Setting the right transit safety standards

Two years ago, two trains on Metro’s red line collided killing nine people in DC. In response to this tragic accident, Metro is spending $1 billion to improve the system’s safety. WMATA’s interim General Manager told the Washington Post:

“The system is absolutely safer than it was a year ago,” said Sarles, who was brought in on an interim basis in spring 2010. “We’ve adopted an attitude of we’re going to change the safety culture to one that’s going to prevent accidents.”

Despite this accident, traveling by Metro is much safer than traveling by car in the DC region. The Coalition for Smarter Growth provides data on injuries and deaths on Metro compared to driving in DC and demonstrates that while eight passengers were killed on Metro from 2003-2009, 2,057 people died in car accidents from 2003-2008 in the DMV area.

Per passenger vehicle mile fatalities are not available for the DC region, which would allow us to see these numbers in context. However, nationwide, heavy rail transit (Metro) averages 0.8 deaths per billion passenger miles compared to 7 for passenger vehicles, according to the same study.

Last week, Senator Barbara Mikulski reintroduced the National Metro Safety Act last week which would require increased national regulations for all transit systems that operate on heavy rail. Figuring out how to pay for these safety measures would presumably be left up to localities, but at least some of the costs will likely be met through increased fares. At the margin, this will lead some riders to choose the more dangerous travel option of driving, perversely decreasing public safety.

I’m not suggesting that Metro’s safety improvements are not money well-spent, but providing a guarantee of safety on public transportation would be infinitely expensive. In a world of finite resources, risks to human life cannot be eliminated. Regulators who require a given safety level on public transport must realize that the increase in costs will lead some riders to choose driving over public transit, increasing the risk of fatalities.

Trying to make a bad policy worse in NYC

In New York, lawmakers are currently debating a compromise between New York City and upstate interests to change the policies that shape residents’ housing costs. New York City lawmakers are fighting for an extension and expansion of current rent control laws, while Governor Cuomo wants to tie this extension to a two percent cap on yearly property tax rate increases.

Legislators voted against a temporary extension of the current policy on Wednesday. The Wall Street Journal reports:

The Senate Democrats had been urged by tenant advocates to reject even a short-term extension in an attempt to ratchet up attention on their efforts to expand protections for existing tenants.

“Our members have said from the start: extension is not enough—we need to strengthen regulations,” said Austin Shafran, a spokesman for the Senate Democrats.

Senate Republicans, meanwhile, blamed the Democrats for the defeat, noting that they are acting against a bill pushed by Gov. Andrew Cuomo, a Democrat who supports expanding regulations.

City lawmakers ignore that in fact rent control laws make housings costs more expensive for many residents and would-be residents in order to appease the fervent interest group of tenants who currently live in apartments priced below market rates.

In 1972, the Swedish socialist economist Assar Lindbeck famously wrote, “In many cases rent control appears to be the most efficient technique presently known to destroy a city – except for bombing.” Why then, are New York City politicians  — politically to the right of Lindbeck — fighting to protect rent control today? The policy is detrimental to all those unable to find housing at rent  stabilized or controlled prices as well as landlords.

Rent control has not had the dire impact in New York that it has in other cities because the number of apartments that are fully rent-controlled is a small portion of the total. A much larger number are rent stabilized (about 50 percent according to Wikipedia). Rent stabilization laws dictate the rate at which landlords can raise rents,] rather than permitting housing prices to equilibrate supply and demand. The tightening of the current price ceilings that city lawmakers support will further limit the rental market from serving middle class and lower income tenants who are not lucky enough to secure rent-controlled or rent-stabilized units.

All of the evidence against rent control begs the question: Why does such a detrimental policy persist with many favoring expansion? On Wednesday, pro-rent control protestors in Albany were arrested for blocking lawmakers’ access to the capitol, and clearly most democratic lawmakers think the current laws do not go far enough.

Rent control has some classic aspects that make it an enduring policy.  The costs are dispersed across all city residents while the tenants in rent-controlled buildings reap the concentrated benefits. Additionally, the harm of rent control is a classic case of unseen costs. Residents may see only the benefit of reduced rent without seeing the policy’s negative impacts.


The Price of Parking in India

In Triumph of the City, Ed Glaeser offers a very insightful analysis of density restriction in India, home of some of the fastest growing cities in the world. He explains that while land use regulations are detrimental to economic growth in the United States, the consequences are much greater in developing countries. In particular he examines the strict FSI (floor space index, equivalent to FAR) limits in Mumbai and the ramifications for business there.

This week at India Lives in her Cities Too, Karthik Rao-Cavale offers and in-depth analysis of the impact of parking requirements in India. In New Delhi’s Khan Market, one of the most upscale shopping destinations in India, business owners are fighting against fees for parking, which the Environmental Pollution Authority has mandated. The case is currently at the High Court, and could have significant bearings for the future provision of parking in India.

