{"id":126952822,"date":"2009-01-09T08:40:22","date_gmt":"2009-01-09T08:40:22","guid":{"rendered":"https:\/\/wp.baltimorespokes.org\/?p=126952822"},"modified":"2009-01-09T08:40:22","modified_gmt":"2009-01-09T08:40:22","slug":"not-so-free-ride","status":"publish","type":"post","link":"https:\/\/wp.baltimorespokes.org\/?p=126952822","title":{"rendered":"Not-So-Free Ride"},"content":{"rendered":"

Americans drive too much. This isn\u2019t a political or moral argument; it\u2019s an economic one. How so?
\nBecause there are all sorts of costs associated with driving that the actual driver doesn\u2019t pay. Such a condition is known to economists as a negative externality: the behavior of Person A (we\u2019ll call him Arthur) damages the welfare of Person Z (Zelda), but Zelda has no control over Arthur\u2019s actions. If Arthur feels like driving an extra 50 miles today, he doesn\u2019t need to ask Zelda; he just hops in the car and goes. And because Arthur doesn\u2019t pay the true costs of his driving, he drives too much.
\nWhat are the negative externalities of driving? To name just three: congestion, carbon emissions and traffic accidents. Every time Arthur gets in a car, it becomes more likely that Zelda \u2014 and millions of others \u2014 will suffer in each of those areas.
\nWhich of these externalities is the most costly to U.S. society? According to current estimates, carbon emissions from driving impose a societal cost of about $20 billion a year. That sounds like an awful lot until you consider congestion: a Texas Transportation Institute study found that wasted fuel and lost productivity due to congestion cost us $78 billion a year. The damage to people and property from auto accidents, meanwhile, is by far the worst. In a 2006 paper, the economists Aaron Edlin and Pinar Karaca-Mandic argued that accidents impose a true unpaid cost of about $220 billion a year. (And that\u2019s even though the accident rate has fallen significantly over the past 10 years, from 2.72 accidents per million miles driven to 1.98 per million; overall miles driven, however, keep rising.) So, with roughly three trillion miles driven each year producing more than $300 billion in externality costs, drivers should probably be taxed at least an extra 10 cents per mile if we want them to pay the full societal cost of their driving.
\n
\n…
\nA higher gas tax might also work. If a typical car gets 20 miles to the gallon, then the proper tax would be about $2 per gallon. But with the current high market price for gas and the political hysterics attached to it \u2014 well, good luck with that one.
\nThis brings us to automobile insurance. While economists may argue that gas is poorly priced, that imbalance can\u2019t compare with how poorly insurance is priced. Imagine that Arthur and Zelda live in the same city and occupy the same insurance risk pool but that Arthur drives 30,000 miles a year while Zelda drives just 3,000. Under the current system, Zelda probably pays the same amount for insurance as Arthur.
\nWhile some insurance companies do offer a small discount for driving less \u2014 usually based on self-reporting, which has an obvious shortcoming \u2014 U.S. auto insurance is generally an all-you-can-eat affair. Which means that the 27,000 more miles than Zelda that Arthur drives don\u2019t cost him a penny, even as each mile produces externalities for everyone. It also means that low-mileage drivers like Zelda subsidize high-mileage drivers like Arthur.
\n…
\nhttps:\/\/www.nytimes.com\/2008\/04\/20\/magazine\/20wwln-freakonomics-t.html?_r=3<\/a>oldId.20090109084022565<\/p>\n","protected":false},"excerpt":{"rendered":"

Americans drive too much. This isn\u2019t a political or moral argument; it\u2019s an economic one. How so? Because there are all sorts of costs associated with driving that the actual driver doesn\u2019t pay. Such a condition is known to economists as a negative externality: the behavior of Person A (we\u2019ll call him Arthur) damages the … <\/p>\n

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