January 6, 2008

Give Me $$$ Because I Ride My Bicycle Everywhere (And Therefore Give You Very Little Gas)

But even if you don’t, I’ll still ride anyways.

Every morning I leave for work, I compete for shoulder space with everyone else going to work in their cars.

Now, the question is: Who is getting to work for free? Is it me or the drivers, some of which do not believe bikers are entitled to sharing the road with them?

The correct answer: me.

I pay nothing to ride and I actually benefit from the exercise I get every morning (a positive externality) whereas every driver I see is paying for wear and tear of their vehicles and for the consumption of gasoline.

Is Harford correct in saying that there is no additional cost for driving after you pay to get on the road (which for all intent and purpose translates to vehicle registration, insurance, and maintenance here in the States)?

Not quite. According to Harford, driving is a voluntary activity (because it is indeed a voluntary activity) so there is a marginal cost, which is the price of gas. The more you drive, the more you pay, and rightfully so.

Why? Because gasoline is a variable cost, not a fixed cost, that can be avoided by not driving as much.

You know, we have it pretty easy here in the United States. Countries in the rest of the world pay so much more for gas that we have no right to complain. Three years ago when I was in Norway, folks over there were paying $7-$8/gallon. And that was back in 2005!

Why not do this right here in the Colorado? I think that would be fantastic!

Like Harford says, the trick is to get drivers to pay for the cost of their actions: they need to pay the externality costs. Make them pay for wearing down our roads! Make them pay for polluting the air! And more importantly, make it more expensive for them to feed me the occasional whiff of car exhaust!

Harford is right: we need to address prices at the margin. Increase the price at the pump. And use that money to 1.) pay for the negative externalities that driving causes and 2.) force existing drivers on the road to have a come-to-Jesus moment and ask themselves “Do I really need to make this trip to the grocery store at 2 am to buy a candy bar?”

One thing is certain: whether you are rich or poor, you will indeed change your behavior because externality charges will make other alternatives look more attractive.
Will rich people continue to drive and poor people resort to public transportation? Probably. But I would rather breathe in a Cadillac Escalade fart than exhaust from an old beat-up truck. At least new car gas doesn’t smell as terrible as old car gas.

But I also have another motive. When rich people waste their money at the pump, I benefit because I own quite a few shares of an oil/gasoline-based mutual fund. Anytime I see people filling their tanks or oil rising in price, the inner economist in me says, “I’m making money off of this so drive all you want while I bike.”

Oh, and before I forget, if any of you want to give me some money because I do my part in sharing very little of my Toyota Camry fart with you (it’s a V6, by the way), just add a comment and let me know where you want to meet.

I’ll bike there!


brendon newton said...

Hmm, okay. I have a few qualms with your argument and I'll pick just one or two that I'll comment on. First and foremost, I personally would not use the term "positive externality" to describe the benefit of exercise you recieve from riding your bike. Externality refers to something exterior from the person doing the original act. Since you are the one doing the bike riding I don't think it is correct to say that YOU are recieving a positive externality. Additionally, you talk about starting to charge people for wearing down our roads and such. I'm pretty sure they already do. I just shelled out $160 to register my '02 subaru since it was 1500 pounds heavier than my saturn that costs me about $35. I think you would be mistaken to think that the money from registration only goes to pay the county clerk. However, as the service manager at a bike shop who rides to work cosistently as well, I'm pretty sure you don't pay a dime to ride your bike on city streets(although you do pay a $4 dollar el paso county tax to upkeep the santa fe trail when you buy a bike). In this case, YOU are the freerider... not the cars.

EdwinHLee said...

Brendan, you and I morph into catalysts of Positive Externalities when we commute to work on our bikes because we're obviously one less car each.

With one less car, we pollute less and we don't damage the roads.

In addition, when we ride, we enhance the reputation of Colorado Springs as the place to be for fitness nuts.

We have the US Olympic Training Center and I'm willing to bet that whenever people see us on bikes, it motivates them to go and workout as well.

