The Issue of So-Called "Free Parking"

This refers to the so-called "free parking" and "below market price" parking. Some people consider this to be a "subsidy". A rather specious argument, in my opinion.

I consider this to be an externality, not a subsidy. I think economic studies need to be carried out, to find the external economic _benefits_ of this item, and see what the net cost/benefit is. The benefits likely well exceed the costs.

This scenario was covered in detail in economics material that I read, and this applies specifically to a country like the U.S., where the vast majority (90%) of all residents have access to an automobile. The so-called "free" parking at business parking lots is an example of a situation that economists call _bundled costs_. These are goods and services that are not explicitly priced, but rather bundled in the prices of non-transportation goods and services. The "free" parking at the malls and businesses is not costless, but included (bundled) in the price of goods and services sold at the mall.

Bundling is not necessarily inefficient; in principle, a producer will bundle a cost, and not price it separately, if the administrative, operational, and customer (or employee) cost of collecting a separate price exceeds the benefits. In other words, beyond a certain point, the cost of the volume of transactions incurred in collecting this cost, exceeds the cost of bundling it into the costs of other goods and services. Economists do not necessarily consider bundled costs to be a "subsidy".

In the case of business and mall parking, it is generally recognized that charging a parking fee would produce an overall effective cost of goods and services considerably in excess of the overall cost when the parking costs are bundled.

To charge a parking fee at a mall/business:

With fee-less parking at a mall/business, the only operational costs would be the periodic maintenance costs of the lot itself. This would include items such as resurfacing once every 6 to 10 years, mowing of grass, clearing drop inlets of debris, etc.; things that would be necessary whether or not there was a parking fee.

Quite a few employers provide transit benefits to employees. That's an ideal way to counter the built-in advantage of auto parking. Bicyclists should get showers and indoor parking, for free.

This is just an overview, but it can be seen that there are good reasons for bundling costs in certain instances. Economists and businessmen generally recognize that the overall costs of bundling business parking costs into the cost of goods and services, is much more efficient than charging a separate parking fee. And it is not a "subsidy".

There are very good reasons for having "free parking" -- the overall economic system is more efficient (*CHEAPER*), so what some people (technically) call a subsidy is really not a subsidy in the economic sense, because it considerably lowers the overall system costs, as compared to "fee" parking.

Also, the parking supplied at malls and businesses is provided by the private sector, so it's really not a public sector issue. If the business community wants to provide "free parking", because of the above reasons, they have every right to do so.

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By Scott M. Kozel, Roads to the Future, PENNWAYS

(Update 1-8-99 1:50 PM; counter 10,081)