Rent Seeking

As mentioned in one of my first posts at TRZ, a cherished aspect of mine about living in Europe is that I do not need a car. When I lived in Köln, I used the subway to get around; in Rostock it was either a bicycle or an occasional S-Bahn, while here in Schwerin I haven’t needed anything other than my bike and a comfortable pair of shoes. Indeed, one of the thoughts that has filled me with the most torment about returning to the US is whether or not I’ll be able to live a similar car-free lifestyle that has continued uninterrupted since my junior year of college. Thus I often pause to wonder: why is it that so many of my compatriots favor das Auto over other forms of transport, as Paul Krugman noted recently:

There are several arguments made, but I would submit that many of them boil down to basic differences in government policy over the past century between Europe and the US:

  1. The most obvious difference is that while both the US and Europe have long heavily subsidized transportation infrastructure, the US stopped paying for rail and public transportation in favor of interstates while Europe kept more of a balance. Hence the development--especially the urban development—of the US became predicated on roads as Europe continued to grow around inter- and intra-city rail lines, which results in tighter, denser development.
  2. Due to a more liberal regulatory environment and heavy subsidies for roads, driving in the United States is and has been quite cheap compared to Europe, where increasingly high taxes on fossil fuels have been enacted and more stringent regulations for carmakers are in place. Since the demand curve slopes downward, more Europeans rationally prefer other forms of transport to driving. The revenue from large gas taxes also helps pay for and further develop public transport.
  3. Land use regulation in the United States has historically discouraged density and multi-use development. The fact that residential and commercial property are intermingled in European cities but not in American cities has much to do with restrictive permitting and anachronistic zoning laws. Giant subdivisions that compel residents to drive for miles just to go to the grocery store are again subsidized partially by highway construction. In Europe, agricultural policy to protect farmland also constrained city sprawl.
  4. To some extent, subsidized home-ownership via tax-deductible mortgages and even loose monetary policy and liberal lending policies especially in the last decade have made home ownership much more desirable and accessible in the US than in Europe, where people tend to rent and live in smaller abodes.

If one believes that the US and European federal governments were more or less the embodiment of the will of its people, then I suppose one can argue that these policies reflect a fundamental difference in outlook between Americans and Europeans. I think rather that policy shaped the people, and the different decisions resulted from the different set of incentives placed before them. To bolster this claim, consider that as Americans face driving costs that were hitherto only seen in Europe, they are starting to buy smaller cars, use mass transit, bicycle more, and move from the suburbs—in short, they’re behaving more like Europeans, even if many don’t yet have the alternatives most Europeans have.

The US government has been subsidizing the preferences of suburbanites for at least half a century; now, at last, it seems my turn might be coming.