The distribution of pricing

 I think this piece  by Felix Salmon is excellent for understanding the oft-obscured distributional effects of the various 'pricing' solutions that are frequently proposed to problems of public policy.

The problem here is traffic, which pretty much everyone hates.

The solution? Dynamic pricing! In San Francisco!

" the central idea is brilliant, and should be adopted everywhere: reduce traffic congestion by pricing parking according to demand — including pricing garages lower than street parking — so that there’s nearly always at least one free parking space on every block. No more crawling around interminably looking for a spot! Congestion should drop immediately, since a huge proportion of city traffic is people looking for somewhere to park."

All of this is certainly true. Parking is only rarely and indirectly priced according to demand. That is, it is priced according to demand at garages (when these haven't secured friendly zoning and bylaws to engage in rent seeking) and pretty much nowhere else. The San Francisco system will only change on a monthly basis, and is limited in how much of an increase can occur in a given period. And this will almost certainly reduce traffic.

But of course the cost of reducing traffic is not evenly shared. Salmon will no longer have to struggle through the interminable struggle for a spot, but only because I will no longer be able to afford it. Granted, those of us who are the targets of this policy are currently paying less than the market deal for parking.[1] Myself, and the rest of the driving world, are probably getting a sweet deal. But given the relative inelasticity of parking supply, in many urban areas this will mean that many people who currently rely on finding reasonably proximate parking will be out of luck.

If you work in a popular shopping, tourist, or entertainment district, you are likely to be shit out of luck. Hope you don't mind walking twenty minutes on top of your commute. And for what? So that those who can afford to pay the market price, a price set by the combination of large demand and quasi-fixed supply, will no longer have to deal with the interminable frustration.

Is it a bad idea? Within limits probably not. The current system of prices in-connected to demand is clearly a mess. But whenever someone tells you that the solution is a better pricing mechanism one should always pause to think about the distributional consequences of the policy proposal. In this case, it will effectively be putting the need for working people to find parking reasonably close to where they work against the consumption patterns of the wealthy. I wonder which will be priced out.

[1] Is it fair to say the targets of this policy? I think so. It only makes sense as a congestion reduction policy if it will get those who don't want to or cannot pay the price off the streets. Certainly this will effect middle class consumption, and will probably be a net positive. But it will also price out working people who will find yet another  obstacle in their way.