The Market As Plan

December 29th, 2011  |  Published in Cities, Political Economy, Socialism

There's a good article in [LA Magazine]( about UCLA parking theorist Donald Shoup. Shoup has made a name for himself (among urban planning nerds) by showing how urban land use practices systematically over-produce free and cheap parking, leading to all sorts of undesirable consequences for everyday life.

As Matt Yglesias [says](, Shoup's views on parking can be reduced to two themes. First, "that governments should not force real estate developers, store owners, and other businessmen to build more parking than their own calculation of what the market balance of supply and demand is." This is just the straightforward point that the state shouldn't force the creation of things that have negative externalities and disproportionately benefit the already well-off. More interesting is the second theme, "that governments shouldn't underprice street parking in a way that leads to Soviet-style shortages of available spaces and elaborate rationing rules about how long you're allowed to stay in a given spot." Yglesias, and Shoup, portray their position as a free-market alternative to the evils of central planning, surely a canny move for liberal audiences. But there's something else going on here; consider this experiment in LA, as described in the LA Magazine article:

> This spring the DOT plans to introduce an $18.5 million smart wireless meter system based on Shoup’s theories. Called ExpressPark, the 6,000-meter array will be installed on downtown streets and lots, along with sensors buried in the pavement of every parking spot to detect the presence of cars and price accordingly, from as little as 50 cents an hour to $6. __Street parking, like pork bellies, will be open to market forces__. As blocks fill, prices will rise; when occupancy drops, so will rates. In an area like downtown, ideal for Shoup’s progressive pricing, __people will park based on how much they’re willing to pay versus how far they are willing to walk to a destination.__

There are two points I want to make about the two bolded phrases, one directed to my left and one to my right. (See? I'm an even-handed centrist.) To Leftists, this talk of subjecting parking to "market forces" sounds like the usual neo-liberal claptrap, in which public services are thrown open to private avarice. And it's understandable that we're all wary of talk of the market, which has become a kind of universal solvent for putative reformers looking to batter down the welfare state; as Tom Frank [remarks](, faith in the market has a utopian fervor on the right, as the free play of capitalism is presented as the magical solution to all problems.

But rather than accept the ideological representation of The Market as all that is competitive and efficient and bounteous and true about capitalism, it's worth reflecting on just what the Leftist objections to the market traditionally were, and whether they fit the case described here. There are two that I think are most important. The first is a narrowly economic argument, to the effect that under the "anarchy" of capitalist competition, the pursuit of private profit leads to unjust and irrational results: luxury goods are produced while the poor starve, inventories pile up that no-one can afford to buy, factories lie idle while thousands are looking for work, the environment is despoiled, and so on. In Trotsky's [Transitional Program]( ), there are repeated references to this kind of market anarchy, which will inevitably be superseded by a superior form of rational, conscious, worker-controlled planning. Indeed, says Trotsky, "The necessity of 'controlling' economy, of placing state 'guidance' over industry and of 'planning' is today recognized – at least in words – by almost all current bourgeois and petty bourgeois tendencies, from fascist to Social Democratic."

But is someone like Donald Shoup trying to introduce the anarchy of the market, or suppress it? Consider:

> Parking had never crossed Shoup’s mind when he left Yale for L.A. in 1968—his focus was public finance and land-value theory. In 1975, he stumbled onto a master’s thesis by two USC students who had worked their way through school parking cars for a man named Rex Link. “Link,” says Shoup, “was annoyed that county workers were offered free parking downtown when federal workers had to pay. ” Link’s student employees proposed a study. “They found that 72 percent of county workers drove to work alone,” says Shoup, “but 60 percent of federal employees carpooled, took public transportation, or even walked. These were workers in the same professions, driving to the same location.” When forced to pay a practical value for their parking, drivers were twice as likely to carpool—traffic congestion was halved, carbon emissions were halved. “The more I thought of that,” says Shoup, “the more I thought there was a perfect storm here. __No one can tell you why parking prices are set as they are. But when people pay comparatively little for something that’s expensive to produce, the result is collective irrational behavior.”__

The Market has been so mystified by its apologists that we no longer recognize a planned economy when we see it. It's true that that last sentence is, in some ways, redolent of old pro-market critiques of Soviet planning: when prices are arbitrarily decreed by the state rather than equilibrated in competitive markets, irrational and suboptimal outcomes are the result. But Shoup's alternative is not merely to unleash the anarchy of the market, in which private firms somehow compete to offer parking at the lowest price. The ExpressPark experiment, as described in the first quote, is an exemplary case of central planning. The city begins by decreeing a production target, which in this case is maintaining one empty parking space on each street. The complex system of sensors and pricing algorithms is then used to create price signals that will meet the target. The key point here is that the capitalist market's causal arrow has been reversed: rather than market price fluctuations leading to an unpredictable level of production, it is the production target that comes first, and the prices are dictated by the quota. What this reminds me of, more than anything, is some of the abortive experiments in economic planning that happened in the USSR under Kruschev, as fictionalized in Francis Spufford's *Red Plenty*. Mathematicians and economists, including the Nobel prize winner Leonid Kantorovich, attempted to use the mechanism of prices, not to restore capitalism, but to make central planning work better. Consider this exchange, which Spufford invents between Kantorovich and his academic critics:

> ‘But what about the evident similarity between your “valuations” and the market prices of a capitalist economy?’ asked Boyarskii, who was sounding rather strained.

