A couple stories got me thinking today about how our transportation needs and systems are changing before our eyes. The first one is from November. I’ve just run across it this morning, but it encapsulates a lot of the challenges we face as entrepreneurs, political leaders, and environmentalists in trying to create a more efficient transportation infrastructure. Aside from the silly political issues (there seems to be a lot of rhetoric that transitioning to any system other than our current reliance on single-occupancy-vehicles is a communist plot or something) there are very real and very serious socio-economic barriers to beginning the transition to self-sufficient transportation. Gil Friend argues that, aside from merely subsidizing inefficient travel with major government financial support for the oil companies, we’re also failing to take into account the cost externalities associated with a petroleum-intensive transportation system.
Sorry, let me back up. “Cost externalities” is a term economists use to describe costs generated as the result of an exchange that may be borne by third parties. Fossil-fueling power plants, for example, generate electricity for their customers and profits for their executives, but also damage crops, buildings, and the health of the general public, despite the fact that the public isn’t necessarily directly involved as a party to the purchase of electricity.
In the case of car travel, I may make heavy use of the country roads around the backwoods of West Virginia on my family vacation, generating all sorts of wear and tear on the road. But since I’m not a West Virginia resident and tax payer, I don’t bear the costs of that upkeep through my taxes. For all intents and purposes (ahem) I get a free ride.
Sometimes, societies attempt to recoup those costs through tax policy. In the case of road examples, West Virginia could institute a toll to make users of their transportation infrastructure directly responsible for its upkeep. That way, drivers help pay for part of the maintenance of the infrastructure of which they make use.
Friend makes a similar argument for increasing the cost of gasoline. The cost that you pay at the pump is only a portion of the total expense required to produce and use the gas you pay for: through taxes, you also pay for subsidies to the oil companies that drill the oil. Through higher insurance premiums, you subsidize the health care costs of uninsured individuals suffering from emphysema due to increased air pollution. Through higher food prices brought on by more frequent droughts, you pay for the cost of global warming.
Of course, it’s difficult to appreciate the full cost of your choices when you’re only paying for a portion of them at the point of sale, and when you’ll ending paying the other costs no matter whether you consume a product or not. As Friend writes “Distorted markets, whether distorted by explicit subsidies that transfer tax payments from general funds to selected beneficiaries or by the effective subsidy of pollution delivered by selected beneficiaries to the general body, whether free or controlled, renders good decision making all but impossible.” Or as he quotes Adam Smith, perfect markets depend on perfect information. Tough to do when the true cost of a product isn’t apparent.
So how much does gasoline really cost us, all in? Friend suggests the costs could be anywhere from $10 – $20 a gallon, when one includes the environmental, health and military costs incurred in order to keep the production and consumption of gasoline going. Of course, should catastrophic climate change significantly damage the global food supply, that estimate could rise significantly.
Frankly though, I’m a bit more optimistic than Friend is about the potential for society to shift away from a fossil fuel-intensive transportation system. As he points out, humans are at least partly creatures of culture and, at least in the US, a massive culture shift is underway with regards to transportation. I bet a lot of you saw this one out of the Atlantic Monthly a few weeks ago or this one in the New York Times, discussing the shift among younger consumers away from car ownership. The numbers are staggering: “The fraction of 20-to-24-year-olds with a license has also dropped. And according to CNW research, adults between the ages of 21 and 34 buy just 27 percent of all new vehicles sold in America, a far cry from the peak of 38 percent in 1985,” according to the Atlantic story.
There’s a lot of reasons Millenials are avoiding car ownership now. Cars are massive investments, particularly at a time when many young people remain without a job. Gas prices continue to rise, and will continue to do so in the future. Many grew up in the suburban sprawl and prefer the walkable commutes and public transportation provided by urban environments to hours of unproductive commuting each day.
Paradoxically, America’s car culture is in some ways a victim of its own success. Driving the only car on the road makes you the most mobile person in your community. However, there will soon be 4 billion cars on the road, worldwide. At that point, a car ceases to make you more mobile, and instead just becomes an uncomfortable place to sit while you wait in gridlock.
And these trends are flipping the script of traditional resistance to new, more sustainable, transportation options. Nowhere is this more obvious than in Southeastern Michigan. Detroit remains, of course, the Motor City, but its struggling to keep up with the demands of an aging population that will increasingly lose their access to automobiles, and younger inhabitants for whom a car is more of burden than benefit. The city, and region, has traditionally been resistant to ideas for new transportation solutions. A quarter century ago, plans for a massive public transportation network linking Detroit to Chicago collapsed into the nigh-useless People Mover project, which can’t do much more than ferry people from the casino to the hockey arena. But even Detroit’s politicians are finally starting to understand that voters are increasingly demanding new transportation options, and that such investments can yield enormous economic benefits.
If the Detroit area succeeds in launching some real sustainable transportation solutions, ahead of support from the federal government, it might just be a harbinger of things to come.