Sort of like lunch, there is no such thing as a free parking space. It costs us dollars or time.
Hoping to optimize so valuable a commodity, some cities are installing parking devices that use demand and supply to price spots. The approach resembles a variable pricing model where a good becomes more expensive when less is available. Others, concerned about the time we waste have apps that instantaneously identify empty parking spaces.
Now, we can add Parking Panda.
Like any market maker, Parking Panda pairs people with parking spots and those who need them. Anyone who has a parking spot can enroll. You might own an office building with a lot that is unused over the weekend or have a home with a driveway you would like to monetize. Whatever the reason, by enrolling with Parking Panda, someone looking for parking can find you.
Our bottom Line: Isn’t it fascinating how a market, with no direction from government, can satisfy people’s needs and make a community more efficient?
Sources and Resources: Thanks to Slate where I first learned about Parking Panda. Also, here is the classic Donald Shoup paper, ”The High Cost of Free Parking,” an econlife post on San Francisco parking solutions, and a recent NY Timesarticle on their progress.
Parking expert Professor Donald Shoup has identified a traffic problem with implicatons far beyond city streets. Essentially he says that cheap city parking is really rather expensive. Throughout parts of NYC, for example, drivers can select meters that might require $1.50 an hour or a free side street. With so low a price, demand is considerable and there are few empty spaces. Consequently, drivers create pollution, exacerbate congestion, and generate pedestrian challenges while searching for spots. Also, land used for parking might have a better alternative function. Explained economically, while “parkers” pay little, the cost (sacrifice) for everyone else is high.
One way to solve the problem of underpriced public commodities is to charge more. San Francisco has begun to experiment with variably priced meters and parking lots. Spaces with higher demand will become more expensive. The result? Fewer people will demand them and negatively impact the neighborhood. Correspondingly, as suggested by George Mason economics professor Tyler Cowen, “…if we are ging to wean ourselves away from excess use of fossil fuels, we need to remove current subsidies to energy-unfriendly ways of life.”
One concern: Should we care that more expensive parking is regressive? Other costs?
The Economic Lesson
An externality is the impact of a behavior or contract that is experienced by a third uninvolved party. When the impact on third parties is undesirable, as with cheap parking, we call the result a negative externality. A benevolent impact on an uninvolved third party is called a positive externality. A community experiences the positive externality of flu vaccinations.
How to diminish a negative externality? Increase its source’s cost. How to encourage a positive externality? Make it cheaper to create.