> ‘It’s true that there is a formal resemblance,’ said Leonid Vitalevich. ‘But they have a completely different origin, and therefore a completely different meaning. __Whereas market prices are formed spontaneously, objective valuations – shadow prices – must be computed on the basis of an optimal plan. As the plan targets change, the valuations change.__ They are subordinate to the very different production relationships of a socialist society. Yet, yet, __the scope for their use is actually bigger under socialism.__ The capitalists actually agree with you, Dr Boyarskii, that the mathematical methods we’re talking about should only be applied on the small scale, on the level of the individual firm. They have no choice: there is no larger structure, in the economy of West Germany or the United States, in which they can be set to work. They have had some success, I believe. I’m sorry to say that, since George Danzig and Tjalling Koopmans made their discoveries of “linear programming” in America during the war, the techniques have been adopted there far more eagerly, far more quickly, than in the Soviet Union. Linear programmers in the USA calculate routes for airlines, and devise the investment policies of Wall Street corporations. But we still have an opportunity before us which is closed to the capitalists. Capitalism cannot calculate an optimum for a whole economy at once. We can. There is a fundamental harmony between optimal planning and the nature of socialist society.

This seems much closer to what Donald Shoup is doing than the traditional liberal conception of the free market. The same might be said of various "market based" solutions to climate change, which begin by setting price on carbon or a limit on total carbon emissions and then allow the rights to emit to be traded. Once again, the plan targets come first and the prices come second.

There is a second line of argument against markets, however; that they are not merely anarchic and inefficient, but also induce ideological mystifications that perpetuate capitalism and exploitation. Bertell Ollman puts the point as follows in his [criticism of market socialism](

> One major virtue of centrally planned societies, then, even undemocratic ones, even ones that don't work very well, is that __it is easy to see who is responsible for what goes wrong. It is those who made the plan. The same cannot be said of market economies which have as one of their main functions to befuddle the understanding of those who live in them.__ This is essential if people are to misdirect whatever frustration and anger they feel about the social and economic inequality, unemployment, idle machines and factories, ecological destruction, widespread corruption and exaggerated forms of greed that are the inevitable byproducts of market economies. But to the extent this is so, only a critique of market mystification will enable us to put the blame where it belongs, which is to say—on the capitalist market as such and the class that rules over it, in order to open people up to the need for creating a new way of organizing the production and distribution of social wealth.

This attack, too, fails to land a blow against the LA parking experiment. Despite the presence of price signals, and a market, it is no mystery who is responsible for the new regime of fluctuating meter prices: the city of Los Angeles, urged on by its academic homunculus Donald Shoup. Indeed, it is the very visibility of the planners that makes projects like this so controversial among those who take their right to free parking for granted, and who oppose policies like congestion pricing that would mitigate traffic by charging drivers for entering busy areas. This is also part of what makes cap-and-trade climate policy vulnerable to right-wing attack; whatever its "market based" costume, everyone knows that the policy begins with government lawmakers and bureaucrats.

Which is not to say that all opposition to these schemes is unfounded. There's a blind spot that characterizes many proponents of things like the re-pricing of parking, particularly those who we learned to call "left neo-liberals" this summer. It's captured in the second phrase I bolded in that first passage: "people will park based on how much they’re willing to pay versus how far they are willing to walk to a destination." In just three words, "willing to pay", we have swept away the inequality of wealth and power that any attempt to turn market mechanisms toward planned ends must confront. Willingness to pay, of course, is also a function of *ability* to pay, and a market mechanism implicitly attributes worth to a person's desires in proportion to the money they have to spend.

Thoughtful neoclassical economists [know this](, but they usually choose to ignore it, presumably because the consequences of confronting it would be too politically uncomfortable. Their own theories tell them that, due to the [decreasing marginal utility of money](, an extra dollar is worth more to the poor than to the rich. It follows that asking an extra dollar for parking hurts the well-being of the poor far more than the rich, and systematically privileges those who don't need to think twice about paying six dollars for a parking space. To which a good left neo-liberal would no doubt reply that the issues of rational pricing and wealth redistribution are logically distinct and should be thought separately. But politically, this means that redistribution is the lonely last instance that never comes.

All of which is enough to make a good progressive recoil from such a thing as "the market price for street parking". But this position is not nearly audacious enough. Rather than a rejection of market relations, this is merely a rejection of a novel form of planning, in favor of the older, more obscure, more unfair and more inefficient methods of planning the use of public space. We could say instead that what's needed is a direct assault on the inequalities of wealth and income that subvert the functioning of prices, and thereby impede the realization of the plan.

Detroit Facts

November 26th, 2009  |  Published in Cities, Social Science

Detroit facts are like the opposite of Chuck Norris facts. Each one portrays the city of Detroit as being unimaginably and implausibly screwed up and economically depressed. And unlike Chuck Norris facts, Detroit facts are true.

