A “Truer” Cost of Sprawl?

15 01 2010

Several months ago Our Most Senior Fellow dusted off the teachings from a very, very long ago Econometrics class requirement and began delving throughout the Texas Transportation Institute’s statistical database. He learned a lot but, the more he grew familiar with the data, the more he grew frustrated. To him something wasn’t clicking, and he started likening his endeavors to golf – He’d rather spend four hours in a row banging his head against a concrete wall over and over and over again than play. Then “Eureka!” exclaimed he, “Their universe is predicated upon moving more and more cars more efficiently rather than moving actual people more efficiently!” And now that he has said pretty much all he’s needed to say in order to dispel the so-called ‘basic God-given Patriotic American right to drive the biggest vehicle one can afford on an increasingly extensive roadway system’ Myth/Lie that has been artificially inculcated into us virtually from birth (and benefits very few at the expense of many), Our Most Senior Fellow has decided to stick one of his very valuable toes back into statistical endeavors, hopefully doing so in a creative and meaningful manner. (Although first he must point out that it was neither Twain nor Churchill who made that famous comment but Disraeli before prefacing with what is sure to be much bloviation; let’s see what happens:)

After excavating and dusting off an eleven-year old missive from which, after clearing his throat, after an overdramatic pause, “The overriding value of steady economic growth is the foundation of American political ideology. If there is anything approaching dogma in the national belief system, it is the idea that economic growth is the key to solving all problems. In every election here in the United States, for example, votes are used to confirm the leaders of companies that use their lobbying power and campaign contributions to make sure the congressional committee that oversees its industry understands ‘oversight’ means ‘failure to notice’ financial or corporate shenanigans that are not truly in the public’s best interest. No one disputes that the aim of today’s society is to keep the economy growing while preventing inflation from getting out of control, and it is also a given that millions upon millions of people have to be unemployed in order for the system to work at its most ‘efficient.’ Using GDP as a system of accounting for real increases in material wealth is, at the very best, troubling,” with many flourishes Our Most Senior Fellow reads (very furiously and without looking up once).

“Furthermore, according to the fundamental economic maxim in effect from the end of the seventeenth century up to right now, the only object Man should pursue is his very own pleasure. If he takes into consideration the happiness of others, it is only to keep his own happiness from being interfered with by the sanctions of society. By solely pursuing your own pleasure, it is thought that you add to the general happiness of society and, by pursuing this, you once again add to your own pleasure. Thus, a motive is only considered to be ‘good’ if it brings happiness to the person directly involved. Furthermore, individual consumers are increasingly essentially Walmart-ized from birth to care about Price rather than Costs, and the dominant economic theory says that they are autonomous entities except at those points at which they come together for exchange. A system predicated on human selfishness such as this not only recognizes but also encourages a selfish element in human nature, which frays the moral fabric of society.”

 (The Placemaking Institute’s staff’s much needed internal summation: In other words, special interests “win” while greater society as a whole “loses.”)

“The post-World War II American Era in particular, with its rigid, hierarchical and largely unsustainable economic and political system, is largely based on commodities that are finite in capacity, thus generating their great paradoxical value. Via our Powers That Be’s ignoring Adam Smith himself’s warnings by embracing the ruthless exploitation sanctified by the marriage of laissez faire economics and utilitarian pleasure principles, human welfare during this period is unable to keep pace with material prosperity. Beginning in the 1970s, with the U.S. reaching its peak oil production output plus the nascent economic threat of the Asian Tigers and, later, the world at large, U.S. firms began to cut the cost of production in order to be more efficient and thus remain as competitive as they had been since immediately after World War II. One of those costs they reduced was the cost of labor. From 1970 to 1990, while mean rents increased by 350%, mean incomes only increased by 180% – a discrepancy that was exacerbated and only keeps being exacerbated by the industrial shift away from manufacturing toward the high-end service sector.”

(Our Most Senior Fellow now makes us minions point out that all the way back in 2000 he wrote: “This kind of society cannot effectively house itself.”)

But while such things as the average annual growth in home prices nationally over the past 50 years was 5 percent, and over the past 30 years was 6.1 percent (see page 11), the price of gasoline, which is needless to say an increasingly finite product that consequently should be becoming increasingly costlier has, in fact, been kept artificially devalued by a high rate of subsidization.

“This figure shows that…relative to 1978, the price of regular gasoline has increased by 260 percent in nominal terms and 47 percent in real terms. However the price-to-income ratio has declined by 17 percent, i.e., it is more affordable today. (source)

“If we look at the average annual Inflation Adjusted Gasoline Prices (from 1958 to 2009)…the long term average price is $2.37 then in 1988 gas was very cheap and in 1978 it was only slightly below average but in 1981 and in 2008 it was extremely expensive on a historical basis. In 1998 gas had gotten really cheap by historical standards allowing people to buy gas guzzlers like SUV’s and Hummers. But that reversed in 2008 as prices rose above the long term average. As of this writing, the monthly average price of gasoline in November of 2009 was $2.61 just slightly above the long term average price of $2.37. With the Annual Average for 2009 at $2.28 being extremely close to the long term average.” (source)

According to the basic Law of Supply and Demand and consensus estimates, regarding commodities there are divergences between societal expectations and reality, which essentially means that, the longer we continue our tremendous subsidization of gas, the greater the subsequent negative impact will be. Let’s now take a look at the True Opportunity Cost of gasoline: “Estimates on the ‘true’ or ‘real’ cost of gasoline vary by study and by year — I’ve seen numbers ranging from $5 per gallon to $10 per gallon to $14 per gallon and higher. Over at the liberal opinion site AlterNet, Jason Mark notes that it is a conservative think tank whose research put real gas prices above $5 — and that was a couple years ago. Presumably that number would only have risen since.” (source)

Let’s apply the inflation adjusted long-term average cost of $2.37 as well as the various true costs of gasoline and perform a quick regression analysis to TTI’s national congestion costs (439 area average) for wasted gasoline:

 

Now let’s apply those terms to the Greater Austin Metropolitan Region:

These graphs speak for themselves. And we here at The Placemaking Institute believe that somewhere within here may very well be a good “true” cost of our oil ravening GDP-based sprawl mentality…You, dear reader, decide what’s worth what to you.

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3 responses

19 01 2010
Justin

Your Most Senior Fellow and I would probably get along well. This is some brilliant analysis. (And I <3 graphs! They make for great support, and great blogging.)

20 01 2010
placemakinginstitute

Wonderful, and pass the word: one can rest assured more looms from him in this regard.

28 01 2010
A MODEST PROPOSAL « The Placemaking Institute

[…] well-paying middle-class lifestyles available anymore at the same time prices for everything (but, believe it or not, gas) are only getting higher and higher while the VERY REAL REAL ”2%” RICH are […]

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