The high cost of cheap permit parking in Amsterdam

This post updates my Jun 2022 post announcing the paper because I have extensively revised the paper (shortening, correcting, elaborating) before sending it out to a journal for review.

I don’t know when we will get news from the review process (somewhere between 1 day and 6 months), so here are the highlights:

  1. We started the paper to see how bureaucratic prices for parking lined up (or not) with market prices for housing. Both prices should go up in “popular” neighborhoods. If they are misaligned, then opportunity costs for misallocation rise. To check alignment, we used GIS and ratios of parking prices to housing prices, which made it easy to compare areas across the city.
  2. Our first pivot came when we realized that people park by the hour (tariff, for visitors) or year (permit, for residents), so we compared both.
  3. Permit parking takes 80% of spaces to earn 20% of parking revenue. That’s because permits are inefficiently cheap, so bureaucrats increase tariffs (€7.50 per hour and rising) to try to squeeze out visitors. Here’s the imbalance:
  4. Although I had heard of Amsterdam’s autoluw (“nearly car free”) policy, I did not know that it dates back to a 1992 referendum to remove cars from the city center. But, there are now more cars (and parking places) in the center than in 1992, so progress is slow.
  5. According to our analysis of ratios, permit parking is too cheap everywhere, and tariff parking is too cheap in Noord, which will harm quality of life as that district develops. This map shows the ratio of tariff to living prices (Noord in red):
  6. The city is not raising permit prices to reduce demand. Instead it is trying to build more supply — underground and underwater parking garages — for permit holders. Spaces in these garages cost €80,000-230,000 to build in our three examples, but the city isn’t even recovering its operating costs in permit revenue. So its spending €millions of citizens’ money on capital projects that will never earn their cost back.
  7. We recommend increasing the price of permits from current (€500/year) levels to around €3500/year, which is what (other academics have estimated that) people are willing to pay.
  8. Such an increase, over time, would reduce the number of cars by around 40 percent, freeing 50,000 spaces for other uses (and removing the need for costly garages). The extra revenue (around €300 per citizen per year) should be used to improve neighborhoods.

You can download the paper from here.

We are happy to hear your corrections and suggestions for improvement!

Irrigation efficiency for who?

I recently met Bruce Lankford, an experienced irrigation expert, at a small conference in London. He was annoyed that policy makers misunderstand the basic facts of irrigation, and especially in how they encourage “efficient” practices that may not be. They assume, for example, that drip irrigation is “modern and efficient” whereas flood row irrigation is “traditional and inefficient.”

He sent me his 2012 paper: “Fictions, fractions, factorials and fractures; on the framing of irrigation efficiency” [pdf].

While reading it, I realized that the debate he’s engaging is not “policy relevant” to economists like me (totally in line with his brilliant Table 1).

Let’s break this down:

Irrigation specialists, managers and the farmers who use irrigation systems really need to pay attention to how much water goes where.

  • Managers need to make sure the system delivers water fairly (with respect to rights) and evenly (with respect to operational performance).
  • Specialists care because they want to have consistent measures of performance, which are needed if one seeks to improve performance or redesign systems.
  • Farmers care about efficiency to the extent that it allows them to get “more crop per drop.”

None of these concerns need be relevant to policy-makers and economists, but they often are.

Why?

Policy makers/politicians love free-lunches, and “efficiency improvements” allow them to give more water from the same volume. With water scarcity and food demand rising, who would not want to grow more food with the same quantity of water? But that goal is vulnerable to accounting errors and tricks, which often means that “win win” systems (on paper) are “win lose” or “lose lose” in reality.

What’s going wrong? Hayek would say that information is too diffuse and unstructured to be aggregated and (effectively) used by centralized decision-makers. And I would agree, which is why I have — for years — favored the simple, but crude policy of allocating irrigation rights with the assumption of 0% efficiency, i.e., 100% consumption of the water.*

This assumption means that “saved” water is a gain to the farmer with rights, another farmer, or the environment. It also means that “efficiency gains” do not come at the expense to non-irrigators.

For example:

  • Ten farmers each have rights to 5 units of water in a watershed with 100 units of water.
  • If efficiency is 0%, then all 50 units are used, and 50 units are left for the environment.
  • If efficiency is 60%, then each farmer “uses” 3 units and 2 units are “lost.” Overall consumption of 30 units leaves 70 units for the environment.

