Parking As Externality

(cc photo by markjms)

Kevin Drum stands up for minimum parking regulations:

Requirements in cities and suburbs vary, but here in the burbs the general idea behind parking regulations is to make businesses pay for their own externalities instead of fobbing them off on other people. If I provide parking for my customers, and someone opens up next door and decides not to bother, then his customers will take up all my spots. If neither one of us provides enough parking because there's a neighborhood nearby, then our customers will take up street parking that owners of existing houses have paid for and are accustomed to using. In both cases, there are people who would like to regulate parking in order to make life more convenient and prevent free riding.

I don't genuinely care if suburbs want to have mandated minimum parking since I don't think it's a big deal in that case, but I think this is an abuse of the concept of an "externality."

Suppose Kevin buys some land. Then he decides to allocate some of the land to his store, and some of the land to a large parking lot next to his store. Now Kevin owns two things of value, he owns a store and he owns a large parking lot. Then suppose I buy the land next to Kevin's lot and I choose to allocate the vast majority of the land to my own store, and only provide a tiny amount of parking. Now like Kevin, I also own two things of value—I own a store and I own a small parking lot. Now further suppose that my store is incredibly popular, and so many people want to park there that tons of my customers want to park in Kevin's lot. Is this really a "negative externality" that I've imposed on him? It doesn't seem that way to me. I've increased demand for space in Kevin's parking lot and Kevin, as the owner of the parking lot, is well-positioned to capture 100 percent of the value of that increased demand for space. More generally, if you imagine whole towns or counties without parking mandates what you would expect is that many entrepreneurs would operate parking lots and parking garages for profit taking advantage of the demand for parking being created by other people's business activities.

What regulations are achieving isn't really to "internalize" an "externality" it's to make parking free. But in places where land is expensive (not just cities, but also many suburbs and small town downtowns), regulations that mandate free parking are mandating a very economically and ecologically inefficient use of precious space.