Singapore’s Pollution Solution
When a country’s economy is ranked the 2nd freest in the world, how do they manage auto congestion and pollution?
By auctioning a limited number of vehicle permits, Singapore makes owning a car very expensive. A VW Passat in Singapore could cost as much as the median price of a house in a US metropolitan area ($158,100).
The reason is demand and supply. On the demand side, there are lots of millionaires (17% of all households), unemployment is low, job security is high and businesses will make interest free car loans to employees. On the supply side, permits are limited. As a result, according to auction information on Bloomberg, the vehicle permit alone could cost you S$89,990 ($73,332.52).
In other words, Singapore creates a market in vehicle permits to control traffic congestion and auto pollution.
Sources and Resources: My thanks to marginalrevolution.com for the Singapore story and Bloomberg for the details. Also, here, Bloomberg reports the most recent price of the permit and here is the (astronomical) price of a VW Passat. Finally, to see why Singapore is categorized as a free economy when its political system is much more restrictive, you can look at the Singapore link in the Index of Economic Freedom.