Don’t Subsidize Me, Charge Me More


Paradoxical as it may sound, I will sound the trumpet again on this message: if you want greener behavior, don’t ask the government to subsidize you, ask it to charge you more. Here are a couple of recent articles I came across – one from a fairly left-leaning source and one from a fairly right-leaning source – on the ineffectiveness of subsidies to effect wholesale behavioral change.

Here I’m not even talking about (nor are these articles) our present toxic political atmosphere, in which one side wants to give out goodies and the other side wants to paint those goodies as give-aways we can’t currently afford. I’m simply referring to basic human behavior: massive outlays for next-generation infrastructure or heavy subsidies of alternative energy systems simply aren’t going to move the needle.

Here’s what will: seeing the real price tag on what it costs to drive our cars, heat our homes, and take our showers. If we bore even a fraction of what it costs society as a whole, all-in, to provide gas, electricity, and water, we’d all make far greater effort to do sensible things that are good for our pocketbook and good for the environment.

It isn’t sexy, but riding your bike to work, installing a timed thermostat, and not running the water when you’re shaving are all easy to do and hugely impactful for resource conservation. Alas, in our current regime, underpricing causes us to squander what are actually scarce and/or costly resources.

It may sound outrageous to posit that the solution to our mess is not subsidies but higher prices. No politician in their right mind would campaign on such a platform. But that’s what it will take to really get this right. And the longer we get this wrong, the more costly it’s going to get.

Comments

Daniel Nairn said…
I'm in full agreement with you. There may be some clever ways to pull away from misplaced subsidies in a politically feasible way. I really like the employee parking cash-out option. Currently, businesses can write off their taxes the costs of providing parking benefits to their employees. This introduces a huge market bias for more parking and more driving. The most simple solution would be to stop offering this deduction, but that would not fly. One proposal is to offer a cash-out option that would allow an employee to accept their tax-deducted share in money rather than pavement. The deduction stays but the market distortions are minimized.

It seems that policy is always additive.
LH said…
Daniel, you are correct that policy is always additive and therefore implementation must take that into account. In that vein, maybe here are two palatable tweaks to the issue you raise, that of parking space:

* At initial development of the land - Rather than stand-alone parking minimums, have payments in lieu of parking, whereby developers can decide how many spaces it really needs, and pay the municipality for the remainder. That way, if it thinks it can get away with less than the minimum, it can save money (since the PILOP would be lower than the construction cost per space). The municipality either gets free money (if the development generates no net new need for street parking) or money to compensate it for the blip up in street parking demand.

* Employers and employees - Pre-tax vouchers for parking can remain as is, but pre-tax vouchers for transit use would be further incentivized ($60 in vouchers for the price of $40, for example).

In both cases, you could play with the ratios as needed, based on how people respond over time.

Now, how you get Washington to stop writing legislation that leads to direct transfers to its favored donors, I haven't the foggiest.

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