Shoup: NPR Puts a Price on Parking. Why Not Cato?

Streetsblog is pleased to present the third episode in UCLA planning professor Donald Shoup’s ongoing inquiry into whether the Cato Institute’s free market principles extend to the realm of parking policy. Read Shoup’s previous replies to Cato senior fellow Randal O’Toole here and here.

Dear Randal,

In your September 1 post on Cato@Liberty, you mentioned that the Cato Institute offers free parking to its employees.

Which policy does public radio adhere to
When it comes to parking, which policy does public radio prefer, and which one is favored by the libertarian think tank?

I checked and found that not all employers in Cato’s neighborhood offer free parking. For example, consider National Public Radio, which is on Massachusetts Avenue three blocks from Cato. NPR charges all its employees the market rate for parking in the building. NPR has 125 parking spaces and it uses fair market prices to ration these scarce spaces among its 400 employees.

The different parking practices at NPR and Cato reveal quite different policy preferences. NPR prefers the free market while Cato prefers free parking.

Cato’s free parking severely distorts transportation prices.  The market price of commuter parking in the commercial garage closest to Cato is $255 a month, so Cato’s free parking subsidizes the cost of driving to work by $255 a month. Because employer-paid parking is a tax-exempt fringe benefit, Cato pays the free parkers a tax-exempt subsidy of $3,060 a year ($255 x 12).

If the round-trip commute distance to Cato is 32 miles (the national average), and if commuters drive to work 22 days a month, Cato’s free parking reduces the cost of driving to work by 36¢ a mile ($255/22 days/32 miles). According to the American Automobile Association, the average operating cost of driving a car is about 18¢ a mile. Because the per-mile subsidy for parking is twice the per-mile cost of driving, Cato’s free parking reduces the out-of-pocket cost of driving to work by two-thirds. Free parking therefore grossly distorts market prices in favor of commuting by car.

In your campaign for market policies in transportation, I hope you will try to persuade the Cato Institute to charge market prices for parking, or at least to offer commuters the option to cash out their parking subsidies. Perhaps you might also write a post on Cato@Liberty about Congressman Earl Blumenauer’s bill (H.R. 3271) that would encourage many employers to offer parking cash out. I suspect that might even make the news on All Things Considered.

Donald Shoup
Department of Urban Planning
University of California, Los Angeles

  • Kristen

    I would just like to say that I love this. Bravo to Donald Shoup.

  • Steve

    The Mt Vernon Square metro station is 1800 feet away, do they give employees metro benefits if they don’t want to drive?

  • Rob

    Defenders are going to step up here and say that free parking is key to attracting and maintaining good talent.

    I want to know how many people are in a position where a parking space is the deciding factor in where they work? People pick where to work because it’s where they want to work. Once in their job, people evaluate their transportation options. CATO employees are fortunate that there are multiple transportation options: drive, Metro, taxi, bicycle, etc.

    There’s little justification for CATO to offer free parking, regardless of their ideology.

  • I really enjoyed the wit of this, and I like to see Shoup taking Randal to task. However, characterizing CATO subsidizing its own employees parking as counter to “Free Market” philosophy is not accurate. I think you know that, and you were simply trying to make a witty analogy, but it is a false analogy.

    Just to state in case a reader took you too literally: In a “free market” an organization is free to provide parking to its employees if it chooses, just as a home owner may choose to let visitors park on his driveway. Or for that matter, serve the visitors sandwiches without charging them the market rate for sandwiches. The difference between a “free market” and interventionism is when a third party (government) interferes with voluntary market transactions to force a certain outcome.

  • Ian Turner

    Rob, I would certainly consider commuting costs, including tax implications, in evaluating the total compensation package of a potential employer.

  • Corn subsidies and mandated parking subsidies: making America fat since 1948

  • Tom

    What does the fact that a non-profit offers a particular fringe benefit to its employees have to do with whether it is in favor of free markets?

    I’m sure Cato offers a whole range of benefits to its employees like subsidized health care, contributions to pension plans, and tuition benefits. Does this make them any less interested in free markets? I don’t think so. If they were telling Streetsblog.org or UCLA how to compensate their employees and lobbying the federal government to make it so, that would be hypocritical. Offering a benefit that its employees want is no violation of the free market.

    I’ve been with Shoup on this issue from the beginning. I think now he is using some of the same lazy rhetorical techniques that he so rightly accused O’toole of using in his first letter.

    Donald, quit while you are ahead. Don’t sell past the close.

  • Lucy

    It’s not a market solution when the employer subsidizes one choice and not another; it’s a corporatism solution.

