The Cause of Gridlock

The gridlock suffered in most large cities is an artifact of technological advances. Pre-industrial cities organized around the intersection of trails and waterways. The population density of these early cities was checked by the agricultural productivity of the surrounding countryside and the available technology for moving and storing food. As these ancient cities approached the limits of their sustenance, starvation begat disease and the population returned to equilibrium.

Industrialization exponentially expanded the ability to cultivate, harvest, transport, and store food. While cities were quickly able to support greater numbers, most citizens could not afford the personal transportation that would allow residential density to spread. People entered the cities to find work, but typically had to live within walking distance of their jobs. This produced high density urban cores.

The first step toward urban sprawl and gridlock was the introduction of low cost public transportation, namely the streetcar. The factories of the early industrial era were noisy, smelly, and in general unpleasant places. The streetcar made it possible for workers to move their families into pleasant residential neighborhoods without sacrificing their jobs. This technological advance created the first set of suburbs. The distribution of these neighborhoods was constrained by the passengers' ability to walk to their streetcar stations.

The confluence of the streetcar lines reinforced a hub and spoke organization. High density employment concentrations were landlocked by the neighborhoods served by the streetcars. When growing per capita wealth and Ford's assembly line made the automobile a fixture in the American household, the hub and spoke organization was already entrenched. The potential for reorganization and redistribution made possible by the automobile was largely wasted. Typically, the residents wealthy enough to buy their own car simply moved a little further away from the employment core into nicer homes in fancier neighborhoods.

The proliferation of personal vehicles and the obsolete hub and spoke organization lie at the root of our costly gridlock problems. Reintroducing the streetcar (urban light rail) only reinforces this inefficient organization. The only transportation alternative that wealthy Americans will voluntarily choose over their own cars is one that takes them from their own front door to the front door of their destination. Light rail and city buses fail this litmus test.

Solving the modern mass transit dilemma will involve integrating modern communications and route planning tools with the flexibility of the jitney. These small limousines, taking orders for rides on cellular PDAs, can provide door-to-door service for six to ten passengers. In many cities, jitneys are the primary source of public transportation, providing service at a cost comparable to the large buses traveling fixed routes.

A little background...

Charles Tiebout was a graduate student at the University of Chicago back in the 1950s. He published a short economics paper suggesting that market forces could be at work forcing efficiency on local government. Forty-five years later I got sucked into the continuing debate as a graduate student at Rice University in Houston. Unfortunately, the lively exchange behind the walls of the ivory tower has seldom leaked into the mainstream press. My objective in publishing this discussion is to share these ideas with people like you who can actually implement change.

First we need to get the premise straight. Adam Smith was right. The free market economy is the most efficient way to allocate resources and generate productive activity. If you disagree, then the rest of this article will likely leave you cold. Communism is great, but for that nagging little thing called human nature. So long as people make self-serving choices before self-sacrificing choices, the invisible hand will shape outcomes.

Tiebout's idea was simple. While consumers in the private market for goods and services vote with their pocketbooks, consumers in the market for public services vote with their feet. The advantages of the private market can increasingly accrue to the public market as consumer choice for public goods and services increases, the cost of information about these choices decreases, and the transaction costs of making these choices are reduced.

Consumer choice for public goods and services is an odd concept for most people. Yet, the combination of federal, state, county, municipal, school district, tax district, and even neighborhood governments across a typical American city provides plenty of choice. The consumer looking at the department store shelf picks the product with the most attractive combination of price and attributes. The supplier who gets the right combination prospers while the wrong combination of price and attribute left unaltered will put its supplier out of business.

In the public sector, the same phenomena can occur. Consumers of government services reward those jurisdictions that supply the service mix they desire at an acceptable price (tax rate), by bidding up prices for residential property. Increasing property values expand the tax base and allow the local government to maintain quality service levels. Conversely, the jurisdiction that allows school performance to slip, crime statistics to rise, streets to deteriorate, trash to accumulate, etc... will see property values decline. Raising tax rates (or tax burden through a bond issue) in an environment of declining property values only accelerates the deterioration. Urban mayors propose commuter taxes arguing that suburban workers traveling into the commercial core use the city's infrastructure and services free of charge. Suburbanites respond by changing their zoning plans to allow for limited commercial development. White collar jobs relocate to landscaped office parks in fringe cities. Vacancy rates in downtown high rises skyrocket and the tax base falls even further.

Consolidation of metropolitan governments gained popularity a few years ago as a potential solution to this vicious cycle. Advocates suggested that combining city and county governments would produce economies of scale and eliminate redundant services. In practice, these consolidations simply increased the collective bargaining power of public sector employees while reducing the controlling effects of consumer choice. Invariably, the metropolitan areas that pursued this policy saw increased costs of government and little or no change in overall service levels.

You, the consumer of public goods and services, benefits most when you can choose from dozens if not hundreds of different combinations created by unincorporated villages, homeowner's associations, volunteer fire departments, park districts, enterprise zones, neighborhood watches, even the retired guy who mows the medians. As the number of these combinations increases, so to does the likelihood of you finding the living arrangement that best matches your desired combination of service level and price.

Maximizing the impact of these choices on the public sector requires that consumers know about them. Happily, the information age makes publicizing these choices an easy task. Any realtor with a new listing can set up a website touting the neighborhood in minutes. School districts publish metrics, homeowner's associations have online newsletters, newspaper websites link to zip code level crime statistics. The enterprising economic development agency can consolidate this information in a user-friendly format to assist potential customers in finding their perfect match.

The final hurdle is the transaction cost. Moving is typically very expensive relative to the potential savings from a lower tax burden. Governments can take advantage of this expense to increase taxes up to the point of indifference, where their existing residents won't move and their property values are not declining. Forcing market efficiencies on these government jurisdictions requires a change in the cost structure. The federal government's tax incentive to reward movers who get closer to their work is a step in the right direction. The recent low interest rate environment encourages realignment, when the interest rates get high again, expect tax rates to climb as well unless we can figure out some way to offset the higher cost of moving.