You Assume Too Much

For many on the left, there is an easy equation to promote energy independence and protect the environment: Less driving, more density, and more rail transit. Even noted economists like Greg Mankiw have supported a Pigovian gas tax to encourage precisely these three behaviors. The question not asked is whether these idealistic behaviors can even be achieved.

Would higher gas prices push people to move to mass transit or into the city? Hardly at all. Recently, the American Dream Coalition released a fact sheet entitled “Rails Won’t Save America”. In it, they challenge many of the assumptions that so many take for granted. According to the Fact Sheet, while driving has dropped by 4% since last year, mass transit has increased by 3.4%. This seems to support mass transit until you realize that the 4% of driving represents 15.4 billion miles. Mass Transit has only increased a mere 455 million passenger miles. That is to say, only 3% of the reduction in driving miles has gone to mass transit. If gasoline at over $3 doesn’t increase mass transit on a broad scale, any incentive would have to be enormous to cause it.

The problems with using mass transit and forcing density as a solution to oil consumption are many. First, mass transit is inescapably inconvenient. I tried it, and for me it added an additional 50 minutes each way to my one way 40-minute commute. For a typical mid-level office worker making $30/hr and valuing his or her personal time at that rate equates to a loss of $10,000 a year. At $4/gallon, I would spend less than $2,000 in gas to commute in my Honda Accord. To understand why people are not moving to mass transit is easy. If I was going to spend an extra 100 minutes away from home it would be working on getting a promotion, not on mass transit.

Secondly, mass transit is becoming increasingly subsidized. Few have made note that while gas and diesel prices have surged, bus fairs have not. Electricity rates have surged along with natural gas and oil, yet electric powered rail prices have not. Cities are simply eating the costs. This is a dishonest as the U.S. Post Office’s recent television ads bragging that they do not charge fuel surcharges, and then also announcing a $1.1 Billion quarterly loss due to high fuel costs. The government folds to political pressure by the rent-seeking public, keeping prices lower than costs.

Mass transit is inherently inferior because a car can travel to and from a near infinite number of locations, while a rail system can only serve a couple dozen locations. This loss of convenience necessitates that it takes longer. Political pressures often dictate transit locations further slowing trips with unnecessary stops. Only draconian changes to development patterns could over come the inherent limits to mass transit.

It is also unlikely, without massive incentives, to get large numbers of people to move into the city center. Pleasant communities near the city center are often very expensive already. If the hundreds of thousands of new residents needed to support a large mass transit system were to move into these areas the prices would skyrocket into the stratosphere. While, at the same time, prices in the sprawling suburbs would plunge, maintaining overall affordability. It is likely that many employers would simply move out to the suburbs and not remain in the city because they could attract workers wanting the low cost of living. In the long run, Dr. Mankiw’s gas tax idea would simply limit the number of job opportunities for everyone by increasing the cost of traveling to jobs that are further away. Any real achievement towards the end he seeks would be small at best.

The simple equation of less driving, more density, and more mass transit, is more dream than reality. Unfortunately, Dr. Mankiw does not seem to think deeply about how people would behave under his policy suggestion or he would realize it won’t work. The Fact Sheet put out by the American Dream Coalition has a lot of great information debunking myths about mass transit helping the environment. At only six pages and lots of graphics, I suggest everyone give it a look see. The link again here.

Hat Tip to Tory on the Fact Sheet