    Whether it’s your employer or the government hiding the real cost of your transportation choice, it’s a distortion that penalizes those who choose the non-subsidized choice, and so antithetical to the principles espoused by the Cato Institute.

    Shoup is right, and right-on!

  • zach

    I bet a lot of CATO institute employees who don’t drive sell their spots to people who work nearby. Or is CATO keeping its employees from free market behavior?

  • Rob

    @Ian Turner, fair – but what if the potential employer offered a parking space? transit subsidy worth the value of the space? or cash worth the value of the space? Would your calculation change?

  • Ouch! Libertarian think tank bested at free market policies by liberal journalists!

  • Ian Turner

    Rob,

    I think the most important factors regarding my commute are non-monetary: Time and quality are the two most important, where quality includes the ability to make commute time productive. So in my case, I’d probably choose a commute mode based on the prospective employer’s work location and then work out the compensation package, including commute costs and tax consequences, based on that choice. Others might make that decision differently, of course.

  • Wil

    The emperor has no clothes.

    For all the rhetoric from CATO about freemarket principles, they gobble up the subsidies that are advantageous to themselves and their employees. They are merely as opportunistic as possible, and their market niche is selling a worldview that they don’t even adhere to.

  • john

    If no 1099s for the IRS then Congress should change the rules. Perhaps a tax rate of 90% on this would help reduce their carbon footprint?

  • Casey

    The main point that seems to be missed here is that this can’t be free market because the Cato Institute is in no way a business. They are a government subsidized, by way of tax deductions, non-profit. Although I suppose one could consider them in the business of philosophically justifying big business and being recompensed appropriately. The organization doesn’t make a profit but the individuals do.

  • J:Lai

    It is true that in a free market, employers retain the right to use non-monetary compensation to attract labor (such as free parking, health insurance, etc.)
    However, providing a perq which influences behavior by distorting the market (in this case the cost of parking) certainly feels antithetical to the mission of a free-market promoting think tank.

    Free parking will change behavior in ways that a mode-neutral commuting subsidy (or just extra cash) would not. This, writ-large, is the type of activity that Cato opposes when governments engage in it.

  • “In a “free market” an organization is free to provide parking to its employees if it chooses, just as a home owner may choose to let visitors park on his driveway.”

    Basic free-market theory tells us that production is optimized if each commodity is charged for separately and priced at its marginal cost.

    An employer has a right to build a company town and provide free housing for all its employees, but that is not a free market in housing. It will lead to inefficiencies similar to the inefficiencies that occur when a socialist government provides free housing to all its citizens.

    Likewise, an employer has a right to provide free parking to its employees, but that is not a free market in parking, and it will lead to obvious inefficiencies. Eg, because the parking is free, someone who lives two blocks away will drive to work, even though it is just as convenient and much more efficient to bike or walk to work.

  • Did my post get pulled down? Drat. Here it is again.

    In response to the original post (nice of Cato not to include a comment section): O’Toole dedicates several paragraphs to lambasting any public support of non-car transportation on subjective grounds. Portland bike lanes are vile “anti-car” measures, and supporters are insidiously “coercive” (never mind the government coercion of the $200 billion interstate system). Then, coincidentally, he augurs ill of the developments of non-car transportation: “As I have shown at length, trying to save energy or reduce auto emissions by reducing driving is not cost effective, and the resulting reduction in mobility could have serious negative effects on our economy.”

    It would seem that when something is displeasing to a Cato fellow – or one of Cato’s corporate backers – it has a way of becoming a “negative effect on our economy”.

    Thanks to Shoup for bringing his much needed perspective to this issue.

  • @Charles Siegal and others:

    “Basic free-market theory tells us that production is optimized if each commodity is charged for separately and priced at its marginal cost.”

    That is not a “free-market theory” I have ever heard. Can you provide a source? By your logic, free market companies MUST charge market rates to employees for use of individual staplers, computers, paper clips, chairs, toilet water, etc. Please explain how that would be “optimal”.

    Many commenters, and even Shoup in this case, seem very inclined to spout off comclusions of what is “free-market” based on misinformed premises of the definition. There is nothing anti-free-market about bundling goods and services together when agreed upon by all parties involved. The problem is when a third party steps and and interferes with a voluntary interaction. So, government subsidies are a violation of the free market (via wealth transfer from taxpayers to beneficiaries) just as mandated parking maximums and minimums interfere with the supply and pricing of parking.

    Subsidizing employee parking is not the way I would run a free-market think tank, so I did get a chuckle from Shoup’s post. But spouting out words without understanding the meaning and implications is intellectually irresponsible.

