From the Sydney Museum of Modern Art. Photo by Charlie Brewer.

Yesterday, we discussed how “all you can eat” pricing can incentivize transit ridership. What about driving?

Traditionally, cars’ pricing is almost purely unlimited use. You buy the car up front, or have a fixed monthly loan or lease payment. You pay registration, property taxes, inspections, and insurance regardless of how much you use the car. Parking is usually free, whether you are a tenant, employee or customer. Your only costs per trip are gas and maintenance, and those you don’t even pay at the time you take the trip, but later, when your gas tank is empty or your tires are worn. There’s a good summary of the per-mile costs of driving here. Insurance, registration, residential parking and car purchase costs about 50¢ per mile, and gas, maintenance, and tires cost about 14¢ per mile. When you hop in the car, it’s easy to not even think about these costs. Psychologically, once you own a car, keep the gas tank filled and maintain it properly, additional trips are “free”. The psychological incentives today promote driving and discourage transit. If we want to rectify that balance, because of externalities like pollution or congestion, safety and noise, then we should move toward more pay-per-use systems for cars.

Charge tolls to drive on roads. Charge per use for parking. Daily or hourly parking charges are better for this purpose than monthly contracts. With a monthly contract, parking is already paid for on day one, so all additional days are “free”. Other methods are less common: insurance can be priced per mile. Shared-car services like Zipcar charge by the hour. Taxicabs charge per trip and mile.

It’s possible to make some of these changes without changing the overall costs, so it’s not even necessary to get into a cars vs. transit debate. If someone pays $1,000 per year in insurance and drives about 12,000 miles per year, it doesn’t cost them more if you charge $200 plus 6.6 cents per mile. It would encourage people to drive fewer miles, however (for comparison, gasoline including taxes is currently about 8 cents per mile). Also, if apartments typically rent for $1500 a month and include two parking spaces free, it’s not an increase if the rent drops to $1300 per month and you pay $100 more per month for a parking space. Parking at work, which used to be unlimited at $120 per month, could be $6 per day against a pre-paid account instead of an unlimited per month charge.

If you change the way people pay for transit and cars, you can still fund both, but align the incentives so that they aren’t pushing people to choose driving over transit. Because driving involves pollution, congestion, safety risks, and inefficient land use patterns, ending our structural economic bias toward driving would help society as a whole. Meanwhile, because increased transit use reduces the bad effects of driving, and increases the political will to run more frequent vehicles and expand the network, it’s good for society to lower the barriers to transit use.

Michael Perkins blogs about Metro operations and fares, performance parking, and any other government and economics information he finds on the Web. He lives with his wife and two children in Arlington, Virginia.