This Week in Dope Smoking and Transport

It is a big week for responsible transportation choices for dope smokers. First, medicinal marijuana patients sued the city of San Diego for zoning regulations that forced them to drive really far to reach the dispensaries:

Medical marijuana smokers in San Diego say the city has forced their pot shops to locate in remote areas and that means the drives to and from will increase air pollution — and ultimately, harm their lungs.

Then, in San Francisco of all places, Eaze is being scrutinized for delivering pot in under 20 minutes. Here is a story. A snippet:

As The Chronicle reported recently, there's a new San Francisco startup called Eaze that bills itself as the "Uber of pot" because it allows medical marijuana patients to use their smartphones to order pot and have it delivered by people driving their own vehicles. No word yet on whether there will be big fluffy green marijuana leaves on the cars' grilles to identify them.

I am pretty sure these are the first two legitimate dope related transport issues that do not involve impaired driving or smuggling.

Welcome to the Future

This past week New York City auctioned 200 new taxi medallions for record prices. The high bid was about $2.5 million for a “minifleet” package, and the accessible medallions fetched record prices as well. These prices and the people who paid them send strong signals about what will happen with the taxi industry in New York. The rent seeking behaviors will continue, the regulators are captured by the industry they are supposed to regulate and taxi policy in the city is expected to remain at the status quo of constrained supply and unmet demand. I suspect that the boro taxi program will barely survive but not be expanded, and Uber and other ridesharing services are screwed. In short, what we have now for taxi services is pretty much all we get. I worry that most or all of our transport systems have similar constraints. Welcome to the future. 

So are we conscripted to a future just like the present? Can we solve pressing concerns?

Recently David Levinson write a nice post about what traffic might be like in 2030. It is a nice future scenario that is dramatically improved on current inefficient systems. I agree with much of it but am concerned that regulatory and labor constraints have cemented too many of our systems in place and the future will end up looking a lot like what we have now. Here are some areas of particular concern and in no particular order:

• ·      Concession agreements are in place that are far longer than existing technologies will last. For instance, the Chicago parking meter concession requires that the city compensate the LLC for any loss of value to street parking during the course of the 75-year agreement. This means that even if cars and driving decline, Chicago may have to pay a penalty.  This affects Chicago’s incentives for reform.
• ·      Labor contracts require too many people working jobs that should be automated, such as train drivers.  This limits new options and services. There will also be a persistent bias toward historical rush hour service even though rides demanded will spread out across nights and weekends. We will also likely replace all passenger cars with driverless cars before we get any driverless transit vehicles. 
• ·      Taxi services are not regulated for the benefit of passengers, nor are the taxi industries all that interested in expanding services.  They prefer to protect their rent seeking. Taxi interests will block new entrants and ridesharing. This is especially problematic because of the nights and weekends issues raised above.
• ·     Cities are branding themselves and this will reduce their economic competitiveness in the long run. Brooklyn, Portland, Austin and others all cultivate their identities at great expense and effort. This suggests that they will fiercely protect what they see as core features, including the built environment and transport technologies. Building restrictions and business preservation will become more restrictive over time, reducing the dynamics of city change.
• ·      Municipal budgets are strained from obligations that do little to improve the lives of current and future residents. Pension obligations are of particular concern as it is extremely difficult to raise taxes to pay for salaries to retired people. These obligations do not have an easy policy answer but will limit future investment resources and flexibility to address currently unknown concerns.
• ·      Much of the infrastructure expansion that has occurred over the past few decades (roads, transit, stadia, etc.) makes municipal budgets worse off in the long run. How cities and states decide to dismantle infrastructure is a crucial issue over the next few decades. As the public rarely has the option of exit deliberate decline will be slower than needed.
• ·      Public investment in infrastructure is not currently aimed at or promoting the greater good. Business elites, downtown interests and others are capturing public spending on transit to serve private interests at the expense of riders. See the streetcar trend as an example. Cities, regions and the nation are not bound together by clear goals, so policy is directed to do something, anything, without a good sense as to what is supposed to be achieved. Again to the streetcars, if they are good for economic development then the budget spent on them should be judged against all other economic development uses of that money. Yet we never discuss opportunity costs like this. Infrastructure investment is pursued as an end unto itself. We tend to focus too much on physical changes (which are small in aggregate) at the expense of service changes that may have larger effects on travel and economic activity.

