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Economics at the Wheel: The Costs of Cars and Drivers by Richard C. Porter

“So now you know why economists are useless: when they actually do understand something, people don't want to hear about it.” –Paul Krugman

Richad C. Porter must be a strange professor. Somebody forgot to tell him that publish or perish means you slap together preposterous, incoherent, manipulative crap, then you make sure it is in tune with one of the steamroller ideologies.

Well-reasoned and well-organized, Economics at the Wheel often answered my questions right after they popped into my head. Porter argues that the costs of second had driving are enormous, much more than the costs of second hand smoke. Economists call these costs to the non-driver externalities.

Some external costs of autos that are not reflected in gasoline prices include:

· Drivers, cyclists, passengers and pedestrians killed or murdered, most of them in the primes of their lives.

· Congestion.

· Air pollution, water pollution, land pollution, other pollution.

· Respiratory illnesses.

· Dependency on the whims of dictators in oil rich countries.

· Military protection of oil supplies.

· Military intervention.

· Potential global warming that may or may not be harmful or beneficial.

· Aesthetic ills.

· Terrorism funded by oil money.

· Weapons of mass destruction funded by oil money.

· Injured citizens.

· Evil ideologies spread by oil money.

· Loss of valuable land.

· Police, court and prison costs.

· “Free” parking.

· Trade deficits.

· Encourages cartels and price fixing.

· Vulnerability to inflationary spirals that stall economies, such as inflation spirals in the 1970s started by cartelized oil price hikes.

Current efforts to make drivers pay the costs they create for others are inadequate, poorly targeted and not cost-effective.

He guesses that current policies arose because:

· Policy makers have little interest in market solutions, preferring top down command and control instead.

· The Huge costs of externalities and command and control are easier to hide from citizens than gas taxes. (Due to an availability bias, citizens notice gas taxes every week at the pump. They do not notice car costs that are hidden in wages and other taxes.)

Several solutions to second hand costs have been employed, most of them bad:

· Bribing politicians.

· Bombarding citizens with propaganda, getting them to believe the costs are negligible or that making harm doers pay is wrong.

· Negotiating among those involved. This is a good solution in some small cases, but cannot be done with autos because billions of individuals are involved.

· Government bans and restrictions (command and control).

· Government permits to engage in a limited amount of an activity.

· Nationalization.

· Taxing per unit of cost produced (Pigovian taxes).

Bribery, propaganda and restrictions are the solutions currently employed in the United States. Porter correctly argues that Pigovian taxes are the right solution.

Delivering an array of stats, Porter states that over 40,000 U.S. individuals die each year from auto collisions. About two-fifths of the world’s cars are in the United States. Up to 10,000 premature deaths each year result from auto pollution.

He points out claims of which many Americans are unaware. The current command and control standards (CAFE) are clumsy. They require automakers to produce a fleet of cars that have a mean fuel efficiency meeting the some standard.

Some of GM’s cars are below the standard and some are above. This is bad because it makes individuals pay costs regardless of the car they purchase and the number of miles they drive, but the costs of secondhand driving are proportional to the number of miles driven and the model of car bought. Thanks to lobbyists many vehicles have diabolical exemptions from CAFE rules. Automakers also engage in costly practices to evade CAFE such as having parts flown across the Atlantic so that a car can be relabeled foreign.

He writes that is unclear what, if any, effects global warming will have. He notes that the Kyoto agreement is a bad deal. It will be almost impossible for the U.S. to meet the 2012 goals unless a disaster occurs or there is a drastic, improbable shift to alternative fuels and engines.

Much of Economics at the Wheel is scary. Truck driving schools, for example, have a 95 percent pass rate. Marcia Brogan, a commuter who puts in 40 miles daily in her Hummer says, “There are lost of nutty people on the road, including myself—I’m a very absent minded driver, so [vehicle] safety was important to me.” This leads to the problem of unintended consequences known as risk compensation. “Safer cars will be driven less safely.” Risk compensation puts cyclists and pedestrians in greater danger. Drivers in tanks care little about harms done to others.