The Times of India reports on the specifics of the case. The New Delhi Municipal Council that owns the garage wants to begin to start charging for use of the garage, but the traders at the market propose they could begin compensating the council to maintain free revenue for their customers. The court has ruled that parking will remain free for customers for now, with the market’s businesses paying a fee to the NDMC.

Currently, parking mandates play an important part in new development in India’s cities. The Urban Development minister supports requiring parking for all new buildings. This is on top of the extreme FSI limits in some Indian cities (1.33 in Mumbai for new construction).

Rao-Cavale suggests that instead of providing parking at no cost, the NDMC should sell its garages:

The task of providing parking primarily belongs to the private sector. The government can permit paid on-street parking where the street space is not required for any other purpose (by street vendors, for example). But the government should not be involved in construction and maintenance of off-street parking lots.

As Glaeser explains, the extreme development restrictions in India could have potentially life or death consequences. Previously discussed in-depth here, parking requirements can have many of the same results that density restrictions do. Given the sprawling development in many Indian cities, driven in part by FSI limits, cars and the space required to park them, parking spots are at a premium in many Indian cities. By giving away parking spaces in any of its garages, the NDMC is reducing opportunities for the growth that cities attain when they permit density of people and commerce.


Some notes on slums and free markets

Infrastructure often lags behind residential development in slums

Recently I’ve been seeing a lot of articles about slums (the NYT on Gurgaon, India, and the Guardian on Cairo), and inevitably the phrase “free market” gets thrown around. And as it should – so-called “slums” often have very minimal active governance, and as a result they often have very dynamic economies and upwardly mobile citizens (something even the New York Times and Guardian, two very liberal papers, recognize).

But it’s lazy to equate them with the free market, and unfortunately I see a lot of people doing that. One problem with slums, from a free market point of view, is that only certain investments are secure. People and their houses (well, at least the owner-occupied ones) are the safest, especially in democracies like Brazil and India. Though of course there are stories of people’s homes in slums being demolished or taken by the government without compensation, it’s my understanding that this is becoming rarer as slum dwellers grow in number and political power. Residents are likely to get titles in some Hernando de Soto-inspired regularization scheme, so people invest in their homes. Residential areas harden as sheet metal turns into bricks, houses get proper roofs, and we start to see two- and three-story structures.

Infrastructure, however, is another story. While many newspapers I think generally exaggerate the lack of services (I refuse to believe the Times’ assertion, for example, that Gurgaon only has employer-funded mass transit – there must certainly be share taxi/small bus services, or at least motortaxis), there does appear to be a real lack. The poorer areas often have open sewers, and running water in homes is rare. Many critics take this as evidence that infrastructure – paved roads, mass transit, electricity, waste collection, water – will not be adequately provided for in a free market, which is a reasonable thing to believe if you think slums are the free market incarnate.

But they are not. It may appear that way because the government isn’t helping, but bribes are still being taken and certain regulations are sometimes enforced, especially against high-profile things like infrastructure. Take, for example, the issue of electricity. Normally what slum dwellers do is hook up their homes and businesses to small generators, which is very inefficient, expensive, and polluting. (Oftentimes they also steal from the government, but obviously you can’t blame that on the free market.) A generator is small and doesn’t attract much attention, and it’s difficult to extract bribes from them because they are distributed among the population – in other words, people get away with them. Real power plants, however, even though they are more beneficial to society, are much more likely to come to the government’s attention, and thus are too risky for entrepreneurs to invest in. Given their prominence, the government will ask the operators for a bribe if they’re lucky, but more likely will just shut the power plant down for not complying with whatever draconian regulations are forcing people to opt out of the “legal” world in the first place.

And though consumers would benefit from these illegal power plants (or sewers, or water pipelines, or railroads) just as they benefit from their illegal homes, consumers are often hostile to the businessmen they are served by (think about the wild anti-rail sentiment of turn-of-the-century urbanites, or the anti-ISP sentiment that we have today), so they aren’t likely to come to their aid when the state tries to seize their property. Their customers might in fact be the ones with pitchforks at the gates, demanding regulation or nationalization. Ditto with water pipes and sewers – they’re just not safe investments given the governments they’re working with, so investors don’t make them. And even multifamily structures are tenuous, since, if regularized, they might have to comply with rent controls (which I hear are very popular in India, at least), making the initial investment less attractive.

Furthermore, there’s the issue of corruption, which would not be present in a true free market. The Guardian says of Cairo, “satellite cities […] mushroomed on the back of dirt-cheap land sales by the state,” and the New York Times cites critics as saying that “graft and corruption are widespread” in India. But crony capitalism is not the same thing as capitalism, even though leftists often like to equate the two. The Guardian, for example, blames Cairo’s slums’ huge wealth disparities on “the retreat of central government,” but this is directly contradicted by its earlier assertion that the wealthy benefit from underpriced land sales.

