically, once you own a car, keep the gas tank filled and maintain it properly, additional trips are "free". The psychological incentives today promote driving and discourage transit. If we want to rectify that balance, because of externalities like pollution or congestion, safety and noise, then we should move toward more pay-per-use systems for cars.

Charge tolls to drive on roads. Charge per use for parking. Daily or hourly parking charges are better for this purpose than monthly contracts. With a monthly contract, parking is already paid for on day one, so all additional days are "free". Other methods are less common: insurance can be priced per mile. Shared-car services like Zipcar charge by the hour. Taxicabs charge per trip and mile.

It's possible to make some of these changes without changing the overall costs, so it's not even necessary to get into a cars vs. transit debate. If someone pays $1,000 per year in insurance and drives about 12,000 miles per year, it doesn't cost them more if you charge $200 plus 6.6 cents per mile. It would encourage people to drive fewer miles, however (for comparison, gasoline including taxes is currently about 8 cents per mile). Also, if apartments typically rent for $1500 a month and include two parking spaces free, it's not an increase if the rent drops to $1300 per month and you pay $100 more per month for a parking space. Parking at work, which used to be unlimited at $120 per month, could be $6 per day against a pre-paid account instead of an unlimited per month charge.

If you change the way people pay for transit and cars, you can still fund both, but align the incentives so that they aren't pushing people to choose driving over transit. Because driving involves pollution, congestion, safety risks, and inefficient land use patterns, ending our structural economic bias toward driving would help society as a whole. Meanwhile, because increased transit use reduces the bad effects of driving, and increases the political will to run more frequent vehicles and expand the network, it's good for society to lower the barriers to transit use.

Michael Perkins blogs about Metro operations and fares, performance parking, and any other government and economics information he finds on the Web. He lives with his wife and two children in Arlington, Virginia. 

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The points are fair, but you're forgetting that people have to buy the car in the first place (or otherwise invest in the capital through lease/loan payments). Many rational people have decided that the upfront costs aren't worth the marginal-cost savings. Those that have presumably are doing little different than the person who buys a large bucket of cellphone minutes so that their calling is "free". Others buy prepaid.

As for aligning incentives, further to the weekly/monthly/annual pass, how about allowing people to buy a share of Metro capital, which entitles them to pay only the marginal costs of a given trip, and not a share of the capital costs? If necessary, put a plaque on the seats.

by ah on Feb 27, 2009 11:24 am • linkreport

I learned this week (excuse me for not remembering the powerpoint slide exactly-I can get a copy if anyone wants)

: that "working poor" or those meeting poverty level use 42% of their incomes to own/operate a car.

by Bianchi on Feb 27, 2009 11:28 am • linkreport

i see your point, especially with insurance and directly auto related expenses, but it breaks down in the parking. an apartment that charges 1500 with 2 free spaces is theoretically the same as 1300 plus 100 per space, but if tenants dont use the spaces, it still poses a cost to the property to maintain. sure, new buildings could adjust, but lots and structures could decay without the money. yes, in the long run that discourages driving, which i agree is overall a good thing. but, we cant let auto infrastructure crumble, it is still vital, and will always be part of our transportation network, at least as far as i can foresee.

by dano on Feb 27, 2009 11:31 am • linkreport

two things...

>>charges 1500 with 2 free spaces is theoretically the same as 1300 plus 100 per

I'm guessing that was just a quick example, and probably fails to meet actually costs. Real world numbers would probably relect real costs and differences. Remember, that the parking needs maintenance too. So anyone not using the 'free' parking pays for its maintenance anyway. There's obviously a formula to apply a value to a parking spot and back it out of the rent fairly.

Still on that front, up here in Philadelphia, a large development project in our neighborhood is seeking a variance from providing 1 to 1 parking (one spot per residential unit), and instead leasing spaces at additional cost only to those who want it. Precisely because the area is so walkable, they figure that not every tenant will want or need parking. I believe in conjunction with the reduced parking area, a few carshare cars will be located on site for use by residents of both the development and the surrounding neighbors.

Which brings up the second point: car share services seem to be currently the only way to get per-mile pricing on basically the whole cost of operation.

I'd love if I could get some sort of per-mile insurance for a heavy duty work vehicle. I'd love to curtail the use of the vehicle, but currently I have to pay to insure the thing at full cost or sell it. If I could lower that fixed cost by putting the vehicle into semi-retirement, I would gladly do it.

by lutton on Feb 27, 2009 12:04 pm • linkreport

you're spot on that we need to find ways to get people to drive less, but most of your examples don't work.

I don't see apartment owners giving you a break if you don't use a parking spot. Most parking at work is paid by the employer as some sort of benefit, and I don't see them willing to give the money saved as additional money to the employee.