We are also in a prolonged period of sclerotic governance. While all levels of government have strong roles for ensuring access to opportunities, public safety and economic health, the process of governance is currently not up to the tasks. I see stronger forces protecting the status quo than pushing for reform (see the taxi industry as an example).

So traffic may decline but we may not be able to adjust our systems adequately to address the changes that occur. If our systems of governance work to maintain what we have then the future will look very much like the present.  So how might we re-orient our governance systems to meet future needs? I will return to this in a later post.

Rent Seeking and Transportation Service Innovations

Steve Blank at the Berkeley blog has a nice piece about rent seeking strangling innovation. He doesn't set out to highlight how rent seeking has diminished innovation in the transport sector, but he ends up doing so with examples including auto dealers blocking Tesla, protectionist policies that distort auto imports and manufacturing, and taxi services. Rather than me writing new explanations of rent seeking, here is what he wrote:

Rent seekers
Rent seekers are individuals or organizations that have succeeded with existing business models and look to the government and regulators as their first line of defense against innovative competition. They use government regulation and lawsuits to keep out new entrants with more innovative business models. They use every argument from public safety to lack of quality or loss of jobs to lobby against the new entrants. Rent seekers spend money to increase their share of an existing market instead of creating new products or markets. The key idea is that rent seeking behavior creates nothing of value.
These barriers to new innovative entrants are called economic rent. Examples of economic rent include state automobile franchise laws, taxi medallion laws, limits on charter schools, auto, steel or sugar tariffs, patent trolls, bribery of government officials, corruption and regulatory capture. They’re all part of the same pattern – they add no value to the economy and prevent innovation from reaching the consumer.

 .....

 How do rent seekers win?

Instead of offering better products or better service at lower prices, rent seekers hire lawyers and lobbyists to influence politicians and regulators to pass laws, write regulations and collect taxes that block competition. The process of getting the government to give out these favors is rent-seeking.
Rent seeking lobbyists go directly to legislative bodies (Congress, State Legislatures, City Councils) to persuade government officials to enact laws and regulations in exchange for campaign contributions, appeasing influential voting blocks or future jobs in the regulated industry. They also use the courts to tie up and exhaust a startupslimited financial resources.


Lobbyists also work through regulatory bodies like FCC, SEC, FTC, Public Utility, Taxi, or Insurance Commissions, School Boards, etc. Although most regulatory bodies are initially set up to protect the public’s health and safety, or to provide an equal playing field, over time the very people they’re supposed to regulate capture the regulatory agencies. Rent Seekers take advantage of regulatory capture to protect their interests against the new innovators.

There have been shockingly few service and technological innovations in all aspects of regulated transport over the past few decades. Automobility is long in the tooth for a technology, which may be why we are seeing a decline in auto travel. Transit has performed poorly relative to investment, with few productivity gains and only minor service improvements since the mid-1970s*. Taxi services remain largely unchanged to the point that few cities have bothered to even consider changing how many taxicabs are allowed.

A major reason that there have been so few innovations is because of rent seeking, and understanding economic rents is critical for all planners and transport officials. Here are a couple of recent rentier examples  that make cities worse off: LA blocks taxi apps, and Veolia engages in regulatory capture. Many of the rent seekers are private companies, so don't think that privatization is the key to innovation. Rentiers can be private or public, and in all cases make the public and consumer worse off.

Here is a link to a podcast about rent seeking by a couple of libertarian (at least libertarian leaning) economists, Mike Munger and Russ Roberts (I updated the names based on a commenter rightly saying I should name these two. The podcast and links are excellent sources for information). There are lots of additional links there, too. One thing about rent seeking is that everyone is against it regardless of political persuasion. People differ in what to do about it.


