In the Washington Post Brad Plumer editorializes on the choice of many Americans to accept longer commutes by car in exchange for larger homes far from their workplaces. He says that consumers are unable to accurately calculate the cost of their commutes, including time spent driving, leading them to make “irrational” choices about where to live. However, Plumer downplays the policies that encourage consumers to buy homes rather than rent and that allow them to partially externalize the costs associated with driving.
Plumer asserts that when buying a house, consumers think they will value additional space more than they do, but he gives no convincing reason that their subjective valuation of home size is incorrect. If in fact if consumers did undervalue the time they spend commuting in relation to home size when they purchased a home, he gives no reason why they would not eventually realize this error and improve their situation by moving to a smaller home closer to a city center.
His piece is written in response to Congressman Earl Blumenauer’s recent report on the topic of shielding Americans from volatility in the oil market. Blumenauer does credit the policy environment dating back to the 1944 Federal Highway Act for shaping the car-centric culture that many Americans live in today, and he supports policies that provide incentives for decreased reliance on cars.
Blumenauer asserts, “For too long, the Federal government has disproportionately subsidized highways at the expense of other modes, reducing consumer choices.” Rather than moving away from determining transportation and urban development through legislation, he provides policy prescriptions at the federal, state, and local level to decrease consumers’ dependence on oil.
For example, Blumenauer suggests that mortgage lenders should be encouraged to take transportation costs into account, making it easier for those living close to their workplaces to get loans. If the recession has taught us anything, it should be that government involvement in lending markets is dangerous. Banks could easily access data on the risk of loaning to consumers who live far from where they work, so if in fact these mortgagees are at increased risk of foreclosure, banks could freely factor this information into their interest rates.
Blumenauer also says that the federal government should provide an index of transportation costs associated with living in various places. Plumer promotes this prescription, writing that it would improve transparency in the housing market. In reality, however, no government body could come close to accurately representing the transportation costs for each individuals’ commute; rather, they could provide averages that may be far from household’s actual costs. Individuals can calculate their own commuting costs across different homes much more accurately than any centralized authority could.
All policies come with unintended consequences. Today in the United States we can see clearly the unintended consequences of policies that subsidize driving and prevent high-density housing — sprawl, congestion, and long commute times, along with the pollution that comes with cars. However this does not mean that the smart growth policies that Plumer and Blumenauer suggest will not come with their own unintended consequences.
We should assume that consumers act rationally given the incentives that they face. Repealing the policies that have shaped current behavior such as undervalued public parking, density restrictions, and tax breaks for homeowners will result in people moving closer to their work places and driving less. Rather than seeking to create a new vested interest that will support mortgage incentives for those who live in smart growth communities, Blumenauer should work to raise awareness of the costs of mortgage interest tax breaks and driving subsidies that are currently borne by taxpayers.