A win for ecosystems? Typically no, since a policy maker would say “Wait! We can allocate those 20 units of saved water to 7 farmers (rounding from 6.67), with the assumption that they also use 3 and lose 2, so now farmers are using 50 (it’s really 51), and 50 still goes to the environment! Win win!”

But now say that farmers get “more efficient,” and reduce losses from 2 to 1 unit per farmer. Now 17 farmers use 68 units. If they reduce “waste” to zero, then they use 85 units! The environment suffers, even though rights are exactly the same.

This process is not just made up — it’s the default, since policy makers like pleasing farmers, and the environment is a terrible lobbyist.

That’s why I support 100% consumption/0% efficiency when allocating rights.* In that case 50 units are allocated and “used” on paper, while the environment gets 50 units on paper. If the farmers “waste” 2 units each, then 20 units ALSO go to the environment, so my conservative accounting provides better protection to the flows that sustain ecosystems — and us.

Farms, as businesses, are profiting from their private use of water that is, fundamentally, a resource owned by citizens. That means that they should not operate if that damages ecosystems (qua public goods). Although that is often the case, it should not continue in a climate changing world, due to the rising value of the ecosystems we still have.

Oh, and my “one unit, all consumed” (OUAC!) preference also helps with water markets and trading. If rights are somehow defined in terms of (non-zero) efficiency, then trading or transferring rights is difficult without complex re-balancing to reflect the efficiency of the buyer. With OUAC, those changes are interesting to farmers, but policy people can ignore them.**

And let me be clear: efficiency, losses, flows and other measures of what water goes where is totally important and useful to farmers and irrigation managers. They need to open and close gates; they need to maintain head flows; and they need to make sure crops get the right volume at the right time, but all of those details — pace Hayek — need not be aggregated to policy makers or into water rights.

My one-handed conclusion is that water rights should be simple to understand and compatible with other water uses, without creating risks and crises if and when practices, technologies or use-location changes.


*Read a few of these:

**A change of point of use (or time of use) does have impacts, even with OUAC rights. I still support those adjustments, which are calculated with formulas, for example in the Murray-Darling Basin (Australia).

 

Nature always bats last!

I’m not sure when I first heard “Nature always bats last,” but the idea stuck with me as more sensible than threatening, since Nature is merely a system without feelings about humans as a species, and there is always the possibility of some reaction to our many actions.

The key idea in the phrase is not that “Nature will win” but that we cannot always imagine how Nature (anthropomorphising here) will “react” to our actions.

But I never knew where this phrase came from, until I was asked to cite the source in a recent paper (pesky academics, asking you to justify your claims!). It didn’t take me too long to track down the source on the internet, and — lo! — it’s from a 1969 column (“Eco-Catastrophe!” [pdf]) by Paul Ehrlich.

Ehrlich was famous for his 1968 book, The Population Bomb, which predicted mass starvation on the basis of excessive population growth. He is also famous for being wrong in that book, as well as when he accepted the “sucker’s bet” from Julian Simon on whether people are good or bad for sustainability (read this and/or this).

And he is indeed again wrong, in some many annoying ways, in his 1969 piece:

  1. He extrapolates the dangers of DDT (a slow-moving toxin) into a catastrophic ecosystem collapse. Although Rachel Carson was right to identify the dangers of DDT to ecosystems in her 1962 Silent Spring, Ehrlich was wrong to assume that regulators would not just ignore the risk but (it seems) allow for a massive expansion of its production.
  2. He claims that waters and air would be catastrophically polluted when reactions were “in the pipeline”: Earth Day 1970, and the Clean Air and Water Acts of 1972.
  3. He misses the forcing effects of GHGs on climate, unlike his contemporaries.
  4. His obsession with (over)population blinds him to alternatives, as well as other risks (affluence, which he mentioned).
  5. He makes over-the-top claims, such as US life expectancy dropping to 49 years in [future] 1973, when it was 71 years in [reality] 1969, or that famines would occur (at the optimistic latest) by the 1980s. Although he gets some other idea right (politicians obsessed with GDP, ocean food chains crashing if plankton die, the USSR China offering aid in exchange for political loyalty and access to resources), the mix of mistakes and accuracies makes it look like he’s just guessing.

