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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 crap tuned to a steamroller ideology.

 

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

 

External costs of autos not reflected in gasoline prices include other individuals killed or injured, most in the primes of their lives. Other evils include congestion, pollution, and respiratory illnesses. Dependency on the whims of dictators in oil rich countries ranks high in the pantheon of externalities, not to mention military protection of oil supplies and jihads funded by oil money. Aesthetic ills rank lower but cause anomie. We misuse valuable land and free parking is no such thing. Police, courts, and prison costs add to the toll. Cartels and other price manipulators increase trade deficits. OPEC has cost at least eleven trillion dollars in excessive, non-competitive costs. If we spent that money on research and development, most nations could be free from OPEC.

 

Current efforts to make drivers pay costs they create for others are inadequate, poorly targeted, and not cost-effective. Porter 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 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 hidden in wages and income taxes.)

 

Humans employed several solutions to second hand costs, most of them bad: Politicians were bribed. Corporatists and dictators bombarded citizens with propaganda, getting them to believe the costs are negligible or that making harm doers pay is wrong. Negotiating among those involved, a good solution in some small cases, fails because auto externalities involve billions of individuals. Government bans and restrictions such as fuel efficiency standards reek with inefficiency. Taxing per unit of cost produced (Pigovian taxes) is the correct solution, however.

 

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 roll around the United States. Up to 10,000 premature deaths each year result from auto pollution.

 

The current command and control standards (CAFE) require automakers to produce a fleet of cars having a mean fuel efficiency meeting some standard. Some of GM’s cars, for example, fall below the standard and some above, a bad situation because individuals pay costs regardless of miles driven. The costs of secondhand driving, however, 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 a car can be relabeled foreign. Most important, CAFE does little to stem the trillions of dollars flowing to evil individuals in the oil extraction business.

 

Porter notes it is unclear what effects global warming will have. He calls the Kyoto agreement a bad deal. It will be almost impossible for the US to meet the 2012 goals unless a disaster occurs or a drastic, improbable shift to alternative fuels or engines occurs.

 

Much of Economics at the Wheel horrifies. Truck driving schools, for example, have a 95 percent pass rate. (Or maybe they are really, really good at teaching.) Marcia Brogan, a commuter who travels 40 miles daily in her Hummer says, “There are lots of nutty people on the road, including myself—I’m a very absent minded driver, so [vehicle] safety was important to me.” This brings up 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.

 

A fantastic, creative solution to cartels exists: Create a buyer’s cartel. Slap a $200, or however much, tax on any barrel of oil sold for over $35 or some other number. The cartel might blink and if not, good. The tax serves a good cause. Taxing oil is much better for individuals and the economy than payroll taxes, income taxes, and most other taxes. Taxes must be shifted from productive work to fossil fuels. (I wish those screaming yahoos out there would wake up and start screaming for a buyer's cartel. What the hell is wrong with individuals? A great, great idea is right in front of our faces and it gets almost no publicity. Mention a buyer's cartel and you get blank stares. What the hell ever happened to American ingenuity?)

 

Other fascinating points by Porter:

·        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 harms done, is $150,000. Unfortunately, such a fine structure stinks for a variety of reasons including psychology, 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 of vehicles--opportunity losses and depleting resources for future generations. About 16 percent of GDP goes to transportation, not counting trillions in subsidies and other costs--a whole lot of human effort put into mere transportation. Our society is designed for motor vehicles more than humans. A few of Porter's 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 he could be right.

 

Porter recommends higher beer taxes due to the harms caused by drunk driving. (There is, research suggests, one other often-unrecognized benefit of higher alcohol taxes: Fewer STDs. No joke.) 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 prevents knee jerk inflationary spirals. His one-dollar figure is not enough, however. Based on the harms the transportation industry causes, we should phase in a tax several times that.

 

Higher fuel taxes 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. Gas taxes can be offset with progressive tax cuts elsewhere. Even if fuel taxes are regressive for some individuals, those individuals should still pay costs. If a poor worker deliberately breaks your window, for example, he should still pay for the damage done, regardless whether it is regressive.

 

Some might argue 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. Taxes paid on gasoline can be used for tax cuts elsewhere or for providing services. Gasoline taxes pay second hand costs. Potholes and their ilk are what economists call deadweight losses. They cause overall 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 outstanding you are for keeping mechanics from finding some other profession.

 

Some claim we should educate citizens with something similar to smoker education, but Porter argues cars, unlike tobacco, mostly create costs for others, not oneself (though the costs of second hand smoke are enormous, too). Research suggests education will have little effect. Incentives matter. Education also does nothing to make cost creators pay for externalities, payments they should rightfully make. It would be like sending thieves to reform school, but allowing them to keep whatever they steal.

 

All the counterarguments against progressive fuel taxes are pathetic. 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 from profits. Second, even if true, so what? Those who spend the most on destructive products should pay the full costs of their consumption, not other taxpayers. We call it personal responsibility, a concept 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 moral and economic growth.

 

For those immune to Porter's well-reasoned arguments, look at Car Crashes and Other Sad Stories by Mel Kilpatrick. Highly recommended.

 

Book review article by J.T. Fournier, last updated July 24, 2010

 

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