One creative solution to cartels is to create a buyer’s cartel. Slap a $100 tax on any barrel of oil sold for over $35 a barrel. Sooner or later the cartel will blink and if they do not blink, good. The tax serves a good cause. Taxing oil is much better for individuals and the economy than payroll taxes, income taxes and almost every other type of taxes.

Other fascinating points:

· A lap and shoulder belt is the most important auto safety feature. “Lap and shoulder belt only” has three times the life-saving effectiveness of “air bag only.” Air bags plus belts are not much safer than belts alone.

· The “correct” fine for drunk driving based on the probability of getting caught and the harms done to others is $150,000. Unfortunately, such a fine structure is a poor idea for a variety of reasons such as bankruptcy laws and inability to pay.

· Increasing beer taxes is an excellent way to reduce teen drinking and driving.

· Trucks do 1,000 times as much damage to roads per axle as cars.

Porter has little to say about other wrongs such as opportunity losses and depleting resources for future generations. About 16 percent of GDP is devoted to transportation, not counting hundreds of billions in subsidies and other costs. That is a whole lot of human effort put into mere transportation. Some of his statistics look far-fetched. He writes that two percent of the nation’s three million square miles is paved. That sounds high to me, but it might be right.

He recommends higher beer taxes due to the harms caused by drunk driving. (There is one other often-unrecognized benefit of higher alcohol taxes: Fewer STDs.) He also recommends a gradual phase in of at least a one-dollar per gallon gasoline tax. A gradual phase in of a gas tax would prevent any knee jerk inflationary spirals. His one-dollar figure is not enough. Based on the harms the transportation industry causes, we should gradually phase in at least a three-dollar a gallon gas tax.

Higher gasoline taxes would reduce congestion, save lives, save gasoline, save money, save time, increase GDP and reduce other harms. Taxes would not reduce necessary trips. They would reduce frivolous trips and get people to think more about home locations. They would not increase unemployment and they need not be regressive. They can offset with progressive tax cuts elsewhere.

Some argue that potholes, waiting lines and 25 mile per hour speed limits are good ways to increase the costs of driving, but they are not cost-effective like gas taxes are. Taxes paid on gasoline can be used for tax cuts elsewhere, and for providing services. Gasoline taxes pay second hand costs. Potholes and their ilk are what economists call deadweight losses. They cause only harm. No one benefits, except auto repair shops and related industries. The benefits to auto repair shops are colossally outweighed by the costs to drivers and others. When your ball joint breaks in the middle of a freeway, and you and your car end up mangled, the last thing on your mind is how wonderful you are for keeping mechanics from finding some other profession.

Some claim that we should educate citizens with something similar to smoker education, but Porter argues that cars mostly create costs for others, not oneself. Education will have little effect. It also does nothing to make cost creators pay externalities. It would be like sending thieves to reform school, but allowing them to keep whatever they steal.

All the counterarguments against progressive gas taxes are pathetic so please do not accuse me of a straw person. One popular counterargument says consumers ultimately pay all taxes and will ending up paying the same taxes anyway. First, consumers do not end up paying all taxes. Taxes often come out of profits. Second, even if were true, so what? Those who buy destructive products should pay the full costs of the products, not other individuals. It is called personal responsibility, a concept that is lost on power market ideologues, except in their sound bites. Third, taxing destructive activities and reducing the rewards for pursuing those activities shifts wealth and resources to more beneficial areas of the economy, increasing both social and economic growth.

Ultra-conservatives constantly love to regale us with how stupid ultra-liberals are for believing neoMarxist nostrums. Ultra-conservatives should look in the mirror because believing that gasoline and diesel fuel are best left barely taxed is an incredibly vile belief. Of course, self-examination is not big in ultra-conservatism or ultra-liberalism. If you are immune to arguments, look at Car Crashes and Other Sad Stories by Mel Kilpatrick. Highly recommended.

—Book review article by J.T. Fournier

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