Roads: US vs Europe

Pick Your Road: The U.S. vs. Europe, by Bryan Caplan

In the U.S., we have low gas taxes, low car taxes, few tolls, strict zoning that leads developers to provide lots of free parking, low speed limits, lots of traffic enforcement, and lots of congestion.

In Europe (France and Germany specifically), they have high gas taxes, high car taxes, lots of tolls, almost no free parking, high speed limits (often none at all), little traffic enforcement, and very little congestion.

I’ve never driven in Europe, but I can’t imagine enduring city driving in the European cities I’ve been to. Those drivers are nuts!

But, I’d venture to say that costs of driving in Europe are closer to reflecting the true costs, as opposed to the US’ tax, build with Pork, then neglect highway systems to spend on other pet projects system. The US socializes and subsidizes auto-transportation, while Europe socializes and penalizes. I imagine the European systems is closer to resembling a free-market transportation system than the US. But, we’ll probably never know for sure…

  • Bill Nelson

    If American motorists are not paying the true cost of driving, then who is paying the cost for them? Pedestrians? Cyclists? Transit users?

    I think it is accurate to say that the costs have been largely socialized (not subsidized) into a something of a big all-you-can-drive buffet. But pay-as-you-go might actually lower the cost of driving in metropolitan areas, where the high fixed costs of highway construction and maintenance can be distributed among many drivers. (Remember, with pay-as-you-go, all point-of-sale gas taxes would vanish. You would only pay for road use.)

    Certainly, bridge tolls would disappear (except perhaps as a part of a larger congestion pricing scheme). As it is, every time you drive over an MTA bridge, you pay $5 directly to the subways. Talk about subsidies!

  • Bill Nelson

    If American motorists are not paying the true cost of driving, then who is paying the cost for them? Pedestrians? Cyclists? Transit users?

    I think it is accurate to say that the costs have been largely socialized (not subsidized) into a something of a big all-you-can-drive buffet. But pay-as-you-go might actually lower the cost of driving in metropolitan areas, where the high fixed costs of highway construction and maintenance can be distributed among many drivers. (Remember, with pay-as-you-go, all point-of-sale gas taxes would vanish. You would only pay for road use.)

    Certainly, bridge tolls would disappear (except perhaps as a part of a larger congestion pricing scheme). As it is, every time you drive over an MTA bridge, you pay $5 directly to the subways. Talk about subsidies!

  • http://marketurbanism.com MarketUrbanism

    If American motorists are not paying the true cost of driving, then who is paying the cost for them? Pedestrians? Cyclists? Transit users?

    Taxpayers pay. Through property taxes, tax free bond issuances, forgone property taxes on road and highway land, Tax Increment Financing, Highway Patroling, untaxed capital used to build the roads, funding of State, County and Local DOT bureaucracy, tax money to pay for cleaning and maintenance, and any other way tax money is diverted from productive business to fund roads or incentivize driving. Then add in opportunity costs of capital that would have been invested in profitable business, had capital not been diverted to roads. Plus the negative externalities highways impose on nearby property owners, which drives down their land values.

    It isn’t just roads, but transit is subsidized as well. Airports too. The whole system is subsidized.

  • http://marketurbanism.com Market Urbanism

    If American motorists are not paying the true cost of driving, then who is paying the cost for them? Pedestrians? Cyclists? Transit users?

    Taxpayers pay. Through property taxes, tax free bond issuances, forgone property taxes on road and highway land, Tax Increment Financing, Highway Patroling, untaxed capital used to build the roads, funding of State, County and Local DOT bureaucracy, tax money to pay for cleaning and maintenance, and any other way tax money is diverted from productive business to fund roads or incentivize driving. Then add in opportunity costs of capital that would have been invested in profitable business, had capital not been diverted to roads. Plus the negative externalities highways impose on nearby property owners, which drives down their land values.

    It isn’t just roads, but transit is subsidized as well. Airports too. The whole system is subsidized.

  • Bill Nelson

    True enough, transportation itself is subsidized. Is there some sort of “social benefit” in having people drive, fly, take trains, etc. more than they would if they had to pay as they went? Not that I can think of.

    Worse, public ownership and regulation of roads, trains, airports, etc. discourages…no, make that eliminates…innovation, and makes us all poorer.

    I think we agree on who pays for the roads. My point was that “motorists” are almost synonymous with “taxpayers” (especially in the sliver of America that lies outside Manhattan). So, it’s not a free ride; it’s actually a very expensive socialized ride. Motorists are undoubtedly paying more than what the roads should cost…but the perverse payment mechanism (taxes) yields over-use, under-use, and, again, an utter lack of innovation.

