On weekends we like to dig into the archives. This post was first published in April 2009.

Now if I’m being honest here, I will admit that public transport advocates do get hammered a bit on the whole “economics of transport” debate. The roads lobby constantly states how through petrol taxes trucks and cars pay their way, yet at the same time rail and buses simply can’t fund themselves and require massive subsidies. Now I’ve always thought this strange – that something which just seems so much more efficient (putting a whole lot of people inside a metal box and moving them) could actually be not as economically justifiable as something which just was so obviously less efficient (putting one person in a metal box and then shifting heaps of those metal boxes).

Thanks to a most excellent book that I own, called “Asphalt Nation: how the automobile took over America and how we can take it back“, by Jane Holtz Kay, we can see the argument for cars over public transport start to unravel. Not only in terms of the environmental and social impact of cars – but in their economic inefficiency, striking at the very heart of those who promote roads-centric policies. It’s a book that Steven Joyce, Minister of Transport, should definitely read. It is written from an American perspective, but pretty much everything can be applied to New Zealand as we’re definitely one of the most auto-oriented countries in the world, particularly in the case of Auckland.  An interesting quote on page 128 looks at the overall cost to individuals of transportation:

While the Japanese walk, bike and pay three times our gas tax, we pull mere pennies from our pockets at the pump and then subsidise the car. The Japanese pay 9 percent of their gross national product for transport; the United States pays 15 to 19 percent. Europe does better too. By paying a truthful $5 a gallon, plus three to five times what the United States pays in visible car-based fees, the Japanese and Europeans have an awareness of costs. The consciousness makes them decrease their driving and curbs cars in cities. It encourages a more compact land use policy and hence promotes four to eight times as much public transport. The reserve obviously holds: Americans pay less for gas and little for tolls and user fees – and this freewheeling policy encourages them to use almost five times as much gas per capita as residents of European cities and ten times as much as those in typical Asian ones; to drive infinitely more, undercut mass transit, build more roads, buy more costly cars, pay more in personal and social fees, and spend more for maintenance.

Substitute America for Auckland and just about the exact same thing could be said. It is true that we pay higher petrol taxes in New Zealand than Americans do, so our cars do pay their own way much more. However, it’s still fascinating to see that Americans spend twice as much of their GDP on transport as Europeans and Asians. Not particularly efficient if you ask me.

David Aschauer, an economist from Bates College, has some interesting facts when one looks as the economic productivity of public transport versus roads building. This is particularly significant at the moment, where investment in transport (read: roads) is being highlighted by the government as one of the ways in which they hope to minimise the recession through economic stimulus.

Spending on public transportation has twice the capacity to improve productivity as does highway spending. A nickel spent on mass transit carries at least twice the impact of a nickel spent on roads. A billion dollars invested in mass transit produces seven thousand more US jobs than does the same amount spent on road construction. A ten years $100 billion increase in such transit investment would enhance worker output five times as much as if made in roads.

Aschauer concludes that “public transportation spending carries more potential to stimulate long-run economic growth than does highway spending.” The reasons for this are obvious, that public transport creates many long-term jobs for bus and train drivers, for those maintaining stations and so forth. Roads construction is very capital intensive, but not actually that labour intensive, so therefore not a particularly efficient way to provide jobs and real economic stimulus.

If one looks at the economic costs of private transportation at a more personal level, its inefficiency becomes even more super obvious. Page 130 of “Asphalt Nation” looks into that further:

In terms of personal use, as well as GDP, the American family spends around 20 percent of its annual income on transportation, plus hidden costs. The Japanese spend only 9 percent, despite having more expensive cars, while Europeans spend a scant 7 percent. While Americans take only 5 percent of their trips on foot, Europeans and Japanese take 20 to 50 percent of their trips on foot and garage their pricey cars. In land costs our highways often steal almost half the space in our cities, Japanese roads one-quarter. In the fifteen most congested US cities alone, our car-bound transportation system adds about $7.6 billion to the price of goods.