*I am referring to transit in the US generally, not specific lines or station areas. While the past few years transit ridership has grown faster than the population overall, transit ridership is below 1970 levels by nearly all metrics. This helps illustrate the problem.

The Kansas City Experiment on Transport Infrastructure Investment

Kansas City (the Missouri one) presents an interesting natural experiment on the effect of transportation infrastructure investment and economic performance. There are two main investments occurring with each investment focused on a very different technology. First, the city is aggressively pursuing a streetcar system with the hope of encouraging downtown development. Second, Google is installing Google Fiber, an ultra high speed Internet service. These two strategies represent two very different approaches to economic development, and figuring out which approach has a greater (if any) effect on the local or regional economy can help guide future public and private investment decisions.

The streetcar project is a two mile, $102 million rail line mostly along Main Street. Last December voters of a special downtown streetcar district approved a 25 year property and sales tax increase to help fund the project:

Voters approved, 351 to 198, a 1-cent sales tax increase, and 344 to 206 property tax increases to help pay for a $100 million, two-mile streetcar system. It will run from River Market to Union Station, primarily on Main Street.
The tax increases, authorized for 25 years, will apply only within the defined boundaries of a downtown streetcar district. That covers roughly River Market, the Central Business District, the Crossroads and Crown Center.
Yet already, Jackson County Executive Mike Sanders is floating the possibility of a broader countywide transit tax that might alleviate some of the burden on downtown.
Wednesday’s results occurred in an unusual mail-in election and involved only registered voters living within the streetcar district.
The city hopes to begin construction next year and start running the streetcars in 2015.

 Local officials are extremely optimistic about the outcome:

“This is going to be a game changer for our city, especially our downtown,” City Councilwoman Jan Marcason said.
“It will be historic,” Mayor Sly James said. “This is only a beginning.”
Supporters emphasized that just running streetcars through two miles of downtown was never the goal. They hope Wednesday’s results springboard a more extensive system of streetcars running to the Plaza and the University of Missouri-Kansas City, and along east-west corridors such as 12th Street or 18th Street.

To place downtown Kansas City in a bit of context, here is Strongtowns' Charles Marohn explaining current traffic and pedestrian conditions in Kansas City:


Looking at the Google project, here is a description of the service:

Google Fiber is a project to build an experimental broadband internet network infrastructure using fiber-optic communication[1] in Kansas City, Kansas, and Kansas City, Missouri; the location was chosen following a competitive selection process.[2] Over 1,100 communities applied to be the first recipient of the technology.[3] On March 30, 2011, Google announced that Kansas City, Kansas will be the first community where the new network would be deployed.[4]
After building an infrastructure of the network, in July 2012, Google announced pricing for Google Fiber. The service will offer three options. These include a free broadband internet option, a 1 Gbps internet option for $70 per month and a version that includes television service for $120 per month. The internet service includes 1 terabyte of Google Drive service and the television service includes a 2 terabyte DVR recorder in addition to the Google Drive service. The DVR will record up to eight live television shows simultaneously. The television options also includes a Nexus 7 tablet that will act as a remote control for the system. In addition, television service will also stream live program content on iPad and Android tablet computers. Neighborhoods that receive the service will be selected through demand from Kansas City area residents and Google has set up a website to pre-register for the service.[5]

Early anecdotes and media stories suggest that the Google Fiber service is already having an impact on the local economy. Here is one article, and here is another. From the latter:

Soon no one will snicker when Kansas City residents proudly refer to their city as the “Silicon Prairie.” As the Associated Press reports, the presence of Google’s (GOOG) high-speed fiber network has turned Kansas City into a major attraction for tech startups that want to take advantage of the fastest Internet connectivity in the United States. According to the AP, “several startup-friendly locations… have sprouted up in Kansas City in recent months” in residential buildings that give entrepreneurs room for “working on their ideas for the next high-tech startup.”

