This morning, I tweeted the following:
Spend extra $ to cut your commute. I read (in @rdobelli‘s book?) that we underestimate commuting costs.
— Art Carden (@artcarden) May 22, 2013
We’ve tried to model it. When we lived in Memphis, we lived in what a colleague called “Midtown East,” near the intersection of Walnut Grove and Highland. I once timed my commute at 8 minutes from leaving my driveway to parking my car at Rhodes. We could walk to the grocery store, Starbucks, a bunch of restaurants, the main public library, and other places. It was great.
We don’t have that luxury where we are now because Samford is in the suburbs (it has a Birmingham address but is actually in Homewood), but I do have a similarly short commute. We’re also very close to Walmart, Publix, and a bunch of other places we frequent. We can also walk to the playground and park near our house. I miss being able to walk to Starbucks, but it’s still pretty nice.
So what of the obvious retort–“that’s great, but most people can’t afford it”? My suspicion is that this is an example in which behavioral economics–or just Frederic Bastiat–has the most to contribute. We tend to notice what is right in front of us while ignoring what is harder to see. We emphasize the present and heavily discount the future. In a world where we have all sorts of cognitive biases, it’s easy to believe people probably under-estimate the costs of commuting and, therefore, under-estimate the value of living close to where they need to be. I’ve read recently–I believe in Rolf Dobelli’s The Art of Thinking Clearly, or in his essay “Avoid News”–that we tend to under-estimate the costs of chronic stress to our health and, ultimately, to our bank accounts. That “great bargain” on the house with the soul-crushing 40-minute commute may not be such a great deal when you factor in the increased probability of a future that involves expensive heart medication.
Is there a policy upshot? It seems like it would be easy to say “and therefore, we should quit subsidizing suburban sprawl and long commutes, either implicitly or explicitly.” I definitely agree, but maybe not on these grounds. Density creates its own congestion problems and stressors For example, living close enough to walk to Starbucks was awesome. Multiple distant sirens daily was not. I’m not sure what the “socially rational” pattern would be, but holding others’ actions and current policies constant, my sense is that the blindfolds of our cognitive biases are causing a lot of people to step over hundred-dollar bills.
So two questions for you, dear readers:
First, is there a policy upshot that I’m overlooking in my haste?
Second, what are other examples of situations in which we could be meaningfully “less wrong” if we worked at it?
Also, I owe some of you responses to previous posts. I haven’t forgotten; I promise!
READER COMMENTS
awp
May 22 2013 at 6:17pm
It is not just that suburbia is subsidized. It is also that producing dense housing with short commutes is heavily discouraged through regulation (zoning, parking mins, etc).
MingoV
May 22 2013 at 6:29pm
I, too, worked in Memphis (at the VA Medical Center). I did exactly the opposite as Art Carden. My family likes to live quietly among nature. We bought a house on four acres of land south of Collierville. The lot has a pond and two acres of fields. We saw a wide variety of birds; fish, frogs, and toads; foxes, deer, raccoons, opossums, and armadillos (they’ve been migrating north from Mexico). This was a stress-relieving environment. The major source of stress in my life was working at the bureaucratic VA; stress from the 32 mile commute (mostly on highways) was trivial (especially since I like driving).
I understand the point about people underestimating the costs of repeated stressful events, but stressors are not the same for everyone.
J Scheppers
May 22 2013 at 6:39pm
There is much to agree with in what you have said, but it is not clear if you are discounting the rational decisions many people are making.
In the past, I have commuted 1:20 minute each way to work on a high profile project. It did not last and I returned to a Metro Area where the monthly payment on my suburban house is far less than the asking price for an efficiency apartment in Santa Monica.
I did not choose to live as closes as Santa Monica, but I saved 15% of my take home pay because of the longer commute. Looking back I still think I made the proper trade off, but the value of a high profile project only lasted one year.
I fully agree AWP that Dense living has its own subsidies and determining whether suburban or Dense urban, or rural receives the largest subsidy is about as likely as determining the true cost of global warming.
lewis
May 22 2013 at 9:34pm
My parents live right behind Samford! HHS ’05! I don’t know if you ever got a chance to meet Thomas Corts but he was an amazing gentleman.
The real problem is that driving is priced irrationally, because, historically, there were very high transaction costs to road pricing. An individual pays for highways according to the gas he or she uses and local roads according to real property.