Indeed, he makes so many that a blogger at the Competative Enterprise Institute, which tends to lean to the looney right, has plenty of material to critique (before over-reaching to deny the risks of climate change).

This result is sad. I get it that Ehrlich was genuinely worried, but he undermines his useful point — Nature bats last for example — in his haste to rant about his never-ending talking point (population). That’s a one-handed failure to connect with his audience.

Geo-privacy (an idea)

“Geo-fencing” refers to a program that enables (or disables) some function based on physical location.

“Privacy” is something we tell people we care about but don’t really defend against violation.

It’s a fact that many mobile phone apps track our location to harvest and sell our geo-data to anyone.

(It’s also fact that mobile phone companies sell this data in some places, and that some stores track us via bluetooth pings. I’m not talking about these dubious practices here.)

So I think mobile phone operating systems (i.e., Android or iOS) should allow you to “geo-private” yourself within x km of various places you specify. Then geo-data is not collected (and thus not available) to any and all apps on your phone.

Example: I live in Amsterdam. I tell my phone to not track me within 15 km of my home. That, more or less, turns off all tracking while I am in the city, which is fine by me.

This system will resotre power to those whose data is being harvested and sold: you and me.

My one-handed conclusion is that mobile phone manufacturers/operating system owners should make it easy for us to protect our privacy.

The 90/10 rule of motivations

Since 2009, I have talked about a 20/80 rule of motivations, e.g., “My rule of thumb is that about 20 percent of people conserve [water] because it’s the right thing to do, and 80 percent conserve because it’s expensive NOT to [because prices are high].”

My point is that far more people (80%) are motivated by price (extrinsic incentives) than doing the right thing (intrinsic incentives).

This rule can apply to many areas where personal action has collective consequences, e.g., eating meat, flying, littering, cheating, etc.. (Read my The Little Book of The Commons for more 🙂

The trouble is that my 80/20 rule is easy to confuse with other “80/20 rules,” such as 80% of profits (or problems) come from 20% of products or customers.

So I am renaming mine the 90/10 rule, for two reasons:

  1. Less confusion (other 90/10 rules are not common).
  2. 90/10 has more empirical support than 80/20.

Let me explain the second point:

In my research on the provision of public goods (this or this) I used games to understand people’s behavior.

In these games, around 10 percent of people are cooperators (helping others, unconditionally), 10 percent are defectors (helping themselves, unconditionally), and 80 percent are reciprocators (help others or themselves, depending on what others do). In this article [pdf], for example, 4% and 12% of students behaved as cooperators and free-riders, respectively.

So the share of cooperators is “small” (4 is around 10 percent, right?), which means that they do not dominate, but neither do free-riders.

So the question is how to motivate the reciprocators, and whether they will be convinced to pursue good or bad policies/behavior, by cooperators or free-riders, respectively.

In my opinion, reciprocators will follow the lead of cooperators if “social mechanisms” support cooperation and punish defection. Such mechanisms (or “institutions”) are composed of informal norms and formal rules, and they are the key to a group’s survival, prosperity, and perhaps downfall.

Are rules necessary for cooperation? No. We share in social situations; we cooperate against common dangers.

Do rules hinder freedom or block innovation? No. Rules help people with different tastes and goals collaborate, by setting expectations in some areas while allowing exploration, innovation and diversification elsewhere.

Are rules elitist? No. Rules assist the weak against the rich and powerful who use their independence to dominate others.

My one-handed conclusion is that rules are useful for getting along in a 90/10 world.

Ceteris is not paribus

(Economists often evoke ceteris paribus — “holding all else equal” — when proposing that an idea from one place can be used elsewhere. They forget that place, people and time matter.)

I start teaching a course on institutional evolution tomorrow.

The main focus is on how institutions (“the rules of the game”) change — or not — over time, either due to outside (exogenous) or inside (endogenous) pressures and actions for change.

Cultural evolution is one such force that can be seen as exogenous or endogenous towards one institution or another. It’s “the secret of our success,” but also hard to direct or control, since it takes place over decades or centuries.

