Timothy Lee reflects on building restrictions in the Bay Area. This is close to my heart, because I’m going to get my PhD  in Transportation Engineering at UC Berkeley in the fall and will be paying a lot of rent. (link)

Today, the Bay Area has about 7 million residents. In a free housing market, the population of the San Francisco Bay Area would have been growing rapidly over the last two decades. For example, between 1900 and 1920, the growth of the auto industry helped the population of the Detroit metro area nearly triple, from 540,000 people to 1.4 million people. If the San Francisco Bay Area had grown that fast since 1990, it would have about 16 million people today.

In the debate over liberalising cities, I notice a whole lot of commentors make a logical error.

People in the Silicon Valley are drawn to the culture of the valley. It’s a culture of living and enjoying the non-urban world around them. 365 days a year there is something to do and see here and it goes far beyond shopping and museums. Mix in another 4 million people and what makes this valley great would disappear or at least get crowded out.

The commentor is basically saying that, if more people were able to live in Silicon Valley, then people wouldn’t want to live in Silicon Valley. That reminds me of the Yogi Berra quote “Nobody goes there; it’s too crowded.” The reason that the Yogi Berra quote is funny is that it contains a fallacy. It’s wrong. What’s wrong about it is that what’s true of an individual–not wanting to go to a crowded place–is impossible to be true of society generally. It’s kind of like how, when you learn calculus, it’s mindboggling that the y*dx’s are individually negligible but somehow add up to big numbers.

This fallacy is really common. I hear all the time that, if cities had congestion pricing, then people won’t be able to get to work/businesses will move out. But if that were true, then the congestion price would be zero.

I don’t actually know very much about why cities restrict development, but I do know this is a bad argument.

New York Times:

With the new system, passengers will be able to print tickets or load a special bar code on their smartphone screens for conductors to scan, and conductors will be able to keep track of passengers on board, Amtrak said.

“You don’t even need to print the document and bring it with you,” said Matt Hardison, chief of sales distribution at Amtrak, who helped plan the iPhone program. “We’ve made a number of important improvements for both our customers and Amtrak, all in one fell swoop.”

New technology cuts transaction costs. Easy transactions help organized firms to compete with self-sufficiency. That is, it lets The Market compete with Autarky. Transportation has more autarky than any industry besides housekeeping, but technology is changing all that. ZipCar allows people to pool auto capacity instead of individually buying cars.  RFID, electronic banking, and plate-reading cameras allow governments to turn road capacity into a saleable commodity. JustEat makes it easy to get free delivery.

Easy transaction costs also allow small ‘firms’ to compete with large ones. Recently in Minneapolis I stayed in a dude’s room for $26/night instead of a hotel for $40, thanks to AirBnB. Craigslist let individuals kill the newspaper classifieds.

As to mass transit like AmTrak, it’s unclear how things average out. iPhone payment helps trains compete with autarky (people driving between cities alone). But a kind of iPhone payment (showing the driver your confirmation email) also helps competitor Megabus pickup people at the curb. And online booking faciliatates yield management, which enables more frequent, more customized services on a larger bus network. Eventually, iPhone payment between individuals will make it really easy to carpool.

My prediction for the future is that most rail firms, intercity and intracity, are going to die. Wireless payment only speeds up buses (what train is slowed down by people paying?). GoogleTransit is way more useful for buses than for trains (who can’t figure out where a subway goes?). Road pricing clears the way for buses to go faster. In the 20-year long run, autonomous vehicles will dispense with the unions, mandatory breaks, and minimum sizes that hinder bus service. Buses are more labor-intensive than trains but less land-intensive. Thus, every single trend is favoring buses more than trains.

To go a little sci-fi, in the future we will have ‘buses’ of varied sizes (some being merely cars) running exactly at capacity over unintuitive-but-efficient spiderweb networks with unintuitive-but-efficient schedules. In some cases, regular headways and circular routes represent efficiency bowing to memorability. But the incomprehensibility of a system designed by operations researchers won’t matter in the future, since we’ll be guided by smart phones that tell us where to go at what time. Stops will be infrequent and will take place quickly, especially once we have specialy-equipped buses for the handicapped and elderly.

Finally, I believe that this high-accessibility system will enable a much higher labor-force participation rate. If you think of a day’s work as a production function, there is a high fixed cost to arriving and leaving work. For workers with low productivity (uneducated, low IQ, lazy, handicapped, recent immigrants or elderly), this makes it not worthwhile to even make it into the office/factory/housecleaning job.  But in the future I have outlined, accessibility is so high that everyone will be able to get everywhere; and low-productivity workers will be able to trade their abundant time for money with unprecedented ease.

Streetsblog: The map above depicts the extraordinary decrease in private motor vehicle traffic, with the bright blue dots showing where driving has gone down more than 30 percent and the bright red dots showing where it’s up more than 30 percent. By the looks of it, the drivable suburbs are still a bastion of private vehicles, but the central city is seeing far less traffic.