Insurance; well your heart is in the right place. I'm on a Progressive policy that looks at my odometer; but it only results in a 5% break that I drive 5000 miles a year. Not much of a savings. Also, that sort of penalizes me if I do a few long road trips, which have nothing to do with daily commuting. If you really had that sort of policy ($200 + 6 cents a mile) I think you'd see an explosion of cars in affluent areas of Arlington and DC.

by charlie on Feb 27, 2009 12:10 pm • linkreport

ah: Some people decide to own a car, and some don't. As it is, my situation allowed me to not buy a second car. Other than car sharing and taxicabs I couldn't figure out a way to spread out the capital cost into a cost per trip.

Bianchi: He's not in poverty, but I believe Dave Murphy of Imagine, DC (and a GGW contributor) has written about how much of his income (about 20%) goes to his car, because his employer is not transit accessible.

Dano: It was a quick example and I agree that charging for spaces would likely result in fewer people using them. Perhaps the buildings could then lease the spaces to others in the area? It's definitely an argument for reducing the required parking spaces, if you can't get people to actually pay for them.

Charlie: It's not really apartment owners giving you a break, functionally they're charging you for a space. I did a little survey and found the practice to be fairly common in DC, with prices ranging from $100 to $250 per month per space. California has actually implemented a policy of requiring employers to "cash out" employees that don't need subsidized parking spaces, giving them the value in cash instead.

by Michael Perkins on Feb 27, 2009 12:38 pm • linkreport

Michael -- I realize the limit. You don't need to allocate the capital to each trip. The point is it's an ex ante decision: is it worth buying a car, knowing that it costs (say) $20000 over 4 years to buy cheap transit.

It rather mirrors yesterday's discussion about "all you can eat" transit passes. There the idea was it was a *good* thing to buy an unlimited transit pass because it meant you used transit more often. Here we're suggesting unlimited use (or low marginal cost use, more specifically) is a bad thing.

by ah on Feb 27, 2009 12:55 pm • linkreport

I don't really see an incentive for businesses to adopt these pricing schemes. If I'm an insurance company, why would I charge my customers per mile? The last thing I want is to futz up my income stream when people got their driving bill in the mail and decided to cut back. Likewise, why would I charge for parking? A tenant that sees his bill go from $1500 / month to $1300 / month + $100 / parking spot might not notice a difference, but a guy just moving in who sees the $100 / parking spot sire charge might get pissed off at the idea that he's getting nickeled and dimed.

Hidden costs make people feel better. Why would any business deliberately cause customers that mental discomfort?

by Zifnab on Feb 27, 2009 1:04 pm • linkreport

Great writing. It's so true. The most overused goods are those that appear free. Driving is an excellent example.

If a person eats all they can at a buffet every day, they will put their health as risk. The same is true of our nation and the buffet of car dependence.

by Cavan on Feb 27, 2009 1:11 pm • linkreport

zifnab -- why wouldn't you want to do it? If an insurance company had data to show that risk correlated with mileage, they could offer a more attractive product to customers at a better price. With a large pool of insureds, the mileage is going to balance out, and they can adjust over time. Sure, people may drive less, but then either (a) claims go down, making them money (b) claims stay the same, and rates go up to compensate.

by ah on Feb 27, 2009 1:26 pm • linkreport

Suburban America is still glad to exchange car dependence for not having to live stacked like cordwood in cities, unfortunately. This has ever been the case. Levittown didn't rise from some Detroit-spawned conspiracy. Boomer families between 1946-56 were stuck either renting in tiny apartments or bordinghouses downtown. For a family of four, that doesn't really cut it. Add Brown v Board of Education, desegregation, and the Interstate Highway Commission to the mix, and you've got a recipe for today's craptacular gridlock and the imploding ghost cul de sacs of Prince William County.

The secondary road corridors like Route 1 and Rockville Pike used to primarily be streetcar lines with adjacent roads. But the roads took over. It's time for the streetcars to take them back. Get rid of that useless cement median with the ridiculous LAWN down the middle and put a light rail line in it's place. Those roads are still there for a reason; people still live there and commerce is still carried out on them.

by monkeyrotica on Feb 27, 2009 1:33 pm • linkreport

By the way, credit goes to David for finding that photo.

by Michael Perkins on Feb 27, 2009 1:34 pm • linkreport

The way I see it, if you're on a diet and you go to a restaurant, would you rather:

Have the salad be priced per pound but the french fries and fried chicken and pizza are all you can eat?

or

Have unlimited salad, but everything else is priced per pound?

by Michael Perkins on Feb 27, 2009 2:04 pm • linkreport

See, the problem with unlimited salad is that people put down half a leaf of romaine and bury it under a gallon of ranch dressing, half a cup of bacon bits, and think they're being "healthy."