What I find most interesting (and daunting) — in terms of understanding institutional evolution — is how (1) the rich and powerful try to avoid or co-opt institutions, and (2) institutions vary from place to place. Let’s look at these in turn.

(1) The Rich and Powerful

The rich, as F Scott Fitzgerald explained in The Great Gatsby, are different:

“Let me tell you about the very rich. They are different from you and me. They possess and enjoy early, and it does something to them, makes them soft where we are hard, and cynical where we are trustful, in a way that, unless you were born rich, it is very difficult to understand. They think, deep in their hearts, that they are better than we are because we had to discover the compensations and refuges of life for ourselves. Even when they enter deep into our world or sink below us, they still think that they are better than we are. They are different.”

This famous quote covers two important elements: the way the rich grow up different and the way that the rich cynically look after themselves rather than trust others.

These differences are obvious when looking at the commons, since the rich tend to (a) set themselves apart from others when it comes to cooperation and (b) ignore the value of the commons in a world where they can buy whatever they want.  (Here’s a post on these issues.)

These facts mean that the rich are often “defectors” when it comes to the commons, whether they are evading taxes or hiring private guards to protect against public chaos. (The poor — as with this Brazilian example — must cooperate to protect themselves.)

Such anti-social behavior should be condemned by the non-rich, but it’s often accepted — and even applauded — by “poors” who (c) prefer might over right and (d) support the rich because they think — via a Dunning Kruger delusion — that they too will be rich some day. (“Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires” — Ronald Wright, 2004.)

So we get a difficult situation in which the rich take advantage, the poor support them, and civilization decays.

Place to place

It takes effort to create, enforce and obey rules. Everyone tries to avoid such costs, so social norms need to reinforce obligations as well as protect rights because no community can afford to protect rights while ignoring obligations. (Even anarchists depend on reciprocation.)

In tribal and “primitive” societies, the rules are old, well-known and vigorously enforced. Local people can count on those constraints, which makes it easier for them to cooperate in the expectation of reciprocation or act freely in the knowledge of which rules constrain or oblige. Such “culture” allows everyone to get along.

In “modern” societies where anonymity and free-movement makes it hard to build a reputation or avoid cheaters, cooperation and punishment are harder to encourage and enforce (respectively). The rich insulate themselves and the poor cope. Since neither has much faith in collective action, inertia (path dependency) dominates.

So people just leave — like I did for the Netherlands from the US or like others facing a much harder road from poor and failed states like Syria, Venezuela, et al.

It’s not easy to find a place in a new land, people, culture and institutions, but plenty of people take those risks with the hope of reaching “a better place.”

(The Dutch are sharp dealers, and they are hardly as friendly as Italians, but the Dutch can tolerate an individualistic culture on top of their mostly functioning institutions while the Italians need solidarity to deal with their domestic chaos.)

My one-handed conclusion is that it’s important to recognize the blessings and challenges of one’s culture, as well as the choices of “exit, voice or loyalty” when one’s culture is not providing the quality of life you want.

Those who live by the sword…

“…find themselves impaled.”

Wall streeters are buying land to get the water rights, which they can flip for profit. Farmers are terribly upset:

“They’re trying to suck the very lifeblood out of these communities for their own financial benefit,” Mueller said. Water Asset Management owns at least 3,000 acres in Western Colorado’s Grand Valley, where Mueller works to protect Colorado’s share of the river. He said the full scale of the land grab is difficult to track because investment firms use different names to disguise ownership.”

But what’s this (pots calling kettles black?), with these farmers, many of whose ancestors robbed First Nations, the Environment, and poorer farmers?

  • These are the guys who benefitted, nay, cheered, when “Indians” were moved from their traditional lands onto reservations in the 19th century?
  • These are the guys who declared “waste” whenever a drop of water made it to an ocean or ecosystem?*
  • These are the guys who regularly, and with government connivance,  exceeded their 640 acre allotments for “reclamation” and/or subsidized irrigation?

Now they are upset that someone is using the system to profit from water that’s been mismanaged for decades?

