Tuesday, April 17, 2007

(Better) Markets in Everything: Parking

The problem of cars is that they entail high fixed costs and low marginal costs. Insurance costs are essentially fixed. Depreciation depends more on time than mileage (Does it?). Parking is likely under-priced at the margin. The private marginal costs of pollution are zero. So one small step to a solution to the car problem is moving as many of the fixed costs to marginal costs as we can. The result will be consumers choosing to drive less.

One of the interesting ways to "free two birds with one stone" would be to unbundle parking spaces to housing/apartments. Some evidence suggests the provision of parking space is a significant contribution to the cost of housing. Unbundling the parking spaces have the potential to significantly reward families/individuals who choose not to own a car. More affordable housing and fewer cars, sounds like a win-win situation to me.

NYT article about removing parking from downtown apartments in cities across the US.

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