I think the main point to take here is that the true costs of an auto-dependent society remain somewhat hidden, or are accepted because we all pay for them individually (rather than paying taxes to subsidise public transport). Contrary to what Libertarians would love you to believe, just because something it paid for through taxation rather than user-pays does not make it more efficient or cheaper. Ironically, if you look at all the hidden subisides the car receives, it actually appears as though auto-dependent societies pay more individually for transport and also pay more through their taxes for transport, when compared with countries that have a more balanced transport infrastructure like Japan.

The provision of parking in a particularly interesting one, especially if we look at who really pays for “free” parking. I will devote a whole post in the future to parking, but Asphalt Nation has some interesting stats which are worth mentioning.

Parking, 95 percent seemingly free to the driver, is, in fact, a drain, adding more than $600 to a home and $1200 to an apartment. For the 85 million employees given apparently free parking spaces, worth $1000 apiece, it amounts to an $85 billion lure.

This is the kind of stuff the roads lobby just doesn’t tell you.

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  1. I’m surprised those prices for parking spaces are so low. $600 for a home and $1200 for an apartment.

    In our apartment building, carparks sell, when they sell, for around $75,000 each, and the real estate agents and property valuers will tell you that the number of carparks your apartment has will add a multiple of $75k to the value of your apartment.

    I understand that this is the cost of building a carpark for a new-build apartment complex, too.

    And for at-grade – inner city and fringe brown-fields site are selling for about $10,000/m2, and a carpark requires 15 m2, (plus another 15 m2 for circulation space to manoeuvre), so that math looks bad pretty quickly.

  2. Plus apartments often come with a carpark whether you want one or not. Its obviously built into the cost of rent but I walk everywhere and haven’t owned a car for years even though my apartment comes with a carpark that gets used once or twice a month by a friend that might visit.

    1. This is a great article and is probably more relevant now that when it was written as we enter an age where we are more poor. We will be more poor because in a couple of years NZ will have a debt of $200 billion with no assurance that the paying down of it will be assisted by significant inflation or sustained economic growth. Correct spending and investment decisions will become more critical. As Rutherford said, “when money is short we have to think.”

      As you say many European cities have discovered that they can produce a better economic outcome for citizens by investing heavily in public transport. It seems in Europe that governments of both the left and the right are embracing such a model.

      Once the network is in place, and it can be as simple and lower cost as buses, cities have found that by finding a “sweet spot” for pricing they can drive significant patronage. The huge patronage ensures a respectable fare box recovery. (Note how very different this is to the AT pricing model where successive yearly increases deter patronage. Also note the comparison with AT car park prices which sets the market floor price.)

      I note that our Ministry of Transport in the preamble to the feebate legislation spoke of the high cost of car ownership.

      More than ever we need to think whether continued investment in private transportation that spawns more investment (due to congestion and sprawl) is a sensible economic approach.

    2. +1, my flat has 3 off street parks, none of the 4 of us owns a car. Admittedly we have 2 motorcycles, and the garage is useful for storing bulky stuff, but still. A small enclave for a tiny hatchback or a couple scooters would be totally adequate for us. And would discourage our hoarding habit. If the bicycling infrastructure was better / existed on manukau road, I’d totally get rid of the motorcycle and only use a bike.

  3. The percentage of GNP spent on transport is a useful statistic when comparing the efficiency of a nation’s transport system to other countries. Is it calculated anywhere by the NZ government when evaluating transport policy? I suspect NZ would rate very poorly by this measure compared with Japan or Europe.

    1. Zippo, good point. It would also be worthwhile considering the indirect costs of transport. For example, how much of the necessity to consider relocating Ports of Auckland is driven by the need to find more space for car imports?

  4. This flashback mentions the hidden costs of a car dominated transport system. I’ve mentioned before the used tyre piles which are dumped in rural areas and often become a cost to local government, as a good example of a hidden cost. But also, NZ has a chronic current account deficit, almost all vehicles are imported as are the spare parts, the consumables, fuel and lubricants etc etc. The lockdown showed what happens when you cut that off, a massive trade surplus. Even if we just cut 20% off our vehicle imports, it would make a huge difference to our long term wealth.