  • @Market Urbanism

    If I were Don Shoup, I would have lost all cool and ceased to be “intellectually responsible” by now.

    If Shoup got a little rhetorical in this post, I don’t blame him. CATO has been loudly and obnoxiously hypocritical, and has misrepresented Shoup’s ideas.

    I can tell you that Shoup rarely uses the words “free market” in his lectures at UCLA. None of his arguments are framed by ideology. Rather, I would argue that they are motivated by empiricism.

    The term “free market” is unnecessarily ideological. Instead of talking about philosophies, we should get back to talking about what actually happens when cities require off-street parking according to pseudoscientific equations and underprice curb parking. I suspect it’s what Shoup would rather be doing. I am certain it is what I would rather be doing.

  • Erin

    CATO also offers commuter subsidies to those who choose to use public transportation to get to work, giving people who don’t drive the same advantage over those who do. That is, essentially, “cashing out” the parking subsidy.

    My boyfriend works at CATO and walks the 8 blocks to work, thus incurring no commuting fee. He also has coworkers who live far outside the city, whose most convenient mode of transportation to work is driving, and he has coworkers who live in metro accessible locations who choose that method. In all these scenarios the employee is not charged for their commute and free to choose which method best suits them.

    Also, Charles Siegel says, “Likewise, an employer has a right to provide free parking to its employees, but that is not a free market in parking, and it will lead to obvious inefficiencies. Eg, because the parking is free, someone who lives two blocks away will drive to work, even though it is just as convenient and much more efficient to bike or walk to work.” — why would someone choose to drive to work if it is more convenient for them to walk? That’s totally illogical.

  • Erin

    Furthermore – That is an example of the free market (see my post above). CATO just isn’t choosing to use free market tactics to impose value judgements on people who drive their cars to work.

  • Erin

    Finally, Market Urbanism, “subsidies” in this case are coming from the resources of CATO, who can choose to use their own money they way they please. So, it’s not really funny/ironic. It’s akin to subsidizing your child’s lunch by paying for them to eat at school. This is unlike the federal government, which subsidizes commuter costs for all employees with tax payer money (aka, other people’s money). If CATO was short of funds one yeah they would likely pull back this policy or other programs and expenses to make up for that. The federal government would simply increase their budget of other people’s money to continue providing the same level of benefits in spite of the current economic situation. I say this as a federal employee who would HAPPILY accept a pay freeze this year and reduction/elimination of transit subsidies… but I am very, very lonely in that opinion.

  • Ian Turner

    Erin: Just thought you should know that I know someone who does, in fact, drive two blocks to work. I think for him it’s a statement of affluence: He would feel poor if he had to walk, but because he can drive he feels richer.

  • Brandon

    This guy was able to get a job at a university?! CATO doesn’t distort the cost of commuting, they offer it as a fringe benefit to their employees. If some don’t take it (i.e. don’t commute farther) than it is their loss. This guy really needs to figure out what a free market is before he goes accusing people of violating it. The parking isn’t “free” it is part of compensation. So really, he should write about how great it is to work at CATO if you commute by car.

  • Jim

    Professor Shoup, Cato is in the *labor market*, offering various transportation benefits to employees in exchange for their labor. If the parking benefit causes slightly more people to drive and park near Cato, increasing the cost of parking to others a small amount by using up some margin of parking spaces, that creates a new equilibrium price for parking. It’s not a distortion of the market. It’s the market.

    If Cato were to offer catered lunches to employees as another fringe benefit, that would lower the demand for bought lunches near their offices and raise the demand for catering services. Distortion? No, just a change in the market for food services.

    Distortions occur when a non-market actor gets involved and artificially limits supply or artificially subsidizes demand. These are the actions of governments, using coercion to direct the society’s resources differently than the society would direct them itself.

    To defeat intellectual opponents, you must know their arguments as well or better than they do. Professor Shoup, you’re not versed enough in the arguments favoring free markets to challenge them effectively.

  • Um, Jim, WHAT!?

    You say that if CATO subsidizes employee’s parking and it causes “the cost of parking to others” to rise, that would be “a market.”

    Yeah, exactly.

    Right now such a “market” does not exist. Cities keep the price of curb parking artificially low, or require individual lots to build so many spaces that it drives the price to everybody down to zero.

    This is what Shoup has a problem with. Minimum parking requirements get rid ofhelpful market price signals – you know, the kind that indicate scarcity, or value. How many drivers to CATO’s neighborhood have a sense of how valuable the urban land is that they park on? Cars park free at the end of nineteen out of twenty trips, giving drivers the impression that the land is worth nothing.

