What If We Paid the Full Cost of Driving?

Driving is too cheap in the United States. It’s a complicated thing to unpack, but David Levinson, engineering professor at the University of Minnesota and blogger at the Transportationist, attempted to analyze the cost per-minute.

Car sharing service Car to Go charges on a per-minute basis. What if we made all out transportation decisions that way, asks David Levinson. Photo: Wikpedia
Car sharing service Car2Go charges on a per-minute basis. What if we made all our transportation decisions that way? Photo: Wikipedia

Levinson estimates that the true cost of driving — including vehicle purchase price, insurance, taxes, repairs, and costs like parking and air pollution that are not borne by individual drivers — is about 34 cents per minute.

Unfortunately, the cost we’re most likely to consider when making a discretionary trip — gasoline — adds up to only about 5 cents per minute. If we made driving decisions based on the incremental costs, and drivers bore the full cost of driving, our behavior would change a lot, Levinson says:

Economists use the elasticity of demand with respect to price to estimate this. This tells us how much demand drops as prices increase. The short run elasticity of demand for driving (measured in vehicle miles traveled) with respect to the price of gas is about -0.05, meaning for every 100% increase in the price of gas, there is a 5% decrease in gasoline consumption (which correlates to driving in the short run, in the long run there is also a shift in vehicle fuel economy). So if we hold that to be true for all costs, going from $0.05 per minute to $0.34 per minute is 676% higher cost (a 576% increase), leads me to expect about a 29% reduction in fuel use (mileage) in the short run if people paid their roughly fixed costs plus infrastructure plus externalities of vehicle ownership as variable costs instead. Of course at the magnitude of shift, the elasticity values may no longer hold. In any case, this is no small matter. Certainly the direction is right, countries with much higher fuel taxes see much less driving in general.

Elsewhere on the Network today: Strong Towns examines the personal impact of one car crash. The Transport Politic considers how to make transit-oriented development work around the Metro stop at DC’s Dulles Airport. And Steven Can Plan singles out some of Chicago’s worst red-light-running offenders.

0 thoughts on What If We Paid the Full Cost of Driving?

  1. Everyone has their own preference. Pretending that your preference isn’t pushing costs on other people is the point in question. Many of the people living in the core are doing so because it IS more affordable for them – They can save money now and hopefully one day afford a down payment on a home. Many others need to have access to the larger job market that the core provides, because they don’t have the skills necessary to compete.

    Arguing that perpetual renters will eventually need gov’t-provided affordable housing is essentially saying “everyone should go buy a home where it’s affordable.” We just had a financial crises that was in large part the result of that exact kind of thinking. Cities that have high percentages of renters tend to be more economically robust, and renters tend to be more able to follow opportunity wherever it shows up. I understand the desire to build your own equity instead of feeding some landlord’s pocket – I fully intend on doing that myself – but the suburbs are not the answer to society’s woes.

  2. You’re committing a huge logical fallacy by ignoring the difference in magnitude. Mass transit subsidies don’t do any harm beyond the cost of the subsidy, if that even counts as a harm for society. If anything, they create a benefit by encouraging people to use an efficient mode of transportation.

    Cars have countless well-documented externalities that the government basically pays people to produce. Even if you pretend away climate change, you can’t really ignore that traffic congestion and auto over-utilization have economic costs. These include:

    • less sidewalk space

    • parking lots take away from space that could be parks or housing or factories

    • health risks/costs (including being run over and air quality)

    • interference with other economically necessary traffic, like delivery trucks

    I’m sure the list could snowball.

  3. BUT THEY DON’T PAY THE FULL COST. Is it that hard to understand?

    Which way do you lean politically? I can give you sources on either side of the aisle (and poltical-dichotomy-independent sources) that explain this point. I understand that it’s a counterintuitive thought for anyone that lived through the 70’s and 80’s when only poor people lived in almost every American city center, but it is the truth. You’re lucky enough to be in NYC (or the near suburbs) where the problem doesn’t tend to be as pronounced, but it is still something that suburbs everywhere are slowly figuring out.

  4. And your point is…? Even with a minority of them driving at the same time, severe congestion ensues.

  5. that just means NYC is more at risk of having people flee for whatever reason and a return to the 1970’s. in detroit people literally abandoned homes. in NYC all you have to do is wait until your lease is up and not worry about selling.

    just wait until millennials start having kids en masse. my oldest is almost 7 and i’m looking to move far away because the price of anything with more than 1 bathroom is insane in a good school zone

  6. Detroit had a high homeownership rate and was predominantly built in a car dependent pattern. Thank you for supporting my point.