    The negative externalities aren’t too terrible, I think, because most residential development follows highway construction. And besides, in a free market, there are externalities all over the place. The goal should not be to eliminate them, but to somehow internalize the costs. Easier said than done, though…

  • Bill Nelson

    True enough, transportation itself is subsidized. Is there some sort of “social benefit” in having people drive, fly, take trains, etc. more than they would if they had to pay as they went? Not that I can think of.

    Worse, public ownership and regulation of roads, trains, airports, etc. discourages…no, make that eliminates…innovation, and makes us all poorer.

    I think we agree on who pays for the roads. My point was that “motorists” are almost synonymous with “taxpayers” (especially in the sliver of America that lies outside Manhattan). So, it’s not a free ride; it’s actually a very expensive socialized ride. Motorists are undoubtedly paying more than what the roads should cost…but the perverse payment mechanism (taxes) yields over-use, under-use, and, again, an utter lack of innovation.

    The negative externalities aren’t too terrible, I think, because most residential development follows highway construction. And besides, in a free market, there are externalities all over the place. The goal should not be to eliminate them, but to somehow internalize the costs. Easier said than done, though…

  • http://marketurbanism.com MarketUrbanism

    Of course there is “social benefit” in mobility. However, do the overall benefits of the overall system outweigh the overall costs? I would argue that in most cases, the total cost (including all of the mentioned secondary costs) of socialized transportation is higher than the total benefit.

    The negative externalities are substantial if you consider what kind of property you usually see along a highway and near airports: industrial.

    Most of these industries, except maybe air-frieght logistics, don’t locate there because they desire to be close to transportation. They chose those locations because the land is cheaper. They tend to be location insencitive and land cost sensitve. (mostly because the marginal cost of transportation is minimal due to free highways, etc.)

    So, the land near the highways are cheap, because they are not desirable as residential. Thus, industries don’t usually compete for that land with other uses.

  • http://marketurbanism.com Market Urbanism

    Of course there is “social benefit” in mobility. However, do the overall benefits of the overall system outweigh the overall costs? I would argue that in most cases, the total cost (including all of the mentioned secondary costs) of socialized transportation is higher than the total benefit.

    The negative externalities are substantial if you consider what kind of property you usually see along a highway and near airports: industrial.

    Most of these industries, except maybe air-frieght logistics, don’t locate there because they desire to be close to transportation. They chose those locations because the land is cheaper. They tend to be location insencitive and land cost sensitve. (mostly because the marginal cost of transportation is minimal due to free highways, etc.)

    So, the land near the highways are cheap, because they are not desirable as residential. Thus, industries don’t usually compete for that land with other uses.

  • Bill Nelson

    You raise an interesting point about land values near highways. At interchanges, it’s probably quite high, as retail and restaurant chains compete to be there. In between interchanges, I usually think of lots of trees. Trees tend to not pay high rents, so I guess your right about land being pretty worthless between well-spaced exits.

    Residential real estate near highways is also worth less, which is why people buy cheap, get you and me to pay for a sound barrier, and eventually sell for a bit more.

    Wouldn’t the “industrial use externality” be present regardless of highways? I mean, if there were fewer highways and industries located near, say, cemeteries or national parks or whatever instead, then we would still have industrial externalities. Unless, that is, if you’re implying that socialized highways have spawned an inefficiently large number of industrial uses. Have they?

  • Bill Nelson

    You raise an interesting point about land values near highways. At interchanges, it’s probably quite high, as retail and restaurant chains compete to be there. In between interchanges, I usually think of lots of trees. Trees tend to not pay high rents, so I guess your right about land being pretty worthless between well-spaced exits.

    Residential real estate near highways is also worth less, which is why people buy cheap, get you and me to pay for a sound barrier, and eventually sell for a bit more.

    Wouldn’t the “industrial use externality” be present regardless of highways? I mean, if there were fewer highways and industries located near, say, cemeteries or national parks or whatever instead, then we would still have industrial externalities. Unless, that is, if you’re implying that socialized highways have spawned an inefficiently large number of industrial uses. Have they?

  • http://marketurbanism.com Market Urbanism

    Industrial uses will be needed regardless. They aren’t spawned by highways, they just choose to locate where other uses do not desire.

    If highways had not destroyed property values, industrial would locate in other places where they wouldn’t compete with residential uses.

    In other words, cheap land will not be abolished, but location preferences would shift among uses.

    But, my main point was that highways tend to destroy property values.

  • http://marketurbanism.com MarketUrbanism

    Industrial uses will be needed regardless. They aren’t spawned by highways, they just choose to locate where other uses do not desire.

    If highways had not destroyed property values, industrial would locate in other places where they wouldn’t compete with residential uses.

    In other words, cheap land will not be abolished, but location preferences would shift among uses.

    But, my main point was that highways tend to destroy property values.