These news stories should not be treated as rigorous evidence any more than stories promoting streetcars. Yet it is the case that these two transportation infrastructure investments are both expected to be transformative for the local and regional economy. I have my own ideas about which one is more likely to prove a successful investment, but the Kansas City experiment should be closely followed to help inform what types of investment in new transport networks should be made in the upcoming decades.

Read more here: http://www.kansascity.com/2012/12/12/3962799/kc-streetcar-taxes-pass-overwhelmingly.html#storylink=cpy

Read more here: http://www.kansascity.com/2012/12/12/3962799/kc-streetcar-taxes-pass-overwhelmingly.html#storylink=cpy

An Allegory for Justifying Transportation Investments: A Brand New Bathroom!

There are many justifications for investing in transportation infrastructure. Some of the most common and widely used claims for why the public should spend lots of money on new trains, roads, bike lanes or other such things are that such investments will create jobs, lead to new economic activity and offer future environmental benefits. These are all offered as unambiguously positive characteristics. To evaluate these claims a bit I developed an allegorical situation where a household decides to build a new bathroom on their house. 

Picture a four person family who lives in a nice little house with three bedrooms and two bathrooms. They decide that their current bathrooms are old and inadequate and something should be done. They can either fix up the two bathrooms they already have or add a third bathroom. They decide to add the third bathroom. So far, so good. The family has a bathroom designed and gets bids for construction. The first bid has five workers completing the project in a week. The second bid has ten workers completing the project in two weeks. The third bid has 20 workers completing the project in a month. Let’s assume all bids are under the same labor rules. Should the family “create” the most jobs and take the month long bid with 20 workers? It seems obvious that the family should take the first bid once they have verified that the company is honest and legit. Jobs are a cost to the project.

But perhaps the family wants to be job creators, so they take the high bid. They figure they will make it up in new productivity from having a new toilet, shower and sink. Will the new bathrooms make them more productive? Are toilets a derived demand? Considering that bathroom use (production) is a matter of inputs (food and activity) it’s not likely that the family will start pooping, peeing or showering more than they did prior to the new bathroom. So productivity is a wash (no pun intended). However, because there is a new place to “produce” the location of production will shift. This may be in everyone’s interest considering the potential externalities, but the family needs to weigh whether the cost of the new bathroom is worth the benefit.

What about the future benefits? There are potentially many from a new bathroom such as lower water flow and nicer fixtures. Yet these could also be achieved through remodeling the existing bathrooms, which will need maintenance and upkeep anyway. Maybe everyone would be better off with a new hot water heater instead so there is always adequate warm water for the existing showers. A new bathroom may allow the family to put off fixing up their old bathrooms, but not forever, and money spent on a new bathroom cannot be spent on an existing bathroom. 

Ultimately, undertaking a new bathroom addition is something that the family may decide they want to do for a variety of reasons (maybe to accommodate new members to the household or congestion before everyone goes to school and work). However, a new bathroom will only shift the time and location where bathroom activities take place rather than causing each member of the family to poop, pee and shower more. Remember, they have adequate bathrooms now and do not bathe in the river. 

In the bathroom expansion case, I suspect most people would insist on hiring the low labor cost company and would never consider that an additional bathroom would increase the need for a toilet.* Yet for transport investments we tend to argue that we need to invest in what has the highest labor cost and claim increases in productivity that have not been borne out through research. In the US the existing infrastructure needs a lot of work, and new facilities (roads, trains, etc) tend to just shift economic activity instead of creating new economic activity.**  While travel is not entirely a derived demand, it largely is, just like using a bathroom. I’m not saying that governments should plan and budget like households, because they shouldn’t. But we should remember that jobs are a cost to projects and that when an economy has a mature, well functioning transport network additions and subtractions to that network will affect the location of economic activity far, far more than create or destroy economic activity.

*It’s entirely possible that the current number of bathrooms is inadequate for peak demand, which the family may want to address, but this is different than increasing overall use.

**In the UK the official policy of the expected net effect on productivity of High Speed Rail investment is zero for precisely this reason.