Parking is like Nickel Beer

From Charlie:

He was definitely talking about Public Parking policy changes when Machiavelli said. As Niccolò Machiavelli  wrote, “There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.”

The Beer Mandate

A bar owner may find it profitable on some nights to charge a nickel for a glass of beer. While she bears the cost of lost revenue from what she could have earned selling at regular prices, in her estimation it’s more than made up for by the increase in sales of burgers and fries, and by the reputation as a lively hang out that large crowds will bring her. Her customers of course bear the cost of longer waits, overcrowding, and noise. If she’s being entrepreneurial she will take such costs into account by monitoring whether she loses customers or sees a drop in her bottom line. If it’s profitable she’ll continue; but if it’s not, she won’t.

Let’s suppose she doesn’t think it’s profitable, but the government orders her to charge a nickel per glass anyway. Unless the government happens to be a better entrepreneur than the owner, her customers will complain more about overcrowding. To address these complaints the government now mandates a minimum upgrade in the food served—say, from burgers to caviar—for which she may charge the market price. But her customers would rather pay a higher price for beer, with less crowding, and so would she.

The owner and her customers would be a little happier if, keeping the nickel beer policy in place, the government left any food upgrade up to her; perhaps it would be steak instead of caviar. Or, keeping the caviar mandate in place, they would be a little happier if she were permitted to charge the market price for beer, reducing overcrowding. Of course, the owner and her customers would be best-off if neither nickel beer nor caviar were forced down their throats.

Obviously, zero priced parking is like nickel beer. On street pricing mandates (OSP) is the caviar mandate, and so we are brought to Professor Shoup’s proposal: institute performance pricing (PP) for curbside parking and remove OSP minimums. Potentially everyone would be better off.

In real life, public authorities tend to respond to the consequences of their prior interventions with even more interventions. So, instead of removing the nickel-beer and caviar mandates, it’s likely they’ll order the bar to charge an entry fee gauged to the density of the crowd. Similarly, cities like London today charge drivers “congestion prices” for entering downtown at certain hours; New York City is considering this as well. It’s a nice cash cow. But it would be superfluous if performance pricing for street parking effectively reduced traffic congestion. Not only would it be far less costly than adding freeways or mass transit, it would probably to be less subject to rent-seeking, and much less interventionist than piling congestion pricing onto ZP parking and OSP minimums.