This is why I don't eat out.

by monkeyrotica on Feb 27, 2009 2:10 pm • linkreport

The way I would like it is to have a restaurant that priced everything by the pound and a restaurant that priced everything as all you can eat. Or even both in a given restaurant. And let me choose which I prefer.

In either of your scenarios you're socially engineering a particular outcome.

by ah on Feb 27, 2009 2:16 pm • linkreport

BTW, I think that car is designed to protect pedestrians . . .

by ah on Feb 27, 2009 2:17 pm • linkreport

Nevermind, I found a way to price capital cost of cars by use:

http://is.gd/l8wo

by Michael Perkins on Feb 27, 2009 2:34 pm • linkreport

You might want to read this blog I wrote on almost the same topic about how A Better Place, Shai Agassi's electric car project, as currently envisioned, goes down this same wrong pricing model path.

http://networkmusings.blogspot.com/2008/10/all-you-can-eat-vs-pay-as-you-consume.html

by Robin Chase on Feb 27, 2009 6:28 pm • linkreport

@Robin: That's great that we had the same idea; I think yours is probably better written.

by Michael Perkins on Feb 27, 2009 7:33 pm • linkreport

Note that paying separately for your apartment and your car park is a common inner-city arrangement in Australia and Europe. The problem with per-mile insurance is going to be tracking and auditing it.

by Andrae on Feb 27, 2009 11:53 pm • linkreport

The california cash-out parking rules are interesting, and I must admit I hadn't heard about them. The case study is informative.

It would be interesting in DC. I have a $350 a month subsidized parking spot. I usually walk but use the spot at least once a week, and often on weekends. I'd gladly take the $350 in cash and buy 8 days of parking ($80) with it.

I'm guessing the cash-out is taxable income, although I'm not sure how it is declared.

Another idea -- which is common at law firms -- would be to give above-the-line tax credits for taxi vouchers. The reality is highly paid white collar professionals are not going to want to take the metro when coming home at 10PM, but are very happy to take a cab. Limit the amount ($10 or $15) at once and you've got some very strong incentives not to drive.

by charlie on Feb 28, 2009 11:27 am • linkreport

Re; charlie's situation and his subsidized parking spot.

There's an elegant solution to this, thus:

It's Charlie's spot anytime he wants it, but on days he walks, he logs in and gives it up. The garage can now sell that spot for a high daily rate--say $15. Charlie gets a credit (say, $5) for each day he logs in and gives up his spot. In a month that might be $75, while the garage brings in $225 (and gives $75 to Charlie). Perhaps his employer gets a cut, too, to get them on the side of encouraging employees to walk, bike, bus or train to work.

I got this idea from a situation of a friend who used to be a professor at Georgetown, where parking is notoriously scarce. Living in Arlington, many days he would bike in, but on rainy days or if he had a lot of stuff to carry or had to go somewhere else after work, he wanted to know he had that spot available, so he was not willing to give it up. However, if he could give it up on daily basis, that would serve everyone's interest, because it would free up parking on campus while encouraging those with parking spots to sometimes take another option and get some cash.

Keep in mind that this system works only as long as there is demand for the parking (invalid in suburbia, by and large). Although, it could be modified such that Charlie only collects if his spot is actually filled by a daily customer--then there is no risk to the parking provider.

by Steve on Feb 28, 2009 5:02 pm • linkreport

The short answer to the debate: more gas tax. The rest of the Western World (Europe) is already doing it, why follow them?

by Jasper on Feb 28, 2009 9:39 pm • linkreport

I agree wholeheartedly. I got rid of my car last October and switched to Zipcar. Since I have to pay by the hour, I'm a lot more apt to walk or take the bus than I used to be.

by Leo on Mar 1, 2009 5:02 pm • linkreport

Actually, you can already buy "per mile" insurance, at least in Maryland, but only from Progressive. The arrangement, called MyRate, means you install some non-GPS wireless device on your vehicle's OBD port and it sends the insurance company information on how long, when and how many miles and how many times you suddenly start or stop while driving the car. I was initially skeptical of this program, thinking that it would just bring me closer to big brother. Actually, I have curtailed my driving as a result of viewing my driving habits (all data on the car is available on a secure site). The less I drive, the less I pay on insurance; I expect to save nearly 20 percent of what I would have paid on the all-inclusive policy I had before.

Of course, if you drive a lot, programs like this actually could increase your premium over time. I guess those drivers in that situation would buy the regular policy and get the savings there. So far, I haven't heard anything about Progressive's income from the program, but I am likely to keep it as long as I can.

by Andrew Waldman on Mar 2, 2009 10:42 am • linkreport

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