Time-of-day pricing would smooth out the peaks in roadways, preventing gridlock and the worst of the stress. It would also give road-builders (government or otherwise) a Hayekian signal about where to add capacity. I’m in a PhD in transportation engineering, and a lot of the theory about where to add capacity depends on basically absurd but well-intentioned indirect ways to estimate people’s utility. It’s made further absurd by the fact authorities have no interest in their constituents’ abstract utilities, since they aren’t receiving money when the right balances are struck.
I think that behavioural economics would justify larger-than-otherwise difference between the peak and off-peak prices, to account for the fact people are bad at estimating the long-term impact of stress. Fortunately, the privatized roads (like the HOT lanes in Northern Virginia) usually wind up with a peak price that is higher than neoclassical theory would prescribe; and privatization is proceeding apace.
Tracy W
May 23 2013 at 4:40am
Is this it, entirely, though? I once lived in a place where I could get to work in 10 minutes by taking public transport, most of the time I chose to walk instead and take 25 minutes. Now I have a kid, the time I spend commuting is the me time.
The other side is that more money free means more money in your savings account for unexpected events, and more money available to buy life insurance/income protection insurance/etc against those unexpected life events. So if you see more of the future, it’s not obvious that you’d chose to pay more for a shorter commute.
christopher fisher
May 23 2013 at 8:15am
Max Tucker has an article about how lawyers do not make that much money when you factor in the hours they work.
Norman Pfyster
May 23 2013 at 9:14am
Why do you think there are cognitive biases at work for others but not for you? I assume you made a rational decision taking all costs and benefits into account; why wouldn’t you grant others the same benefit of judgment?
When I started a new job in a new city, I spent a year looking at hourses in various areas. Because my job was in the suburbs, but I wanted to live in a more urban area, I ended up choosing to lengthen the commute so that I could live in the urban area. I certainly took the commuting costs into account: it’s the only reason I was even looking at houses out near where I work. It seems to be working out for me. And if doesn’t, I’ll move.
Philo
May 23 2013 at 10:37am
Driverless cars will take most of the pain out of commuting.
Mike Rulle
May 23 2013 at 5:06pm
Clearly, you do not live in or near NYC! I honestly doubt that more than 5% of people who work in NYC have a smaller commute than your “soul crushing” 40 minutes—-even if they live in NYC.
You assume that a commute is an unqualified bad thing. Of course many commutes are so, but it is far from obvious that most are. For example, I would never listen to the radio, which I enjoy a lot in the car. It may be music, talk news, talk sports, books on tape, etc.,—but there is always something on. Yes, I could listen at home, but for me radio IS a car experience and is enjoyable in its own right.
Richard
May 23 2013 at 8:38pm
One thing I like to do while driving is talk on my cell phone. I know that it increases the risk of accident, but it makes the commute so much better it’s worth it. The law now bans talking while driving in my state too, so I have to take that into account. But it’s still worth it.
I wish there was something that could hold my IPad up on the dashboard so I could read while driving too. I think I can keep an eye on the road while taking in news articles. I’ve experimented with this and it’s worked pretty well.
I think we err on the side of safety and should focus more on making driving enjoyable. I’d have to do a cost-benefit of all this to be sure.
Ken P
May 23 2013 at 10:01pm
Why subsidize anything. Doesn’t that hide true costs?
I believe it’s nearly impossible to assess whether someone else is making the best choice. I can’t imagine living in a suburban neighborhood where the houses look identical, so I figure people who want that must have a different perspective than me (and value that more than I do). I pay extra to live in the city and also endure a commute to the burbs for work. Value is subjective.
With regard to rationality, I believe that the sub-rational is very important. I also believe that people most often make their decisions subconsciously and rationalize the decision consciously. People who justify a frugal decision on the basis of rationality may have a deep subconscious value for financial security. Others may highly value the happiness of their surroundings, whether that is acreage with a pond like MingoV (above), or living in the midst of an art district and close to live entertainment like me.
It’s an over simplification to think other people see only one layer deep when calculating and miss the second layer hidden costs. It’s also an over simplification to think that deeper issues like what makes you happy or even deeper- what makes you feel most alive- are less important than second layer costs. In the end, we’re all… NOPE, I’m not going to quote Keynes.
JKB
May 23 2013 at 11:39pm
So your saying we should build residential areas across the street from industrial plants, say like a fertilizer plant? And people should consider buying near their office, say government office, which is located in a part of town where you don’t go outside after dark?
