Sunday Train: Crowding Out vs Crowding In and Transport

(10:30AM EST – promoted by Nightprowlkitty)

Burning the Midnight Oil for Living Energy Independence

I was reading a Grist article critical of the most recent MIT report promoting nuclear power, and one of the arguments made got me thinking about transport:

Another critical omission in the MIT analysis is the fact that large commitments to nuclear construction tends to crowd out alternatives. The financial and managerial resources of the utility are concentrated on bringing these large complex plants online. Policies that reduce demand or promote alternatives are seen as a threat to the viability of the large nuclear project. My analysis of France and the U.S. bears this out. [emphasis in the original]

This got me thinking, because Crowding Out versus Crowding In is an important issue to face when looking for Oil-Independent Tranport in pursuit of Economic Independent for the US.

Crowding Out is not the Only Alternative

In textbook introductory mainstream economics ~ that is, the kind of blinkered economic orthodoxy that is completely incapable of understanding that we were in a housing bubble in this last decade, and that we had pushed deeply into the Ponzi stage of financial fragility ~ it is a commonplace to examine the question of how much government spending crowds out private investment in real productive capacity.

The range of possible answers is from “not very much” to “completely, dollar per dollar”.

Of course, in the real world, there are a number of examples of specific programs where government spending has led to substantial private investment in real productive capacity. Government spending on transportation often generates this kind of “Crowding In” ~ because it increases the things that are possible to do, it can lead to investment spending that takes advantage of those new possibilities.

This is one kind of “crowding in”: investment crowding in by creating new investment opportunities. Because of the possibility of investment crowding in, the textbook introductory economics question is itself misleading: the possible answers actually range from “substantial crowding out” to “substantial crowding in”.

If we are going to build a Brawny Recovery, with income-driven growth allowing consumers to spend more while at the same time hauling ourselves out from underneath our mountains of debt, we obviously want to target our longer term stimulus spending on projects that Crowd private investment In, and not on projects that Crowd private investment Out.

Crowding Variety Out

The Grist article, however, is focused on a different kind of crowding out. That is the crowding out of variety. It answers the question that should be posed far more often: does any particular policy tend to increase the choices available, or cut down on available choice. Pursuing large, centralized, capital intensive power sources that require high and steady demand for power to be cost-effective will, obviously, lead to a need to generate that demand for power, and a need to prevent other rival means of providing that power from being brought online.

Not all projects have that effect. For example, if a utility invests in a wind farm in a particular resource area, that increases the incremental benefit of investing in a wind farm in a distinct wind resource area, and increases the incremental benefit of investing in CSP solar.

If there is investment in transcontinental Electricity Superhighways to broaden the number of consuming regions that can benefit from a given wind resource, that also increases the appeal of investing in the harvesting of a variety of other sustainable, renewable energy resources, including run-of-river hydro, seasonal biomass, dispatchable biocoal, biogas and others.

When we crowd out variety, we end up putting all of our eggs in too few baskets, and we become exposed to risks such as the loss of access to petroleum at a price that we can pay without throwing the economy into repeated recessions.

Crowding Out Policies in Transportation

An American could be forgiven for conclusing that we have a transportation system that so massively exposed to the risk of oil price shocks and disruptions of oil supply because transport in the US is a “winner take all” market.

“Winner-take-all” markets are, indeed, one way to crowd variety out. The classical example is Microsoft’s rise to an effective home and small business microcomputer operating system monopoly in the days of MS-DOS. Some programmers program for only one operating system, and more of these write for the operating system with the most users. Some programmers program for multiple operating systems, and these have a tendency to program for the most used operating system first, and then release for other systems after. And then customers want to have the operating system that has the greatest and most current selection of available programs. The larger the market share of the market leader, the harder it becomes for other participants to gain market share.

When looking at transportation system, this draws the focus on the “fixed” (overhead) costs of the underlying transport infrastructure. For example, two-lane, two-way roads were early on found to be far more effective than narrow one-way lanes, even for very low levels of traffic. But the road that makes sense because of that threshold level of traffic can support substantially more traffic.

While rail can operate more effectively on single track with passing sections, it too experiences a large jump in capacity when moving to two-way track, so the service level that justifies the investment is normally well below the capacity of the upgrade.

Now, take part of the funding for the system on a per-user fee. The more users, the more fees paid. The more user fees paid, the less overheads have to be covered by each.