My one handed conclusion is that they need to read the Bible a bit more often, as I think it’s got the answer every farmer would understand:

“Be not deceived, God is not mocked: for whatsoever a man soweth, that shall he also reap.” — Galatians 6:7

H/T to DL


* Watch this space lakebed: Tulare Lake (formerly the largest west of the Mississippi) is coming back, whether they like it or not… (some history)

Learning is struggle

ChatGPT excites people who think (I use this word with caution) that they can use GPT to do less work/impress people/advance their careers.

This ideal may be true for those who already know how to do the work they are asking GPT to do (e.g., writing a blog post), but it won’t work for learners who admire GPT output without being able to do it themselves. They will pass GPT’s work as theirs, but they will not be able to explain “their” logic or conclusions. “GPT-cheats” will get caught. Hopefully they will just be disciplined, but others will do far more damage in their assertive ignorance (a human version of hallucinating). I am reminded of the massive damage caused by Bush’s loyal-but-incompetent agents in Iraq.

In the meantime, GPT users will be busy trying to fool each other into getting paid for work that GPT has done while non-GPT users will find the entire situation frustrating.

Non-augmented humans will take hours to do what GPT can do in seconds; they will struggle to understand complex ideas and integrate them into reasonable thoughts. They will question the point of going on. But then they will be the ones to spot the errors, to suggest novel alternatives, to add value.

In the land of the blind, the one-eyed man is king.

With GPT, we will see adults losing their analytical skills. Students will not even acquire them. Average IQ will drop, as will productivity.

(The only exception will be the few people who use GPT as a “Socratic sparring partner” to push their knowledge and/or skills. They can benefit from GPT, but the vast majority will fall for an “apple of knowledge” that is rotten inside.)

My one handed conclusion is that GPT will take the jobs of anyone who uses GPT to do those jobs, let alone study for them.

Too much bread, too many circuses

We humans have mastered survival and adaptation. We’ve gone further, to thrive, by developing religion and states, bureaucracy and markets.

Now we have easy access to the sugar highs and social signals that were rare and valuable in the survival and social eras, respectively. But the mass market version of these pursuits means that everyone’s party is disrupting everyone else’s. We’re hearing more cacophony than music. We’re experiencing more destruction than development.

And we’re not gonna stop. We’re addicted to gluttony. Poor people are obese. How can a poor person get fat? By living in a system where you trade debt for calories and pay billions for insulin.

And then there are the bells and whistles of over-consumption: formal dining (never used), collections (never touched), three-car garages (no space for cars), and parties that burn down forests, blow out kitchens and bankrupt the hosts.

At the polls, we vote for more of the same: Populists promising that the party can go on, that consequences are for suckers, that we can have all the rope we want… to hang ourselves.

Roman emperors had a policy of pane e circu — or bread and circuses — that kept the masses busy with stuffing their faces and laughing at tragedy while the elites did what they wanted. The emperor paid a lot, but everyone preferred parties to hard work or self-denial.

In these modern times, many of us have the buying power of emperors and the discipline of children. We’re fat and unsatisfied. Influencers and saviors are everywhere, promising a good time for $19.99, but we remain unfulfilled.

Money can’t buy you love — and it can’t replace the ecosystems that allow us to live — let alone party.

We — petty, drunken emperors — are going to have a very bad hangover when the bread runs out, and the circus is washed away.

Be careful what you ask for.

Don’t take water for granted

In his 1987 hit, “Diamonds on the soul of her shoes“, Paul Simon sings:

She said, “You’ve taken me for granted
Because I please you
Wearing these diamonds”

This lyric, although a bit paradoxical, has always resonated with me, and I’ve applied it in many “taking-for-granted” situations.

One of them concerns clean water, which most of us have certainly taken for granted, and in a way that is naive (to people who do not have access to affordable, clean water) as well as dangerous (the value of water in our lives is so high — relative to its price — that we do not think of the disastrous consequences of losing access to that water).

Well, it’s worth thinking about, as the end of abundance starts to bite into our water consuming habits.

We have less and less clean water because our actions — direct in terms of mining ground water or polluting surface water and indirect in terms of climate change and water embedded in animal products — are making it so.

And those actions rarely consider what would happen if we had no clean water — let alone no water at all.

“You’ve taken me for granted because I please you, flowing this water”

My one-handed conclusion is that a lot of people are going to be surprised and upset as “their” water disappears in volume, decays in quality and increases in cost, until we no longer take it for granted. Beware.