I've Got a Price for Gas

In his comments on a recent article in the Brookings-Wharton Papers on
Urban Affairs, urban economic development godfather Edwin Mills
calculates what the price of a gallon of gas should be in the US. He
considers the gas tax to be a user fee which, if priced correctly,
will result in the optimal level of its consumption; i.e. if the fee
is too high, we'd underconsume it, and if it's too low or free, we'd
overconsume it.

The user fee isn't really to use the gas, of course, but to use the
roads, but it's a close enough approximation. Considering an
uncongested urban road, an appropriate user fee should consist of
three things, according to Mills: 1) the opportunity cost of the land,
the depreciation of the right-of-way, and the operating cost of the
road (traffic control, snow removal, etc.). Divide that by vehicle
miles, and Mills arrives at a figure of $2.50 per gallon of gas, which
at the time of the article's publication (2001) would result in a
price to us consumers of about $4.00 to $4.50; today it would probably
be closer to $5.00 or $6.00.

You could throw in all sorts of other externalities that gas consumers
should pay for, but let's not for a second. At that new price, Mills
argues, all sorts of changes would take place, which would help the
marketplace arrive at a better equilibrium: less wasteful car trips,
more purchases of fuel-efficient vehicles, people moving closer to
their places of work, higher densities around centers of urban and
suburban employment, and so on.

To Mills, it's all about getting the price right. He is a true
economist: if the price is right and the market is correct, the right
level of consumption will take place. As a result, he pooh-poohs
urban growth boundaries, which are a trendy but blunt object for
reining in excessive suburbanization.

He also points a finger at cities, often the finger-pointers
themselves in the vilification of sprawl. Far from being the passive
victim as people and jobs and resources move away from them, cities
sometimes contribute to the problem, in Mills' mind. Take Chicago,
for example. As dense as its center is, the marketplace would welcome
more density, except that current property owners lobby to zone it
out, lest the additional demand deflate the rent prices they can
charge to their tenants.

I've been recommended to Edwin Mills before, but haven't yet found a
good book of his to read. And here I bump into him at the back of an
article I'm to read for school. The guy's given me a decent price for
a gallon of gas, so now I have to find more of his writings to guzzle.