And when they do, that's even one more less car on the road.

If pollution and congestion are both negative externalities, then an agent of change to eliminate both would obviously be a positive one!

Larry Eubanks said...

There are 2 key concerns I have with your essay, and Brendon notes one of these.

Externality, as Harford has defined it, means a "bystander" is affected by your choices/actions. In your essay you identify the benefits to you of your own exercise as a positive externality. You are not a bystander to your own choices. This benefit of exericse to you is not an externality. It is just a benefit to you.

My second concern involves your question about who is getting to work for free. I believe the answer is that no one gets to work for free. There is always an opportunity cost to a choice an individual makes. You as well as those who drive, bear opportunity costs. In addition, you who rides, and those who drive, enjoy positive net personal benefits, otherwise each of you would make a different choice.

Larry Eubanks said...

Edwin's response to Brendon's comment ends with this: "If pollution and congestion are both negative externalities, then an agent of change to eliminate both would obviously be a positive one!"

I realize that this seems, on the surface, to be correct. But, I'm not sure it is. Can anyone offer a reason why this might not be correct?

jgraul65 said...

I don't know if this is what your asking, however, the only place you can get free toilet paper is at a friends house, or down the street at the local restaurant, if they let you go potty without eating there. Embarrassing Econ. The ratio of diesel drivers on the road to unleaded drivers is fairly offset. Yet, as Brendon was saying, the maintainence of infrastructure (roads, bridges) is revealed in the excises or taxes on diesel fuel, though diesel has been shown to cost less to refine from crude. Bearing the brunt of the tax are company fleets in construction or service, but even moreso are the wages of truckers who transport freight,(more weight-more charges-more wear and tear on roads) or the goods that we buy at the local market. Do you think that the taxes we pay on goods and services are equally offset by those that truckers pay indirectly, and what is the mode of dispersal? According to a source of mine, many cannot stay in the industry as it is getting to be too expensive, although the saved costs are lodging and the like. To me, what may initially seem like a positive effect that is created by the elimination of a negative externality is merely a cover for the costs (or externalities) that are incurred in a different sector. For example, as an alternative to diesel fuel, biodiesel can be produced at a cost marginal to fossil fuels, and reduces emissions by 67 %. So what is the catch? Biodiesel can be hard to maintain in certain temperatures, (rising costs) but moreover, obtaining biproducts (oils, fats) as waste, can lead to a proliferation of environmental problems such as deforestation if the there is a large demand and minimal government regulation. So we have to weigh the mitigating expenses and detriments carefully with the benefits. Although this is an extreme example, because i do agree that you are playing an active & positive role in the environment, God forbid a large SUV with a woman and her rambunctious kids, drinking a latte and talking on the cell phone, did not see you, would the potential for harmful costs outway the summary benefits? Although morbid, our society functions in this way, much like the occupation of Edward Norton in Fight Club. Everything has a price sadly and it forms our value judgments, Hoffa paid the price of unification with his life. As i am still alive and breathing, i cannot complain, but my father (a retired m.d.) would not allow my brothers to have a trampoline, treehouse, and forbid ever having a motorcycle. Our perceptions, or lack thereof, truly do influence the choices we make and want others to make. One question, do you wear a helmet. If not, incur the cost!

jgraul65 said...

one more thing that is worth checking out, http://www.washingtonpost.com/wp-dyn/articles/A11169-2005Apr23_2.html . Its similar to Harfords approach, examining the smaller things in the context of the larger picture.

brendon newton said...

An externality, positive or negative, is something unintended. If your action includes an intention to correct a negative externality then your action isn't an externality. It is a course of action. Just like making money off of the sale of products within a business is not an externality... it is an intention.

Jessica Wade said...

I think another thing to ad is that by riding your bicycle you are not creating a positive externality just less of a negative one. If riding your bicycle actually cleaned the lungs of bystanders then maybe, but I think in this case, although it may be helpful, is just reducing the potential for more pollution or as you stated less "camry fart".