    1. I agree Zippo. And if 20% less vehicles were produced that would result in a very significant drop in carbon emissions, and the same from a consequent reduction in fuel usage. As economists are starting to say, this next crisis will only be averted by a reduction in demand. It might be a frightening concept for many to deal with, but as Rod Carr was saying on Radio NZ, we have to restructure our economy.

  5. Even excluding the hidden costs like health environment etc etc. cars are very expensive to run. This aa article takes a relatively new small car being driven 14000 km a year and does a Cost analysis on it. $21 a day is pretty steep imo. The car business model really hides how much it costs you. Upfront cost, fuel, maintenance, depreciation. The original micro transaction model. I suppose that’s the problem with bikes, there is no real money in it like with cars. https://www.aa.co.nz/cars/motoring-blog/vehicle-ownership-costs-more-than-just-the-purchase-price/

  6. Yes Jack, and if only the costs stopped there. If we add borrowing costs on a $75k car park that’s about an extra $6 per day and then add rates as well.

    Buying a car in Europe is not a rational economic decision. In NZ possibly it is because paying for PT for all your transport needs is so damn expensive.

    I would love to see some modelling for an annual pass pitched around the $1000 per year mark ($20 per week) and $150 for kids to see the projected impact on patronage. I would fund the annual passes by taking money from the AT capex budget for roading because that’s a rational way to respond to a climate crisis.

  7. Only problem with all these attempted arguments is that a car is at least a %1000 better transport option than a hideous bus or train.

    1. Better is a subjective thing. You can optimise for different things. If you want to optimise for individual comfort and potential maximum speed then the car is the way to go. But if you want to optimise for space efficiency then the car is absolutely not the way to go. There are so many things to optimise for and balance in choosing the way a city gets around. (Health, space, cost, environment, actual realistic speed, people who cant drive (kids, elderly), businesses etc etc). The argument on this blog is that cars have been overvalued and had too much attention and money over the last 50 years, which has had significant negative effects on Auckland and the people that live here including car drivers. If we took some (10-15% I’d say) space from cars and dedicated it to modes that have significantly higher capacity than cars and their lanes (bike lanes, busses, rail) the city would be much better off, with the space being used more efficiently everyone could get around faster, yes even car drivers. For example overseas, look at this video, https://youtu.be/gOl5vF8l7Fc at 1:10 into it. This street now carries way, way more people than if all of those people were in cars. Totally worth the sacrifice of some comfort. Also the problem with your attempted argument is that you didn’t provide one. Only a hyperbole that had a small amount of truth behind it. Do you disagree with what the author of this post said above? Or is your argument only that cars are “better”

      1. This whole blog is full of hyperbole with a little truth behind it.
        But I’m not disagreeing with the article. I’m saying cars are worth the extra cost. Because they’re better.

        1. Fair enough, if they are better for you and always will be then go for it. That isn’t necessarily the case for everyone now, and I think the city would be much better for everyone (almost everyone) if the other, more dense, transport modes were better than they currently are now, and therefore get more use. Also you still didn’t define how you think cars were better.

        2. Bob – How are cars better knowing that the planet is warming and the mean average temperature in Auckland will rise 1-1.5dg C over the next 5-10 years due to increase use of concrete and asphalt as Auckland sprawl increases let alone the indirect pollution, social, environmental and health costs which are not factored in car based urban sprawl planning.

        3. “This whole blog is full of hyperbole with a little truth behind it.”

          The usual comments from people who don’t like the results of competent analysis and industry specialists.

          The only difference with this one was the scientific evidence kindly provided, that cars are “1000% better” but without mentioning the basis.

