PAY A LITTLE MORE NOW, GET A LOT MORE BACK LATER

Timothée Mantz                                                                         

Many anti-smart growth activists complain that smart growth is costly. The prices of housing are skyrocketing, tax rates are constantly rising in order to finance transit, and congestion actually increases, they point out, concluding that smart growth is inefficient. But this is not rational criticism.  Yes, at first smart growth means higher prices, but this is not an unexpected side effect, and it is no sign of inefficiency. On the contrary rising prices could be considered the purpose of some aspects of smart growth.  At least in the shorter run.

Air, climate and environment are public goods. Pollution and climate change are negative external consequences. At the moment, the cost of polluting activities to the individual (such as driving a car) is lower than the social cost of such polluting activities, and as a consequence of this imbalance in costs, pollution is produced in an over-optimal quantity. The pricing mechanism is simply deficient. Regulation is therefore required in order to internalize the external costs. Thus, smart growth is mainly about sending a price signal to economic players so that they will shift their lifestyle towards more sustainable ways of doing things.

Having, for example, the individual and social costs of cars equalized can require the implementation of city tolls or the raising of taxes in order to subsidize much cleaner public transit, which means higher costs for car drivers. But this could be temporary if people take into account the price signal they are receiving and draw the right conclusion, meaning changing to a healthier lifestyle. As less people use their car (because it has become more expensive) and more go to work by train or bus, tax rates could be lowered as transit network finances will be able to rely more on consumers (more consumers means more money) and less on subsidies (ie.: taxes). Similarly, more density can lead to increased congestion, but only temporarily if drivers respond rationally. If they do, they will start walking, cycling or using transit instead of car, congestion will drop, and so will pollution. (And as a byproduct, with the extra exercise, people’s health will improve.)

Raising taxes, stiffening regulations and increasing prices are therefore crucial instruments to foster smart growth, not signs of failure. In the short run, it seems expensive. In the long run, as behavior shifts, it will save money.  

POSTSCRIPT: THE HIDDEN COST OF CAR OWNERSHIP

According to the U.S. Department of Labor, Bureau of Labor Statistics, car ownership costs are the second largest household expense in the U.S.

Based on default values of the Bureau of Labor Statistics Consumer Expenditure Survey:

Annual vehicle purchase cost: $3,397

Annual finance charges: $323

Annual gasoline and motor oil: $1,598

Car insurance: $964

Maintenance and repair: $652

Licenses, parking, other fees: $426

TOTAL ANNUAL COST: $7,360

If you didn’t own a car and began investing your monthly automobile savings at age 25 at 5% interest, you would have $1,049,627 by the time you retire at 67.

Or, if you decided to be “irresponsible” and live it up now, considering that two of twelve work months are dedicated to paying for your car (based on an average $45,000 per year), you could have an extra two months per year for vacation, hobbies, or continuing education.

 PART THREE

PARIS

Paris is our city but for this exploration into smart growth it became our laboratory. The city’s policy has been to take away space from automobiles and give it back to more mellow forms of transportation: buses, bicycles, and pedestrians, in an effort to reduce carbon emissions while improving the quality of life. Naturally, some of us decided to write about Paris, not without contradictory opinions. Here are some of our views.