But even if we limit our discussion to well to do individuals who work at non-industrial facilities located in good neighborhoods, there are still other factors. Many commute so their family can live in a small town environment or their kids can go to a good school or ride a bike without adult defensive supervision. Others prefer to do things that would get them hassled in a dense environment, perhaps their hobby is noisy out about 30 feet or so. Or perhaps they want to end up owning their property for their retirement and do not trust in the “investment” concept of real estate, i.e., they could end up owning a home in a bad part of town 20 years from now.
But why do people do things like drive a truck? You drive a truck for 20 years, you are away from home and will probably have serious health problems from poor diet, lack of proper rest, constant sitting and stress of traffic. So we should have a policy against people driving trucks to bring stuff to the dense urban centers.
Dave Hamilton
May 24 2013 at 1:41pm
I have had various commuting distances from around 1 hour to less then 5 minutes (I could walk if the weather was nice). I do think the distance can be stressful more so if the commute involves mostly non freeway driving. I guess my biggest problem is time loss, for example I can leave early and arrive at work an hour before time, or I can leave 20 minutes later and set in traffic to arrive at 10 minutes before time. So there is a time loss there even though my commute distance now is rather small. So I leave early and occupy my wait time with reading.
I am no expert in urban planning but it would seem to me that more flexible zoning would allow work facilities to be clustered around a major metro area instead of concentrating most employment in one area. Thus allowing people to live closer to where they work. This however doesn’t solve the school district problems, I think most people select where they want to live based on where their children will go to school. Where I live (Detroit) pretty much excludes the city if you have children unless you can afford a private school.
bobroberts17e1
May 24 2013 at 1:44pm
These utility conversations usually focus on the thinking that the vast majority of people don’t operate at the most optimal level.
Maybe for your ordinary non-economist, the benefit of not having to think about such things outweighs the cost of sitting down with a spreadsheet and weighting things like distance to work, quality of neighborhood, taxes, crime rates, etc. when buying a house.
Personally, there are some things (even financial things; gasp!) that I consciously choose to do in a sub-optimal manner.
Example: there are vending machines at work. I haven’t done the math, but I suspect that even including the time it takes to prepare food at home and bring it to work, it is still cheaper to bring a lunch. But I don’t. The hassle of thinking about the $0.25 I might save a day just isn’t worth it. Yeah, it adds up. But I like being a normal person who gets a soda and bag of chips, regardless of its utility.
When I was a kid, my parents were (are) misers. We’d play a game called “cans versus rabbits”. Every time we’d get in the car, we’d count the rabbits we’d see (it only worked in the spring) versus the aluminum cans on the side of the road. The only catch was, we’d stop and pick up the aluminum cans to recycle them.
We made a crap ton of money doing it (Dad’s an accountant, over 15 years it was like $500), but it taught me that life is more than “optimization”.
It was a nice supplement, but we didn’t need that money. You can kill yourself trying to make everything completely optimal, saving pennies for the sake of saving pennies. Or an extra minute on your commute.
Arthur_500
May 24 2013 at 5:39pm
Living in a city has its own stress but commuting has its stresses; how do you calculate one stress against another?
My daily commute is 50 minutes one way. On a Friday I deal with the ‘weekenders’ and getting home can take well over an hour. Indeed commuting has its stress.
However, I live where I do not to recreate but to re-create. It is quiet. I have my yard. I don’t have traffic outside. I spend time with pets. I relax.
Does this offset the stress of commuting or the additional costs of vehicle, tires, fuel and oil and the inevitable windshield? Regretfully, I have not yet seen a model that will include all the costs and benefits.
In the end, I presume that we live where we feel most comfortable and we include the stresses in our lives that we are comfortable with. since we accept the costs and the approve of the benefits we will ultimately be satisfied or move.
Should government be building roads? I would suggest that the Interstate Highway System has been one of the best contributors to our growth as a nation and its benefits have outweighed the downsides.
Dave Tufte
May 25 2013 at 6:10pm
I did this calculation when we moved from New Orleans to Cedar City, Utah (University of New Orleans to Southern Utah University) in 2000.
We lived “close” in New Orleans. Even so, my commuting time was cut by 110 minutes per week.
At the time, my base pay was $68K for two 15-week semesters, plus some extra days for meetings. This works out to about $54 per hour.
So, I saved about $99 per week in commuting costs, or about $3K per year.
Comments are closed.