    Now, CATO is helping their employees continue in this impression. They give their employees the sense that something VERY valuable is free. Why is this good again? Sure, they have a right to do it, but its the same kind of information distortion that CATO so criticizes when a government happens to be the one doing it. And let’s be real here. Both Shoup AND CATO think this distortion of information is a problem. Now in what sense is CATO not a “non-market actor” getting mixed up in the market for parking? CATO doesn’t buy or sell parking, they don’t buy or sell any other kind of transportation system – they are most emphatically NOT in the market. CATO is a non-market actor distorting their employees’ transportation choices and they need to own up.

    You can hem and haw about the difference between a market distortion and a price distortion and an information distortion. The fact is that CATO employees who don’t drive are subsidizing the ones who do, and this is NOT a traditional or fair market mechanism. None of the employees has the option to opt out or to trade their parking subsidy for a different kind of subsidy.

    Who benefits from this distortion? Drivers. If I worked at CATO, I’d be a chump not to take advantage of the very valuable free land my employer was giving me. If my choice is between free parking and Nothing, which am I going to pick?

    Who is harmed by this distortion? Everyone. Everyone who has to deal with sprawl, higher rents, dirty air, congestion, and greenhouse gas emissions.

    Drivers should pay, not employers, not apartment renters, not tax payers. Drivers.

    I have a question for you, Jim. How well versed are you in Professor Shoup’s arguments? Do you know what the three reforms are that he proposes for parking? Have you followed your own advice and learned his arguments “as well or better than” him? I think if you really took yourself to heart and did this, you would find his ideas downright libertarian.

  • Howard Bingham

    In Houston, Tx., when the Metropolitan Transit Authority of Harris County ( METRO http://www.ridemetro.org ) built it’s headquarters, only a handful of parking spaces were included in the building complex proper, in the same block, the downtown Houston transfer facility has 3 covered lanes (BUSES ONLY), employees as well as board members are supposed to get to employment by use of the system buses & light-rail which has a station adjacent to Main Street Entrance, I don’t now how the few parking spaces are allocated, but imagine they are reserved for either official vehicles or handicap vans (One board member at time of planning the facilities requires motorized wheelchair & has served on a number of advisory committees in both City of Houston and Harris County.).

    Maybe larger U.S. Metro cities ought to charge a toll to drive into the business district, In Houston it would be easy to define, as it’s surrounded on all sides by elevated freeways (I-10 on North, I-45 on West & South and U.S. 59 on East)..

    Metro bus routes serve the entire business district, although most coming from the South & Southwest can ride MetroRail, which has expansion plans underway, which have been hit with some legal issues by FTA over rules in bidding for equipment (As MOST USA manufacturing locations are foreign owned & it is not un-common for imported complonents to be necessary.! ).

  • Erin: “My boyfriend works at CATO and walks the 8 blocks to work, thus incurring no commuting fee.”

    Ah, but somebody who drives to CATO receives “free” parking worth $255 on the open market and thus, are effectively paid an extra $255 per month. Does your boyfriend receive an extra $255 cash/bus pass/commuter benefits? I doubt it.

    A true free market would give out a commute voucher worth $255, or whatever CATO pays for parking, to every single employee that could be used for parking, a transit pass, walking shoes, or cycling gear.

  • Aleks

    Erin: When a person who doesn’t work at Cato decides where to live and how to get to work, her decision is based on many factors, one of which is the relative monetary cost of driving and/or transit. When a Cato employee makes that decision, driving, and (to a lesser degree) transit, are more appealing than they otherwise are, since they have an (effectively) lower monetary cost.

    You’re right that all this talk of the “free market” is just a red herring. Cato is free to spend its money however it wants. That said, Cato is still choosing to spend its money in a way that gives its employees an incentive to drive, or to take public transit, relative to their cost to the general public. It’s surprising that a libertarian think tank would choose to spend its money in a way that caused such a distortionary effect.

  • Anonymous

    You won’t persuade Cato or any of the other thinktanks about parking, they are beholden to the oil industry. They want more people to burn the nasty black stuff that pays their billionaire corporation funders that pay their wages.

    It’s all  part of the Denial Industry campaign to bamboozle the Public and poison democracy.
    Koch
    http://tiny.cc/SecretFunding2011Update
    More Koch
    http://tiny.cc/KochBothersCfAPAFReport
    Smoke, Mirrors & Hot Air: How ExxonMobil Uses Big Tobacco’s Tactics to Manufacture Uncertainty on Climate Science
    http://bit.ly/29B5Ki

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