  7. point is most people with cars in the outer boroughs take transit to work and dont drive everywhere just because they have a car.

    if your non sequitur was even remotely true i would see a lot more parking turnover where i live

  8. The health care and other mortality costs of treating people poisoned by car driver’s pollution in New York City alone is approximately $7.1 billion every year. Costs that car drivers are not paying.

  9. and this is only true in a few large cities. in the USA the car ownership rate is pretty close to 100%. it’s not some small minority passing their costs on to everyone else.

    even i the burbs here if you factor out people driving into NYC almost everyone owns a car outside NYC and pays for the infrastructure. only places with a low ownership rate outside NYC and a few other big cities are college towns

  10. most of that pollution is trucks, taxis which tend to be a lot older and all these decades old buildings with decades old heating systems that pollute the air.

  11. I strongly doubt that there is anywhere that car ownership approaches 100%. I note that zero source was provided for this assertion.

    Such a place would have no children or elderly people who are unable to use a car. A place without children will soon cease to exist.

  12. In exactly the same way as all the major car-free zones in large cities throughout the world. Manhattan is an island, like the car-free city of Venice.

    Hint: my 12-year-old daughter can pull a bicycle trailer with over 1,000 lbs of cargo. Uphill even, thanks to this modern invention called “gears.”

  13. I agree with you. I’m using anon_coward’s language so it’s easier for them to understand. If you read elsewhere in the comments, they even go so far as to suggest that the US has nearly a 100% car ownership rate as a whole (as though children, old people, and anyone who chooses not to or can’t afford to own a car don’t exist). It’s ludicrous.

  14. Ever heard of rust? Even if they never move an inch cars will rust out and have to be replaced.

  15. How are you so adamant that the average person driving doesn’t cause any negative side effects anywhere ever? This is getting ridiculous.

  16. In these “few large cities,” the costs of transit access are not borne by anyone beyond the borders of the city. Virginians don’t pay for New York’s transit. However, New York does pay for Virginia’s driving habits.

    And even if car proliferation is near 100%, those who use more intensively cost the most for everyone else, yet manage to pay the least per mile.

  17. “… countries with much higher fuel taxes see much less driving in general.”

    But the thing is, the higher fuel taxes are not the only factor. Countries with much higher fuel taxes also have other ways people can get around. What tends to get overlooked, in proposals to have drivers bear more of the true costs of driving, is how different the U.S. is from other first-world countries (if you allow the charitable premise that the U.S. is still a first-world country). We have less transit and fewer walkable places than our peer countries, greater disparities of income and wealth, and fewer transit-accessible employers. What that amounts to is that for many Americans, probably most, a substantial part of their driving is not choice but necessity.

    I’d be able to pay higher fuel taxes, parking fees, and so on, but it would be a pinch. Lots of people would be hit harder than I would be. I’m not opposed to putting more of those costs onto people who drive *if*

    –the burden of these costs is lightened in some way for those least able to afford them;

    –a substantial amount of the funds raised goes to expanded transit; and

    –effective incentives are put in place for employers to locate near transit, and effective disincentives for inaccessible locations.

    Unfortunately we’ve let sprawl and car-dependence go unchecked for so long that most of the money, population, and political clout is out in the burbs, and the guiding lights of our political philosophy are no longer Madison and Jefferson but Ayn Rand and Ronald Reagan, so my “ifs” can be translated into “when pigs fly and pink unicorns fart infinitely renewable energy.”

  18. Some of those countries with higher fuel taxes might also be smaller, hence there is less driving not only because of the tax, but because of a lot of factors such as the lack of long distances that have to be traveled and political decisions made long ago to discourage the development of a driving-based land use pattern. For example. The area of Copenhagen in tiny Denmark (pop. 570,000) is 34 square miles. The area of sprawling Albuquerque, NM (pop 555,000) is 190 square miles. Me thinks the horses are long gone from the barn.

  19. Let’s do this analysis for walking. We’ll start with the farming for food to produce the calories used, the children who make the shoes in far away lands, and the quarrying the materials needed for the sidewalks and work our way to a cost per minute using various arbitrary and estimated figures along the way to arrive at something which supports our predetermined opinion. Then we can tax and subsidize as needed to shape society the way we want it. Which of course add to all the existing distortions and if we keep doing things that way the result is Elvis dead slumped over the toilet.

    Or perhaps we can start undoing all the distortions and interventions and move things in the direct of a free market and then people will naturally make their own cost/benefit analysis that really works because they are paying the costs.

  20. What has gone unchecked in this country is the desire to tell our neighbors how to live. To have economic interventions so we pay less for more while neighbors pay more for less. Of course the more one is able to bid for a politician the more lucrative this system is. The more it distorts things in one’s favor. The end result is what we have now. More interventions will only continue the distortions although they may reflect another group’s preferences. Collapse is certain in either case.