  8. Its not a matter of which is correct, but as the article title alludes to its a matter of setting the pricing (including externalities) correctly then ensuring decisionmakers have socioeconomic business case evidence on which to make decisions,

    1) There are socioeconomic benefits to provide PT (in some form) for those without alternative transport means. This should be a full coverage network with min acceptable frequencies (eg. 30min) funded by central government

    2) Travel is just a derived demand of spatial land use distribution. (Most of NZ & USA are low density meaning more car dependence). Land use zoning & density needs to be freed up so that it is only constrained by National environmental standards (themselves based on socioeconomc cost benefit assessment). Land use staging can be considered via socioeconomic business case assessment. (Ideally there would only be a single agency regulating both)

    3) The pricing of travel needs to include an updated review of transport pricing in NZ.
    a) trucks are probably underpaying
    b) congestion tolls need to be introduced (manage peak congestion, less infrastructure needed in the future, saves money for other initiatives with high socioeconomic benefit/cost ratios, pushes users to other modes increasing their efficiency)
    c) all parking should be charged for and parking requirements removed
    d) The ETS carbon price needs to move with the carbon price
    e) there should be an vehicle air pollution levy
    f) the full cost of crashes should be internalised in the transport system (not sure the acc levy covers all?)
    g) The fuel excise tax should be increased or decreased so that the socioeconomic return on spending in transport matches that of government spending in any other sector.

      1. No:
        1) There are socioeconomic benefits to providing access to transport that cant afford other transport means.
        2) Car users dont pay their full costs – there is no argument that non-transit captive PT users should pay their full costs until car users do

        1. Yep, and it is largely accepted that transport is the most effective way to get people out of poverty, at least in first world countries. Allowing access to jobs and education in the city without having to pay 1000s upfront plus much higher ongoing costs removes a large barrier to entry for people to become much more productive members of this country. And then it has big advantages to the city in other areas like I mentioned earlier.

        2. Bob – Public transport is not just for the poor and elderly, it is also for Gen Y, Gen Z and Gen A.

          Public transport is for people who want to save money instead of continually putting their hand in their pockets to keep their cars going.

        3. Bob also conveniently ignored point 2. Car users don’t pay their own way and ask for the external costs to be socialised. Why should PT users be treated different?

    1. Couple comments,
      1) Is ets price currently under pricing compared to the value of carbon? I thought we got rid of / are getting rid of the max price
      2) Parking is my biggest gripe at the moment, especially on main arterial roads. How can someones parked car possibly be more important than the bus lane, or the possible bike lanes it currently is occupying. Totally agree with charging for more of it.
      3) I know road pricing is a great solution, but damn I’m still opposed to it at the moment. I feel like its too indiscriminate, it would be much more desirable to have better alternative modes in place before starting it, and even then, I can see the headlines now. Cleaner that drives 3 hours uphill each way to start work has to pay x amount per day, now he cant afford to feed his family of 5 etc etc.
      4) I don’t know how my motorcycling habit would like having to pay my demographics fair share of acc levies, we already pay like 6 times the car levy.
      I agree with pretty much everything else though. Especially the housing density / parking mins, central government is finally fighting back agains the NIMBYs though. There is hope

      1. Yes, congestion tolls raise equity issues and also need viable transport alternatives to be put in place, ideally beforehand.
        Having a congestion toll cordon that is also T3, plus high frequency fast PT with PnR available would address some of the issues.

        I presume the ETS added to the petrol levy is already set up to float with the carbon price? I was simply restating the need for it.

      2. The ETS will never rein in private transport emissions. At $35/tonne it’s adding 7c/litre to petrol. If the price rose to $200, a lot of industry would be wiped out, but petrol demand would hardly budge.

        The point is that some uses of fossil fuels are productive and earn money, while others are more of a dead loss. The ETS does not address this. Another way of looking at it: car drivers think the “utility” of their cars is way higher than the measly ETS price can address.

        The true externalities of buying a new ICE vehicle are far higher than just its greenhouse gas emissions. It locks us into a high-emission future.

        A study from MfE found that there was already a net financial benefit to ban all ICE imports in 2019, even before counting the cost of carbon.

  9. The insidious thing is that most of it is fixed cost. The numbers in the article amount to about $5000 per year fixed cost, and you have to add the cost of your parking.