Of course, people aren’t just sitting at home. They’ve embraced other ways of getting around. So while there are fewer vehicles in London now than in 2001, one motorized mode has become more ubiquitous: the bus.

Also, check out Dr. Kenneth Small–UC Irvine–on the interaction between the congestion charge and buses in London:

By clearing cars off the most congested streets, pricing sets off a “virtuous circle” for mass transit, especially bus transit. Here’s how it works…

Weirdly, none of my professors here at Leeds have reference this ‘virtuous cycle’ when we talk about bus ridership in London.

Also, speaking of buses, last week I 90% rewrote the wikipedia article for the Mohring Effect.

The Mohring effect is the observation that, if the frequency of a transit service (e.g., buses per hour) increases with demand, then a rise in demand shortens the waiting times of passengers at stops and stations. Because waiting time forms part of the costs of transportation, the Mohring effect implies increasing returns to scale for scheduled urban transport services.

At Bloomberg, Michael Kinsley has a problem with the variably-priced tolls on the 520 bridge in Seattle:

But the big problem with the new toll is that it is another small chipping way of our shared life as citizens, and another area where money makes the difference. It used to be that no matter how rich you were, there were some things you could not buy your way out of. Rush-hour congestion was one of them. The law, in its majesty, allowed rich and poor alike to get stuck in traffic…

As explained by philosopher Michael Walzer, and somewhat more entertainingly by my friend Mickey Kaus, there are two ways to deal with wealth and income inequality (if it bothers you, that is). One is to reduce it, through the tax system. The other is to make money less important. Create national parks, open to everybody. Restore universal military service. And so on.

This is wrong. Let me count the ways:

1. You have to pay for the national parks! This is a terrible example. Why did he mention it? Yeah, they are ‘open to everybody,’ in the sense they are open to everyone who pays $6-10…just like the 520 bridge…and just like a laser tag arena.
2. Rich people are not paid more by accident. On average, they produce more per hour by managing companies, transplanting hearts, writing code, entertaining, and teaching courses.  Therefore, we should want them to have extra time. And we should want them to possess clear minds, unstressed by rush-hour traffic. The rest of us benefit when they work more and better.
3. What is wrong with reducing inequality through the tax system? I have no idea. It’s simple. It works every time it is tried.
4. We do not face a choice of whether to pay for the bridges. Either we will toll them or raise taxes elsewhere. If you raise taxes elsewhere, then you will force lower and middle-income people to pay. How is this better than giving everyone a choice of whether to pay?
5. Forcing everyone to sit in traffic is the most roundabout and wasteful way of enforcing equality I can imagine. It’s not far from Harrison Bergeron, where the government ties weights to strong people and interrupts their thoughts to counteract intelligence.

On a side note, I notice that Michael Kinsley was born in 1951, but he didn’t go to Vietnam. Neither did Mickey Kaus. I notice this idea of universal military service is fairly popular among men too old to actually serve and who avoided service the last time it was mandatory.

Matt Yglesias opposes privatization:

Infrastructure Privatization Leading To Inefficient Pricing In Hampton Roads

Josh Barro defends limited privatization of bridges/tunnels:

Roads and Bridges: Just Like Any Other Monopoly

But not all pieces of road infrastructure are equally monopolistic. The Queensboro Bridge is divided into upper and lower levels, each of which carry two-way traffic. Let’s imagine that instead of privatizing the bridge in one piece, you privatized its two levels separately, with operators setting tolls independently from each other. In this situation, each operator would have no monopolistic pricing power; if the Upper Level operator tried to set a price above the socially efficient price, I would just switch my business to the Lower Level, and vice-versa.

Barro’s commentary requires a grain of salt. There are huge gains from planning traffic flows on a network that are lost when owners of different links price independently. In fact, this is becoming even more true as ITS and in-vehicle systems allow a network controller to reroute traffic and reduce system costs.

I think Sam Schwartz is enjoying the Matthew effect, ever since his mention in the New York Times a few weeks back (Meet Sam Schwartz). I’ve seen him mentioned in number of articles connected to his congestion pricing plan. Recently…

Congestion pricing may still become NYC reality

A man who embraces the sobriquet Gridlock Sam isn’t going to just fade away after 40 years of soldiering in the New York City traffic wars.

No, what Sam Schwartz is going to do is more Don Quixote than Douglas MacArthur.

Schwartz, the traffic commissioner in the Koch administration and go-to consultant for all things traffic ever since, has embarked on a glorious quest to bring congestion pricing to the city and raise $1.2 billion a year for its transportation infrastructure.