  21. rust is directly proportional to how a car is kept clean and how much winter road salt it sees. The best original condition antique cars often come out of states where their owners put them away for the winter.

    The best restorable cars of course come from the desert states where high mileage has worn out the mechanicals, the sunlight faded the interior, but the body is as rust free as the day it left the factory.

  22. Thank you for breaking this down. Truly one of the most asinine articles ever published on streetsblog (and I am a fan).

  23. No, that is only writing about the health care and other mortality costs due to traffic, not building heating systems. Unlike you, I am able to provide sources for my assertions. In this case, the Medical Officer of Health AQBAT model. Toronto is the benchmark city, with the same methodology linearly scaled for New York City.

    Let me know if you have any problems following the math and I will walk you through the analysis.



  24. Okay. So go ahead and show some math for this. Especially interrased in fuel/maintainence expenses and the externalities of foot traffic. Presume marble in your quarry figure if you like.

  25. Your “free market” is a fantasy. You’d need to wind out centuries of “socialism” and renegotiate ownership of the roads, and the external costs (pollution, impositions on other people’s time and attention) are left out of it completely.

  26. Technically we do. The funds that go to road construction come out of other taxes. So the full cost is born by the taxpayer, but not the individual driver.

    The cost of driving has to be born directly onto the drivers themselves and nobody else. How to do this is a difficult question.

  27. The marginal increase in “fuel” needed to walk, vs. just breathe, is really quite minimal — especially compared to the marginal increase in fuel to move around a multi-ton steel cage.

    And, in fact, we DO price things like transit on a marginal-cost basis. If you, like most Americans, don’t have a transit pass, you pay per trip, which is a major disincentive to take transit. Whereas the fact that the big costs of driving (the car, the insurance, the off-street parking spaces) are largely already paid for in advance makes the marginal cost of each new driving trip low — and, in some cases, even negative, since every additional trip amortizes out prepaid, fixed costs.

  28. Actually, now we do see Enterprise Car Share parking on the streets outside of airports. They, and other car-sharing companies, pay a fair rate for using public land for their business. In most cities, they pay legal rates far higher than any individual or business does to use curb parking.

  29. *Politically* difficult. Modern technology makes it relatively inexpensive to do the following:

    – a weight-indexed-and-pollution-indexed mileage tax.

    – a carbon tax (on fossil fuels, either burned in power plants or burned in cars). Already done in parts of Canada.

    – a congestion tax. Already done in other parts of the world. Tech could make this more flexible, and thus probably more efficient.

    – rejiggering the financially-at-fault rules for crashes to put more of the burden on the heavier vehicle; a side effect of this is that insurance rates will rise slightly on heavier vehicles and on cars and trucks in general (the mere existence of cars on the road makes walking-under-the-influence far more dangerous than it otherwise would be, and our current system of law/liability does not account for this). Already done in other parts of the world.

  30. “we DO price things like transit on a marginal-cost basis”

    Which transit authority prices the single ride ticket in a way that reflects marginal cost of that single ride?

    Especially in a similar manner to the article’s discussion of the cost of driving, wherein the full cost of the transit system (or at least the cost of the rolling stock + operations cost) is put into the calculation.

  31. “if you allow the charitable premise that the U.S. is still a first-world country”

    Yes, we have clearly slipped behind the emerging market world, and barely keeping ahead of the third world–we do compare unfavorably to the BRICs, and probably to Nigeria and South Africa, too. It’s a wonder that the Guatemalans and Hondurans aren’t heading for a real first world country instead. Must be because they’re falling for the Hollywood/Madison Avenue image, rather than the reality.

  32. But, since we’re measuring ‘economic cost’, how much is *saved* by that early mortality, in the form of social security, medicare, medicaid, and general health care costs for non-pollution-related illness?

    Also, your link shows nothing of the “scaling up” to New York–which, undoubtedly, has a different air pollution profile than Toronto. Using a linear scale from Toronto ‘costs’ to NYC ‘costs’ ain’t going to be very accurate.

  33. Crawl back under your rock, coward. I’m not some “small minority of people riding around all day”. My bike is my transportation, yet gross proportions of my taxes are spent subsidizing YOUR destructive driving habit. See the infographic about who is really paying for our roads.

    Some safety improvements using paint (bike lanes, etc) are a pitance to implement, considering 25M in this country bike on a regular basis (most own a bicycle, or have). Some cities are seeing a groundswell in bike commuters, some approaching 10% modeshare. Given the inumerable benefits, the govt should be paying us to walk or bike, not charging.

  34. Sorry coward, drivers don’t come close to paying the full cost. Nowhere near close. Most people on the planet don’t drive, yet all are paying HUGE socio-economic and environmental costs associated with driving and carbon based transport (YOUR driving habit). Those who don’t drive in this country alone are paying a far disproportionate cost for a transportation system that doesn’t suit them in most cases – only kills them (peds/bikes account for nearly 20% of traffic fatalities, yet less than 2% of the transportation budget covers ped/bike safety and infrastructure). Again, do some reading or crawl back under your rock, where you came from.

