Everyday Externalities
Via Mark Thoma, a new paper in Vox on the effects of increased rail service, making clever use of natural experiments created by changes in German ownership and regulation. The results aren’t that surprising — more frequent rail service sharply reduces pollution and other costs associated with driving — but it’s good to have this kind of solid work to back our intuition.
And can I say that this is a subject that really deserves a lot more attention? Mea culpa; I haven’t written much for a while on these issues, focusing mainly on the economic crisis, which is for the moment on the front burner. But we know, as surely as we know anything in economics, that there are huge market failures here — that every time an individual chooses to drive during rush hour, he or she is imposing huge costs on other drivers, people who breathe the air, and more.
Ideally, the right answer is to get the incentives right, and charge large fees for driving in congestion. Short of that, there are huge second-best payoffs to mass transit; if you did the accounting properly, Amtrak’s northeast corridor service (which makes money even without taking this into account) is a huge social boon, and projects like the Hudson rail tunnel should be total no-brainers.
And the thing is that these are externalities that everyone can see. You can deny global warming (and may you be punished in the afterlife for doing so — this kind of denial for petty personal or political reasons is an almost inconceivable sin). But can anyone deny that more drivers means more traffic congestion?
Well, maybe I’m understating the power of denial. But still, this is a totally obvious case for government intervention that’s staring us in the face every time we hit the road.