What pains me about coverage of the Schwartz’ plan is the ongoing connection of congestion pricing to transit subsidies. You want to use tolls to subsidize transit? Fine. But you can also just pay them back to drivers through reduced vehicle fees. Unfortunately, pricing is conflated with transit subsidies, and hence its reputation is conflated the reputations of transit agencies and their unions. Some people recognize this openly (from later in Ms. Rife’s column):

State Sen. John Bonacic, R-Mount Hope, warns that until or unless the payroll tax is repealed and the MTA’s credibility is redeemed, “the kiss of death” will greet any plan to give the transit agency new money.

If congestion pricing is that dependent on the credibility of the MTA, then I don’t see any way Albany will approve it. Just like economists who spend their lives railing against stupid deductions in the tax code, proponents of congestion pricing will go hoarse against ‘starve the beast’ shouts as long as pricing is food for transit unions.

Over at Bloomberg View, Rohit Aggarwala, who has a PhD and an MBA, tackles some magical thinking about infrastructure banks. He scores some points for user fees, too:

If we embrace user fees, opportunities abound. If we turn the Interstate Highway System into a toll network, we can eliminate the federal gas tax. If we accept congestion pricing in city centers, we can subsidize mass transit without resorting to raising local sales taxes. Alternatively, if we force transit agencies to charge customers more so that they operate at break- even levels, they will carry fewer riders, but those riders will get better service.

This is optimistic and simplistic, but at least Bloomberg is consistently running articles that promote congestion pricing. This affirms my theory that congestion pricing has reached Conceptual Juggernaut status.

From what I understand of US transit systems, we could do better than raising fares by simply eliminating useless routes and offering lower retirement benefits. I’m also very skeptical of transferring money from congestion pricing to transit. Drivers loathe the idea, and much of the additional subsidy money will be swallowed by the union. To think otherwise is to ignore the evidence and hope that this time is different.

From Slate’s Moneybox blog, Infrastructure Pricing Shouldn’t Maximize Profits

Now in the real world, publicly owned transportation infrastructure is essentially never priced optimally as I outlined above. So it’s very possible that in practice some jurisdictions are reaping some gains by moving to privatization. But in a structural sense, privatizing your bridges is a step toward locking bad pricing policies in permanently.

Those of us in the pro-pricing camp need to be watchful of privatization deals that could ruin the pricing brand. We need public officials to strike a hard bargain.

At The Freeman online, Professor Sandy Ikeba of SUNY-Purchase muses on San Francisco’s demand-priced parking meters:

As I said before, to do market pricing correctly, well, you need markets. What the San Francisco approach does is to try to mimic what it is thought a private market would do. But the standard of “at least one empty parking spot” is arbitrary – like mandating that every ice-cream cone have two and only two scoops of ice cream. The Shoup-inspired San Francisco solution is I think a step in the right direction, but only a step.

Street parking is zero-priced because those streets, and the curbs and sidewalks that abut them, are not privately owned.

I wish libertarians would give more unqualified support for governments that practice road pricing and parking pricing (road pricing for stationary cars). I think Dr. Ikeda supports San Francisco’s plan, but it’s kinda buried. He obviously supports privatization, but privatization is not on the agenda in San Francisco, nor will it be. Elsewhere he criticizes Mayor Bloomberg’s congestion pricing plan as “intervention,” which from a libertarian has undertones of opposition:

Every so often during his tenure as mayor of New York, Michael Bloomberg has tried to push through congestion pricing, in which drivers would have to pay to use city streets in Midtown and Lower Manhattan. That’s a popular solution to chronic overcrowding but, like drinking coffee to try to cure a hang over, it doesn’t really get to the heart of the matter. More intervention usually doesn’t solve the problems that were themselves the result of a prior intervention.

This is a problem with libertarians: you can’t figure out how they rank policies below their favorites and above their worst-case scenarios. For example, I know libertarians abhor Keynesian fiscal stabilization, and I know that thinking libertarians like George Selgin want “free banking” to determine (or undertermine, as you will) macro-stabilization. But in-between it’s unclear what to do, which leads a wide berth for asinine gold fetishism/Internet-Austrianism/superstitious fear of “printing money.” That’s why a libertarian like Scott Sumner, whose NGDP-level-targeting strategy would neutralize the case for fiscal policy in its entirety by making the multiplier zero, gets angry comments from libertarians. On road pricing, this ambiguity leads grassroots liberty-lovers to organize against strategies that, while not fully free market solutions, at least embrace the price system and give drivers more choice. Other times I hear about people filing lawsuits against private utility companies for installing smart meters, in the interest of liberty. To be clear, I think the libertarian intelligentsia does have these policies ordered, but there always seems to be a vagueness in their advocacy I wish they would drop, even if it pissed off your run-of-the-mill Ron Paul/conspiracy theory libertarian.

To be clear, I’m not a libertarian. I’m a registered Democrat, because social insurance is a success.