Guarded car parking – welfare consequences

Subsidized Guarded Car Parking Facility Revisited: The Welfare Consequences

 

The theft of objects from cars has been on the rise and has proven to be pervasive, which has triggered anxiety among the citizens and societal discontent with the municipal government´s inactivity. In this paper, the possibility of government intervention through the provision of a guarded parking facility is scrutinized in order to evaluate the microeconomic ramifications of the proposal.

The analysis of the proposal is four-fold: Firstly, the rationale for government intervention is discussed; secondly, the welfare consequences are evaluated; thirdly, indirect effects of government intervention are deliberated; and fourthly, an alternative measure and its impacts are postulated.

Throughout, it is argued that a government-run and subsidized facility for guarded car parking is an inexpedient solution to the abovementioned problem.

 

2. Rationale for government intervention

There are two primary justifications for government intervention into the free market in order to increase societal welfare:

1. The free market fails to provide an optimal outcome both for society and the individuals.
2. Individuals themselves are unable to infer and value the possible benefits and drawbacks of their actions; this includes their unwillingness to reveal their true preferences which then results in the underprovision of public goods (guarded parking places). (Rosen, Gayer, 2010)

Hence, any proposal by the municipality should be adopted if and only if a) no company or individual would find it profitable to operate a guarded parking facility or b) citizens fail to demonstrate their preferences and needs which, however, “need” to be taken care of.

Ultimately, a government has such an obligation, stemming from its role, to provide an either partially or fully subsidized public good, if and only if such a policy increases the living standards of the majority of the population while leaving nobody significantly worse off.

 

3. Welfare consequences

First and foremost, it has to be underscored that the building and maintenance of the guarded parking edifice is likely to be a costly undertaking; between $800 and $1200 per space annually (Levinson, 1984). Thus, in order to finance such a project, taxes would have to rise substantially, public expenditures would have to decrease, or a combination of both would have to be implemented.

However, all of the three proposals  outlined have a cost in terms of societal welfare: While slashed spending affects predominantly poorer segments of the population (e.g., single mothers) who are recipients of municipal grants, vouchers and other forms of support, higher taxes are widely believed to have an adverse effect on work effort, job creation, and output in general.

Therefore, it is important to note that partial subsidization is preferable to full subsidization: Not only does it require less income redistribution in the form of taxes or spending cuts, but as a consequence it also distorts consumption habits of individuals to a smaller extent.

Secondly, a government-funded parking facility can distort competition between the providers of parking spaces. Given the high initial fixed cost (Levinson, 1984) and the possibility for the government to subsidize the facility indefinitely (e.g., for political reasons), thus pricing under the marginal cost, the government can discourage any further private initiatives in this field. This, in turn, could amplify the costs and worsen the problems stemming from increased taxation and/or decreased public spending.

Thirdly, it is crucial to note that while a subsidized guarded parking facility indeed ameliorates the outlined problem (i.e., ensures that valuable objects in cars are secure and decreases the fear of prevalent crime): it delivers these benefits only to a fraction of the population as not everybody owns a car, not every car owner wants to use the facility and not everybody feels the anxiety about security, does so at a cost for everyone, and fails in comparison with the alternative that will be explored in the fourth section.

Fourthly, it is necessary to model the direct benefit to the users of the parking facility. Adopting a modified version of Lambe´s model of the value of a parking place and assuming perfect rationality (i.e., no personal biases such as habits or personal dislikes) and no impact of the distance of the parking facility from the point of origin (i.e., assuming that there is only one guarded parking facility), the utility derived from parking can be expressed as:

U = a.S – P – b.W

Here, U stands for utility of the car owner that has to equal his or her pleasure derived from the sense of security (S) this facility provides times the weight (a) this user assigns to this feeling, minus the price of the parking place (P) minus the indirect cost of walking[1] from the parking facility to the desired destination (W) times the weight (b) assigned to this cost.

Thus, the utility of the society can be increased by the parking facility only if it provides a high (perceived) degree of security for a low price at a place that is not prohibitively far from the destination of most drivers.

Problematically enough, while the first two aspects can be achieved by increased spending on the facility (high quality security systems, subsidization of usage), the third aspect requires the facility to be located near the city centre, where most of the offices, shops and recreational facilities are to be found. This increases the initial cost of the facility as the land for sale in the centre is more expensive than on peripheries and damages the panorama of the historic centre, which is elaborated more in the following section.

Thus, it can be concluded that on the level of direct costs and benefits to the society a government intervention in the market is not justified.

 

4. Indirect effects of government intervention

Firstly, as Arnott notes, the economies of scale required in parking facility construction demand that such voluminous buildings be vertical and rather incongruous structures if built in the city centre (for the reasons outlined in the previous section). Such edifices would distort the panorama of the city, adversely affecting both tourism (and consequently the livelihoods of many citizens) and the subjective pleasure derived from having aesthetic historic buildings in the centre. As a consequence, the welfare of society would decrease.

Secondly, the facility could incentivize drivers to take more trips, thereby negatively affecting congestion. Additionally, the location of the facility or the spacing between multiple parking facilities could result in more congestion as well (Arnott, 2006). Subsequently, the welfare of drivers would decrease.

Finally, a parking facility inevitably has dire consequences on the environment, to wit, a detrimental effect on soil and vegetation in its vicinity (Shaw, Reeve, 2008) as well as on the air quality. This concern is pertinent especially if we take into account the incentives to drive more described above. Although it is very difficult to estimate the extent to which this affects societal welfare, it can be assumed that damages to the environment have a negative impact on the utility of individuals and society.

Therefore, even from the perspective of indirect effects, the proposal is not justified.

 

5. Alternatives

In order to redress the problem of theft from cars, the following is proposed:

The efficiency of police should be increased by

1. Having fewer inactive police(wo)men in offices while sending more officers to the streets
2. Examining which locations are the most crime-ridden at what times and devoting attention to them
3. Establishing a rapport with the public so that every crime is reported immediately

Not only does this proposal solve the problem of perceived insecurity in the streets and increased safety stemming from deterrence[2] from the presence of police officers in problematic areas, but it also requires little or no extra spending by the government. Additionally, no direct or indirect harms are intrinsic to this proposal.

Thus, from a welfare-enhancing perspective, no government-funded parking facility should be built; rather, the efforts should be devoted to improving the service of police.

 

6. Conclusion

In this paper, it has been proven that a government-funded guarded car parking facility as a solution to pervasive car-related crime is not justified from a societal welfare-enhancing perspective. Not only that it fails on the level of direct as well as indirect ramifications, but it also lacks theoretical justification based on the role of the government. Moreover, it has been demonstrated that there is an alternative measure available that can redress the abovementioned problem while not having any adverse effects on social welfare. Therefore, the proposal to build a guarded car parking facility should be rejected.

 

References:

Arnott, R. 2006. Spatial competition between parking garages and downtown parking policy. Transport Policy 13.

Lambe, T.A. 1996. Driver choice of parking in the city. Socio-Econ. Plann. Sci. Vol. 30, No.3.

Levinson, H.S. 1984. Whither parking in the city center? Transportat.

Rosen, H.S. Gayer, T. 2010. Public Finance. Ninth edition. McGraw Hill International Edition.

Shaw,P. Reeve, N. 2008. Influence of a parking area on soils and vegetation in an urban nature reserve. Urban Ecosyst.

[1] Walking is assumed to be a cost; according to Lambe, in some cases “walking is perceived to be roughly six times more costly than driving“.

[2] It can be assumed that breaking into cars is an emotional, on-the-spot crime, thus deterrence can play a major role in preventing it.