I kind of think that Will Wilkinson ends up making Yglesias’ point for him here. Libertarians have a weird blind spot when it comes to transportation and planning issues. Will agrees, and then proceeds to rationalize that blind spot away, which is something libertarians basically never ever do on the issues they care about.
But there’s a bigger point to make about his post. Will writes:
What makes this issue so tricky for me is that the status quo pattern of settlement and transportation certainly does reflect systematic regulatory mandates, but itâ€™s not clear how worthwhile it is to try to back out of this pattern once it has been established â€” even if those mandates were stupid. The way we live is indeed very much a function of choices made by government some time ago and reinforced by its ongoing decisions to maintain the established system. I think the case for the proposition that many of these choices were big mistakes â€” that weâ€™d have an overall better pattern of settlement and transportation had government made different choices â€” is pretty compelling. Yet it remains that whole cities have formed around the suboptimal status quo system and many tens of millions of people have invested in goods like houses and cars taking for granted the structure of the status quo system.
I suspect defenders of greater density and more public transport overstrain themselves trying to make the implausible case that a transition to their favored alternative would cost most everyone less than maintenance of the status quo, despite the fact that almost everyone has already arranged their lives around the current system.
Libertarians, for some reason I haven’t yet grasped, seem to view the world as remarkably static. In their world, population is not growing. New entrants to the workforce aren’t choosing where and how to live. Demographics are etched in stone; the population isn’t getting older and embracing smaller family sizes. And people never, ever move house. Libertarians also seem to like the “newspaper commenter” critique of urbanist arguments: “Why do you want to make everyone live in Manhattan?” There’s no such thing as a shift at the margin in this view.
In practice, the US is far from done building. Tens of millions of new homes will be built in the coming decades. Hundreds of billions of dollars will be spent on transportation infrastructure. The current built environment has, as a result of decades of government policy, taken on a rather suburban, auto-centric tilt. So what? No one is suggesting that we tear down all of that and replace it with something entirely new. I, and others, are suggesting that making it easier (or, you know, legal) to build in a denser, more walkable fashion would be advantageous. Similarly, given the burden of maintaining such a large and costly road infrastructure, it might be wise to devote a larger share of dollars for new construction to substitute technologies.
Will goes on to write:
I donâ€™t think this kind of path-dependency/status-quo bias/lock-in effect would be insuperable if government would simply stop actively subsidizing people to arrange their lives around the status quo system. It could make people pay directly for using roads; price for congestion; shift incidence of taxes from labor income to carbon use, etc.
But this is hard to do in a democracy, since people tend to want what theyâ€™ve got and feel entitled to the subsidies that support the status quo. If people live the way they do because theyâ€™re being actively subsidized to live that way, and the government takes the subsidy away, people will feel punished.
But surely Will is familiar with the concept of price elasticity of demand and its relationship to the availability of good substitutes. People bristle at removal of subsidies for things that they have come to depend upon. But if they have good alternatives to those things, then suddenly the removal of the subsidy isn’t so painful. Taxes on gas or congestion or carbon aren’t so hard to stomach, in other words, if consumers can substitute easily away from the things being taxed. So much the better if the substitutes are actually more economically efficient in the first place.
It’s like Will, and Tyler, and libertarians generally are stuck in the sunk cost fallacy — “we’ve already built all of this stuff, so it would seem to make sense to keep building similar stuff.” But that makes no sense. And it certainly is no reason to ignore the many bad government policies that prevent developers from building things that people seem to really want.