    The marginal cost of driving amounts to justs 23 cent per km.

    So once you own a car, trying out alternatives is actually a quite expensive endeavour. The bus costs about the same as driving but it is much more limiting. An e-bike costs about the same as driving 10,000 km.

    1. That’s a good point when weighing up being a 0-car vs a 1-car household. But we have heaps of 3-car households as well. For them, the economics of dropping to 2 cars may look pretty compelling, if public transport is acceptable.

  10. Bob is right, the reason people buy cars is because they are useful and enhance our lives. I remember how much my life changed at 15 when I got my DL. It was probably the biggest life changing event I have had. The car meant freedom – instead of being locked into where I could walk, cycle or catch a bus too, I could go as far as my 15 year old budget could afford the gas.
    I know the arguments against cars – I buy into the global warming evidence – but we are able to have our cake and eat it too. There is an abundance of energy to tap into, that can be converted into synthetic fuels. Instead of landfill, we could be using waste as fuels to power our cars, trucks and planes.
    As for the social costs of vehicles – sure they exist. But the social cost of a medium sized dog is the same as a SUV and a second child far exceeds even Kim Dot Coms fleet.
    We are over consuming what our planet can produce – that is the problem. Don’t have more than one child if you want to save the planet and science will work out the rest of the problems.

    1. Dad
      Unfortunately you are ignoring the time frame. It was thought that we had until 2030 to reduce emissions by half. Now the thinking is there is a one in four chance that 1.5 degrees of warming will be reached by 2024. Science has been working on this since the 1990’s. Behavioural change is necessary. The parallel is today’s other great crisis, coronavirus. Eventually science will solve it, but inestimable damage has already been done, just as has already occurred with climate change. We only have to think what is happening right now -huge fires ravaging much of the west coast of the US and a collection of storms on the west coast.
      This will only get worse as Bolsonara and his collection of climate thugs allow the Amazon and now the Pantanal to be torched.

    2. The point is that if cycling and public transport were better in this country, then owning a car, while would still allow more freedom, it wouldn’t be so necessary or allow so much more freedom than alternatives. Not because driving would be more restrictive, but because alternatives would be much better. In the future I am planning on buying a car, when I can easily afford to, just so I can go tramping and climbing outside of the city more easily than now. But I see absolutely no reason that the majority of trips in Auckland should have to use a car. I had a totally opposite experience, I moved to Auckland for university and was absolutely amazed with the freedom that the busses and ferries gave me. I could not care about parking, not worry about the cost, not worry about actually driving, and go drinking and not have to worry about getting home. For most trips in the city, alternative modes of transport have the potential to be the better choice for most people with some infrastructure upgrades like cars have enjoyed for the last 60 years. Energy isn’t the only issue, and personally I think global warming can and will be engineered away when there is an actual economic incentive. My biggest current gripe is how the street space would be much better used and allow everyone to have much faster trips if we reallocated some more of it to bike lanes and busses.

      1. It really depends where you live in the super city. My experience is like Greta’s Dad. Living in the rural fringes PT was nonexistent and even if it had been, it wouldn’t have the density to make sense. Private transportation was a life saver. It opened up a myriad of opportunities that wouldn’t have otherwise existed. While cities drown in cars they are an essential part of rural life.

    3. Greta’s dad – The planet is warming every second of every day and the days of being young in the 1970’s, 1980 and 1990’s by having car to hoon around in are over. Gen Y, Gen Z and Gen A will not have those days of youthful care free life like you did, as the urban temperatures rise, unpredictable and erratic weather and heath emergencies become the norm. As Sir David Attenborough has said, the point of no return or tipping point is not that far away.

      As a country, NZ needs to start to planning now for a warming planet through sustainable environmental friendly urban planning and design, infrastructure, food production, transport, lifestyles, recycling, fresh and water systems, etc.

    4. I will outlive my car and it won’t give me grandchildren.
      Without that, there is no (human) future. So what are you saving? Life will go on without humans.