Its easy to tell a winner-take-all story from here. Let one mode of transport get a lead, and its patronage leads to a surplus of funds for investment, which sees more investment in its infrastructure, which sees more users, which sees more funds for investments, and so on.

Of course, that is not the car transport system. Road capacity may go up in jumps, but each additional car requires parking ~ at least one at home and three to four elsewhere.

UCLA professor Donald Shoup (the link above is a reprint of his answer to Oilybertarian propagandist Randall O’Toole) has estimated the cost of “free” off-street parking at $127b to $374b. There are roughly 200m licensed drivers in the US, so that is a subsidy of between $635 and $1,870 per driver.

And the “user-fee” model of auto transport funding that many Americans carry in their heads is largely fantasy. As the Brooking Institute showed back in 2003, less than 60% of road costs are funded by (in descending order) gas taxes (35%), vehicle taxes (20%) and tolls (under 5%). So road transport on the whole does not not even cover the cost of their roads.

And obviously roads are just one cost that cars impose upon the community. An earlier look at the full economic costs of driving by Clifford Cobb for Redefining Progress arrived at cross-subsidies of $59b and social costs, including costs such as health effects of air pollution, of at least $125b, which (without correcting 1990’s figures for inflation) means subsidy and free riding worth $1,260 to $2,495 per driver.

One key to the ability of the car to generate these big subsidies per driver is reliance on open-ended commitments. A state or community that builds a road takes on an open ended commitment to keep the road passable. The more traffic there is, the more expensive it is to maintain it ~ and for cities in particular, the bulk of gas taxes collected from urban drivers go to cross-subsidize road work in suburban and rural areas ~ so that more driving generates a demand on the general fund. The more driving there is, the more occasion there is for parking to be a problem, and the easier to mobilize support to take that parking from commercial property owners in the form of including minimum parking in zoning regulations.

Rigging the Problem

The other side of what appears on the surface to be a winner take all problem is the nature of the transport task.

Put simply, when we dictate how residences are to be distributed and how workplaces are to be distributed and how shops and restaurants and cinemas and beauty parlors and doctors offices are to be distributed … we dictate the nature of the transport task.

It is in part in zoning regulations where we dictate those things. Single-use zoning with substantial parking requirements heavily tilts the balance to cars versus public transport, requiring more spreading between destinations than if individual property owners were allowed to decide, and making it far more difficult to design a route that serves commuters during peak hour, shoppers and clients of professional services during the daytime, children going to and from school, and people heading out in the evening.

But it is not entirely zoning. It is also in the implicit subsidy for middle class and higher home-ownership over rental housing in the mortgage interest tax deduction. Of course, making it a tax deduction rather than a fixed percentage tax credit says that we are very concerned that high income households own their own home, moderately concerned that middle class households own their own home, and don’t much care at all whether the working poor own their own home.

Its also in the federal roll-over of capital gains from property development, which encourages the acquisition of a large enough acreage to shelter the entire capital gain.

This is not crowding out by a winner-take all market.

Rather, we crowd out alternatives to Car transport by a whole range of interlocking government policies that subsidize the use of cars to meet transport tasks that are in effect required by law to assume the reliance on cars. Those who are looking for car transport to florida could find it by a simple Google for a company.

Monoculture does not cure Monoculture

The dependence of our car transport system on petroleum is only the most prominent of the problems caused by the extreme car monoculture in much of our country. However, it would be a mistake to identify any specific set of problems caused by our car monoculture and try to find a different alternative that will cure “that” set of problems, and then put all our eggs in that basket:

• putting all our eggs in one basket is a bad design no matter what basket we are talking about

For a Brawny Recovery, we need alternatives that “Crowd In” investment. For long term resilience, we also need alternatives that “Crowd In” alternative modes of transport. And in those term, consider the following modes:

• Walking. The more destinations that can be reached on foot in a given neighborhood, the wider the variety of modes of transport can be supported. Cycle lockers can be provided in addition to curbside staple cycle parking. Parking can be pooled, reducing the space per car required when parking lots surround big boxes, and simplifying support for recharging of electric vehicles. Bus routes can be designed for efficient throughways, rather than having to wind their way through ~ which also simplifies conversion to oil-independent trolley buses. A streetcar line or train station serves a wider variety of destination.
• Cycling. Cycle lockers located at key bus destinations or route interchanges substantially widen the local recruitment of that bus stop, while in-bus luggage racks for folding bikes make effective use of the high wheel bays of modern low floor buses. Train stations and trains can include the same, as well as more space efficient automatic rack cycle parking at higher traffic train stations.
• Buses. Express/Local bus interchanges can provide pooled parking for cars and neighborhood vehicles. Bus bays on road overpasses or under rail overpass platforms can provide efficient cross-route transfers, and bus ticket systems can be integrated with light rail and local rail transport systems for flexible last-minute trip planning.
• Rapid Streetcars. Streetcar lanes on roads can be off limits to private motor vehicles but shared with express buses. Streetcar routes running through commercial areas can provide pooled parking at the ends of the route to reduce parking requirements in the commercial area itself. Rapid streetcars can share the cost of developing passenger rail corridors with local rail services running in the corridor.
• Local Passenger Rail. A location for pooled parking for destinations in area with greater parking congestion, including support for recharging local electric vehicles. A patronage driver for local bus routes connecting to the station. In many cases, an opportunity to provide dedicated express cycleways along the rail right of way.

There is every reason to expect that if we support the development of these modes of transport and do not impose crowding out habits on the development of these modes of transport, then they will each pursue mutually beneficial connections with each other.

Therefore, I propose establishing a source of funds for development of oil-independent and oil-conserving transport choices that permits crowding in investment in a variety of forms of transport: a Dime A Gallon import tariff on petroleum, to be divided between four funds:

• An Active Transport fund, to be placed in local community accounts (cities, towns, counties and reservations)
• An electric transport fund, to be placed into state-based accounts on a per-capita basis
• A High Speed Rail fund, to be placed into state-based accounts on a per-capita basis
• A Steel Interstate fund, to be placed in a national account.

The primary pull toward Crowding In of transport modes built into this program is the allocation of the Active Transport fund to community directed accounts. This is available on a current basis for funding:

• Capital spending on sidewalks, pedestrian crossings, pedestrian benches and bus stops
• Capital spending on dedicated cycleways, shared use bicycle boulevards, public bicycle parking and secured storage, and recreational bike and hike trails
• operating spending on sidewalks and dedicated cycleways (eg snow removal) and maintenance of pedestrian crossings

If other transport modes wish to benefit from these funds, they must propose qualifying projects and make the case to the community concerned regarding the benefit. And the pursuit of projects making it easier for pedestrians and cyclists to become passenger for their systems is something that they can fruitfully pursue in coalition with other transport modes ~ because none of them can spend the money directly on their own core infrastructure.

Further, the fact that projects are selected out of annual funding by local communities means that the transport systems that want to get the most benefit from these projects must coordinate with local communities, so that the local communities have leverage to push the distinct modes into cooperating where the operators of distinct transport modes, even if the operators do not take the initiative.

There is also likely to be a secondary pull toward Crowding In in many states. The Electric Transport funds are allocated to population-based state accounts for qualifying projects for the purposes of:

• Electrification of rail corridors
• Purchase electric rolling stock
• Electrification of bus corridors
• Purchase of electric trolleybuses
• Purchase of pluggable hybrid buses
• Charging infrastructure in support of electric vehicles
• Credits on the purchase of electric vehicles
• operations of an electrified transport system (this is not capital spending, so it would be out of current revenues)

States are permitted to borrow ahead on the first ten years of projected revenue.

Now, there is no requirement for each state to spread these around among a variety of different projects. That is intentional: allowing this allocation to be made at the state rather than federal level means that the fight at the Federal level to get the fund established does not get bogged down into the fight over what is seen to be urban-biased rail funding and suburban-biased bus funding.

However, consider a rough estimate of the amount of funding we are talking about:

• California, 36,96m, $3.5b available;
• Ohio, 11.5m, $1.1b available;
• Iowa, 3m, $287m available; and
• New Hampshire, 1.3m, $127m available.

I view it as likely that logrolling among different interests in state government will result in state governments establishing distinct project lines to be funded out of the transport state account. And where distinct lines are allocated, a dynamic is established similar to the one with Active Transport, where operators of transport modes outside a particular project line lobby for projects that will complement their own operations.

To Be Continued …

This is, of course, only the beginning of the story. One pool of transport funding will not, on its own, reverse the long habit of local, state and federal policies that dictate a car-dominated transport system.

But one must start somewhere. The next time that I bring up Crowding Out versus Crowding In, the focus will be on the role of private vehicles in a system where they are not imposed as the default mode of transport.

Midnight Oil ~ King of the Mountain