Blackadder’s Lair

The home of many a cunning plan

The Joy of Public Transit

Ezra Klein, on the advantages of cap and trade:

A cap and trade carbon plan will raise the cost of carbon intensive products like gasoline. That’s how it works to discourage carbon consumption. By capping emissions, and then lowering the cap, it makes carbon-intensive products relatively more expensive, which in turn increases the economic incentives to purchase, and develop, non-carbon intensive products.

This, in the short-term, makes gasoline more expensive. That’s the point of it. There are a variety of ways to compensate people for making gasoline more expensive, but gasoline will still be more expensive. That’s going to make cap and trade a tough sell. But that doesn’t mean it will be bad for the economy, or bad for people in general. Money not spent on gasoline is money spent on other things. As carbon-intensive products become pricier, other products will become cheaper. Lots of good stuff will happen, and my sense is that a move away from oil will actually entail significant lifestyle benefits. That’s why I talk about transit and food policy a lot. Transit is awesome. Not sitting in traffic makes people happier. Riding on subways is fun.

It’s hard to know quite what to make of this argument. True, money not spent on gasoline is money spent on other things. But if one has to spend a larger percentage of one’s income to buy the same amount of gas, then one has less money to spend on other things, not more. Presumably the idea is that gas will get so expensive that people will give it up altogether, but this will only mean people will have more money for other things if there is some comparable transportation that is less expensive than driving. The popularity of private automobiles suggests that this is not the case. As the price of gas rises, alternatives will become cheaper in a relative sense, but there’s no reason to think they’ll become cheaper in an absolute sense. If riding the subway was so much fun and was cheaper than driving, then the fact so many people continue to drive would be rather mysterious. The truth is that people like their cars, and any attempt to set transit policy is defiance of these very clear, widespread, and strong preferences is liable not to work out so well.

I was reminded of Ezra’s post today at lunch when listening to the latest EconTalk podcast. It seems that, until recently, Santiago, Chile had a largely privately run bus system, which is unusual. Also unusual (though not necessarily unexpected), Santiago’s bus system was in the black. The government didn’t much like this, so they banned the private buses, and introduced a new, government run system, with the result that the system now is losing $600 million a year ($100 per city resident). Commute times have drastically increased, ridership is down (unless you count the large numbers of people who sneak onto the buses and so don’t pay fares at all), and the city’s metro system is overloaded. Oh, and the new government buses are larger than the traffic lanes, which leads to accidents. Things got so bad that Chile’s President apologized to the city’s residents for the debacle, though needless to say she’s not in favor of any sort of privatization.

So perhaps Klein is right. Transit can be awesome. Or at least aw-something.

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July 7, 2008 - Posted by | Driving, Economics, Energy

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