  35. Whether you drive a car or not, you still need the basic infrastructure for roads for delivery trucks and service vehicles, police, fire, ambulance, buses. For people who don’t own an automobile, do your tax payments cover the share you use? Probably not as much as the other road users.

    Hate cars all you want. But if you take the taxes generated by auto/truck users out of the equation, other road users will see their share of taxes go up. Create a system where every road is tolled, and you will see the costs of delivery and services go up. That’s passed directly on to all goods and services that you purchase whether you bike to the store, walk to the store or drive to the store. This kind of tax will definitely be more burdensome on the lower income people as it will be regressive.

    Hate the fact that people park their cars on the street and do not have to pay for it (except where metered parking is allowed)? Find me a politician that will stand up and say to the voters, “you know that parking space in front of your home, you have to pay for it now with a higher city sticker, gas taxes or an adjustment to your property taxes.” How long will he or she remain in office? No one is going to touch that third rail.

    Hate the fact that stores have parking lots? The cost is a very incremental cost of the total overheads on that operation that add costs to your purchases. The number one cost is employee wage expense, followed by costs of goods, facility rent/purchase amortization, debt, utilities and so on. The costs per auto parked at a typical grocery chain amortized over 35 years is probably less than what is added to the cost of goods sold for the delivery of food and utilities.

  36. 1) You missed the point. The point being that the sort of analysis in the article is pulled out of someone’s behind with a predetermined result.
    2) Transit is so heavily subsidized by drivers, income tax, sales tax, etc that fares are simply arbitrary political numbers.
    3) car insurance is mandated, regulated, licensed, etc by government to be high priced.

    4) want things priced out better? get a free market. Except that’s the last thing the anti-car crowd wants.

  37. Guess that means we’re going the route of Elvis in the bathroom.

    We’ll end up with a free market or something closer to it one way or another. we can choose to unwind the interventions and distortions slowly and orderly or just wait for the status quo to collapse hard and more interventions will only make it hurt more.

  38. I don’t see that any of that is necessarily so. I just returned from vacationing in a place where fewer people drive, gasoline is far more expensive, and both expensive parking and congestion charges apply. It seemed astonishingly civilized and non-collapsed. (London and Cambridge are like that.)

    And as a fan of the free market, you surely must must know that when housing is incredibly expensive in a large and dense city (and people are allowed to move around the country and emigrate, which they are), it means that the city is generally regarded as a desirable place to live.

  39. It’s nice you get to vacation. Some of us have to keep working to pay the taxes.

    It has nothing to do with driving and not driving. That should be a personal decision, not one dictated by whomever has political control at the moment through a series of social engineering equations.

    What it has to do with is the interventions, distortions. Housing is “incredibly expensive” because people bid it up with cheap money because the fed fixes interest rates at zero for the banks. There are so many interventions and distortions that if any part of this web fails it can be disaster. Every little crony interest, every control freak who wants to tell his neighbors how to live, uses government to interfere to their ends.

    We’ve got a system now where ~50% of the population do not pay significant portions of their earnings in taxes and/or survive on a government check. Meanwhile most of the rest work anywhere from 4.5 to 6 months a year just to pay taxes. It’s not a sustainable social condition let alone an economic one.

    The economy is so juiced right now that the fed has changed the rules so that exiting money market funds can be prevented. It seems they’ll be doing the same with bond funds next. All to try to keep stocks, juiced on fed money creation from faltering and preventing bond fund collapse if interest rates rise.

    Currently savers earn effectively zero on their savings. Then there are the distortions to tell people how to live. The taxes on this or that. The subsidies for this but not that. Household balance sheets have never been in worse condition as so many people are strung out on cheap credit. To keep auto sales up, sub prime credit is at work while the government piles on greater regulatory costs.

    What’s going to happen to all those things when the larger economy’s cheap money addiction’s high ends in the inevitable crash? Go ahead, add some more taxes on driving because you don’t like driving. Tax people more to support transit. You could add the straw that breaks the camel’s back.

    This country is like Elvis in his last days. We can start pulling off the pills that treat the side effects from the other pills or we can add more pills. Dr. Nick has another prescription in hand. No pain if you take it.

  40. That is the best estimate I have been able to find. The cars are the same, human lungs are the same and both are waterfront cities. I am not really seeing any major profile differences.

    If you believe that you have better numbers, feel free to share them along with your source.

  41. I have not seen too many horses in the car-free zones of any major city that I’ve been in. Lots of cargo bicycles making deliveries…

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