Anyway, I guess my point is that while gawking at slums and saying, “Look! The free market sucks!” might be a fun and easy game, it’s not very helpful. Slums might appear lawless to outside observers, but the hand of government and specter of its return are real concerns for its inhabitants and entrepreneurs, who shape their actions and investments accordingly.

Where have I been?

I (Stephen) have been focused on trying to find a job recently (speaking of which – if anyone’s got any freelance or permanent work or knows of anyone who might, I’m interested!, so as you can see, posting has dropped off. Adam also hasn’t been posting much lately, but, as you may have noticed, we have a new blogger – market urbanists, meet Emily Washington! She’s already posted a few articles, and hopefully we’ll see many more.

As for me, you can still read my writing, but you’ll have to accept it in 140-character chunks. Adam gave me the password to the Market Urbanism Twitter account (@marketurbanism) a few weeks ago with the idea that I would post links there and then collect them every few days in a post. I started tweeting a lot more than I though I would, though, and have been too lazy to collect them in a post. But, since I post about a dozen links a day there’s a lot of content, and even if you don’t use Twitter you can still check it out. Unfortunately, though, the webpage and RSS feed include what are sort of conversations with other users – basically any message that starts with an “@” sign, though not things that start with “RT @” – so you’ll get a lot of tweets that are just my half of the conversation with someone else. I don’t have a solution for this in the RSS feed (anybody know how to filter them out of the RSS feed, as Twitter would if you were following them?), but if you sign up and make a Twitter account and “follow” @marketurbanism, you’ll see the tweets on your homepage as they were intended, without all the annoying half-crosstalk – it’s free and easy, and you don’t need to post anything to your account.

Irrational, or responsive to incentives?

In the Washington Post Brad Plumer editorializes on the choice of many Americans to accept longer commutes by car in exchange for larger homes far from their workplaces. He says that consumers are unable to accurately calculate the cost of their commutes, including time spent driving, leading them to make “irrational” choices about where to live. However, Plumer downplays the policies that encourage consumers to buy homes rather than rent and that allow them to partially externalize the costs associated with driving.

Plumer asserts that when buying a house, consumers think they will value additional space more than they do, but he gives no convincing reason that their subjective valuation of home size is incorrect. If in fact if consumers did undervalue the time they spend commuting in relation to home size when they purchased a home, he gives no reason why they would not eventually realize this error and improve their situation by moving to a smaller home closer to a city center.

His piece is written in response to Congressman Earl Blumenauer’s recent report on the topic of shielding Americans from volatility in the oil market. Blumenauer does credit the policy environment dating back to the 1944 Federal Highway Act for shaping the car-centric culture that many Americans live in today, and he supports policies that provide incentives for decreased reliance on cars.

Blumenauer asserts, “For too long, the Federal government has disproportionately subsidized highways at the expense of other modes, reducing consumer choices.” Rather than moving away from determining transportation and urban development through legislation, he provides policy prescriptions at the federal, state, and local level to decrease consumers’ dependence on oil.

For example, Blumenauer suggests that mortgage lenders should be encouraged to take transportation costs into account, making it easier for those living close to their workplaces to get loans. If the recession has taught us anything, it should be that government involvement in lending markets is dangerous. Banks could easily access data on the risk of loaning to consumers who live far from where they work, so if in fact these mortgagees are at increased risk of foreclosure, banks could freely factor this information into their interest rates.

Blumenauer also says that the federal government should provide an index of transportation costs associated with living in various places. Plumer promotes this prescription, writing that it would improve transparency in the housing market. In reality, however, no government body could come close to accurately representing the transportation costs for each individuals’ commute; rather, they could provide averages that may be far from household’s actual costs. Individuals can calculate their own commuting costs across different homes much more accurately than any centralized authority could.

All policies come with unintended consequences. Today in the United States we can see clearly the unintended consequences of policies that subsidize driving and prevent high-density housing — sprawl, congestion, and long commute times, along with the pollution that comes with cars. However this does not mean that the smart growth policies that Plumer and Blumenauer suggest will not come with their own unintended consequences.

We should assume that consumers act rationally given the incentives that they face. Repealing the policies that have shaped current behavior such as undervalued public parking, density restrictions, and tax breaks for homeowners will result in people moving closer to their work places and driving less. Rather than seeking to create a new vested interest that will support  mortgage incentives for those who live in smart growth communities, Blumenauer should work to raise awareness of the costs of mortgage interest tax breaks and driving subsidies that are currently borne by taxpayers.