My favorite Detroit fact used to be: what's the average price of a house in Detroit? I would ask people this, and almost no-one gets it. When I first started asking people this a couple of years ago, it was about $10,000. I think it's less now--the median was reported as $7,500 earlier this year.

Now, however, I have a new favorite Detroit fact. In New York City, you can buy this for $600,000:

Greenwich village studio apartment

It's a very nice little studio apartment in Greenwich village. On the other hand, for only $583,000 in Detroit, you could have bought this:

Pontiac Silverdome

That's right, it's the Silverdome. Needless to say, this does not augur well for the future of Detroit. Nor does this:

This plots gains in house prices with post-crash declines in different cities. Detroit's housing prices didn't really go up during the bubble, but they've come down with the crash.  Which suggests that it's the underlying weakness of the local economy that's bringing down prices. I think urbanists need to be thinking a lot harder about what we can do about places like this--bringing them back to their former glory seems impossible, but to simply abandon the people who live there would be immoral. We need a strategy for, quite frankly, gradually letting these places shrink. See also Ed Glaeser on the case for letting Buffalo die.

The Game Beyond the Game

September 10th, 2009  |  Published in Art and Literature, Cities, Politics, Social Science, Sociology

The new issue of City and Community has an article by Peter Dreier and John Atlas about a show that captivates many an urban sociologist, The Wire. Their piece extends comments they made last year in Dissent, in a symposium about the show. In both pieces, they repeat the common accusation that the show is nihilistic, because it presents urban problems but doesn't show any solutions to them. To bolster the point, they dredge up a quotation from an interview, in which Simon proclaims that meaningful change is impossible "within the current political structure".

As a corrective to what they see as The Wire's shortcomings, Dreier and Atlas catalogue some of the real community activists who have struggled against injustice in Baltimore, and won some small victories. And these are indeed inspiring and courageous people, who have managed to win some real improvements in people's lives. But by bringing them up and presenting them as the solution to all the problems The Wire portrays, I think Dreier and Atlas miss the point of what David Simon and Ed Burns are doing with the show.

It's misleading to say that The Wire is nihilistic. It's true that the problems it portrays appear, within the context of the narrative, to be insoluble. And it may even seem, initially, as though the show is sympathetic to a conservative position: the poor will always be with us, government intervention always makes things worse, so we might as well just give up and try to make things better in our own small, individualist way. But this would be a profound misreading, because the show suggests, not that there are no solutions, but something far more complex. We come to understand, as the seasons unfold, that each of the dysfunctional institutions we see is embedded in a larger system that goes far beyond the scale of Baltimore. There is, as Stringer Bell puts it in season 3, "a game beyond the game". We therefore have to conclude, not that there are no solutions, but that there may be no solutions at the scale of a single city.

The police find themselves hamstrung by their need to deal with national agencies like the FBI, which has been caught up in the mania of the "war on terror". The dockworkers find their way of life destroyed by the automation and the transformation of the global shipping industry. The mayor is at the mercy of Maryland state politics because he needs funding. The local newspaper struggles, and fails, to adjust to a world of profit-driven news and competition from new media. Even the drug dealers are at the mercy of their out-of-town "connect".

None of this implies that Baltimore's doom is inevitable. Neither imperialism, nor neoliberalism, nor Republican domination of state politics, nor the tabloidization of all journalism are inevitable. If they seem that way on the show, it is because of the careful and clever way in which the story is framed: these larger-scale institutions, the ones where the real agency lies, are always kept off screen and held beyond the reach of the characters. Thus the world the characters inhabit appears to them to be one where nothing can be changed. That doesn't mean that the world of the show, that we viewers can sense, is actually so tragic.

But is true that none of these problems can be solved in a single city, and most of them require a long-term, and fairly radical project of social transformation. This may present difficulties for liberals who would prefer that social problems have incremental, non-threatening solutions. But by presenting small-scale local activism as an adequate response, Dreier and Atlas do a disservice both to the problems they address, and to the activists themselves.

Perhaps, however, their real political objective is somewhat different from simply promoting the importance of urban collective action. The giveaway comes at the end of the City and Community version of their essay:

Perhaps, a year or two from now, Simon or another writer will propose a new series to TV networks about the inner workings of the White House and an idealistic young president, a former community organizer, who uses his bully pulpit to mobilize the American people around their better instincts.

This president would challenge the influence of big business and its political allies, to build a movement, a New Deal for the 21st century, to revitalize an economy brought to its knees by Wall Street greed, address the nation's health care and environmental problems, provide adequate funding for inner-city schools, reduce poverty and homelessness, and strengthen the power of unions and community groups.

A show like that would certainly be a nice bit of wish-fulfilment for liberals who like to imagine a "great man" riding in and fulfilling all their fantasies. But it's unclear what has to do with our world, in which an ambitious young politician used his charisma and the wishful thinking of his base to ride to power, and then proceeded to cater to the needs of bankers and insurance companies while sinking America ever deeper into an intractable war in Afghanistan. Faced with that reality, the world of The Wire doesn't look so nihilistic or unrealistic after all.