      Even having two children per woman is below replacement level, in aggregate. So I would suggest doing that.

      One each would put the future population into a demographic nose dive just when it would be most in need of its youth in a climate crisis.

      I would rather go down in lifestyle that be sterilised. I know some feel differently.

      Not transport related.. but I felt that point needed rebuttal.

  11. ” personally I think global warming can and will be engineered away when there is an actual economic incentive”
    and Trump thought he would find a cure for cancer.

    I am not sure that this sort of “thinking” is helpful. Not only does science have to find a way of stopping carbon from entering the atmosphere, but now it seems that a way will need to be found to remove some that is already there because we will have overshot levels that will keep warming below 1.5 degrees.

    I admire your belief that you will always be able to live your life in exactly the same way that you always have, and that it will be just as it is now. I am telling my kids, choose closely where you live because soon you will be paying a carbon charge for your travel and if you buy a vehicle, buy one of lower cc rating to minimise your costs. With 50% of households emissions coming from transport something will have to change and it is most likely to have to change quickly.

  12. There are legitimate ideas for geo engineering. And while I accept its way less ideal than just lowering co2 emissions there are ways in which we would prevent the complete devastation of 10’s of meters of sea level rise. I dont loose sleep at night or ever feel overwhelmed by climate change because of these plans. The most popular idea at the moment is sulphur dioxide injection into the upper atmosphere. And its been proven to have the desired effect. Even the IPCC recognises it, This article explains if fairly well. https://www.theguardian.com/environment/2018/oct/08/geoengineering-global-warming-ipcc
    What we dont fully understand is the side effects. But hopefully a bit more simulation and ice core sampling will tell us what we need to know. Also we do have a carbon tax, that is integrated into fuel price, the ETS, and while currently selling for $25 a tonne and not fully implemented yet, hopefully the next government will continue to push it ahead. Curing cancer is vastly harder than halting increased temperature which is all I’m talking about.

  13. “Curing cancer is vastly harder than halting increased temperature which is all I’m talking about.”

    I’m not certain that’s true. Climate issues were recognised way back in 1992 at the Rio Earth Conference and there emerged the United Nations Framework Convention on Climate Change (UNFCCC). However since then the pace of carbon emissions has been on an upwards trajectory with the latest projection of no Artic ice by 2050.
    Contrast that with the terrific efforts that there have been in the cancer field with greatly reduced mortality rates.

    1. Fair. But I was getting at “curing” being kind of impossible without some step change in tech. Treating and lowering mortality sure, but like you said at least there is progress being made on cancer. Anyway my point is there is an option to mitigate the worst effect of carbon, and buy more time (which we have already run out of years ago) to stop with the co2

  14. Pretty much anyone visiting the USA will remark on the low price of petrol. But it’s interesting that people there spend much more as a % of GDP on transport. Cheap petrol masks the fundamental inefficiencies of car-centric urban planning and results in much greater misallocation of resources (e.g. towards sprawl and car parking).

  15. That Public Transport is more productive than private transport would depend on things like people on public transport being able to reappropriate time they would have otherwise spent driving for productive activities. Otherwise PT is a bit of a time hog and would almost certainly result in lower productivity. I suspect they are over estimating the ability to reappropriate the time. PT most certainly puts work and play opportunities more distant on a time to destination basis unless part of the formula is also denser living, working and playing. Then the argument isn’t purely PT vs private transport. Having those things more distant inevitably means less access to work opportunities for individuals and less patronage for business.
    To measure PT efficiency in terms of energy use it most certainly comes out on top, but in terms of time use and personal effort it most certainly doesn’t.
    The argument about private transport being subsidized in the US has merit in that the oil industry has some big costs that it isn’t paying. This isn’t strictly private transportation as electrified private transportation isn’t part of it and a lot of PT still runs on oil. Energy security is one area where a high price is paid in both dollars and lives to support the oil industry. A lot of conflict around the world is over oil supply. While NZ isn’t directly involved we are a beneficiary of US efforts.

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