Need for Speed…and Parking

For some reason, people in Queens are often shocked to discover that I have a driver’s license and that I actually drive. This disbelief is either due to their unwarranted condescension toward New Jersey citizens or due to the fact that they frequently spot me from a mile away boarding the E or the Q64. Most people I encounter seem to have an aversion toward any form of public transportation.
They argue that buses and trains are an uncomfortable, dirty form of commuting, whereas driving provides them with a greater sense of independence and an overall more pleasant ride. That so many individuals prefer to drive bears tremendous economic implications that are evident on a microcosmic and macrocosmic scale, from the parking lots of Queens College to the streets of China.

As I briskly walk to class everyday, I am grateful that I do not have a long commute. For many, this is not the case; on average, students drive about half an hour. After encountering the unpredictable Devil, better known as the LIE, they then face another arduous task: finding parking. Queens College has a system in place whereby, at the onset of the semester, it hosts a lottery in which it gives out a certain number of decals for spots. Parking on campus is a precious commodity. Not only does one not have to worry about finding a spot, but one is also guaranteed a close walk to campus proper. If chosen, one may then purchase it for $250.

For full time students who spend more than a few hours on campus, a simple cost benefit analysis highlights the tremendous perks to obtaining this spot. Especially for those who rush in the morning, this is the Holy Grail. Unfortunately, competition is fierce. Only a limited number of spots are available. The scarcity of the decals, combined with the high demand for a spot, results in the decal bearing a value that far exceeds its stated price of $250. As a result, a black market pops up, in which the decals are resold. Since students are desperate to obtain a convenient parking spot, their willingness to pay is high, and their price elasticity is very low. Consequently, the price surges at least 40%. Covert arbitrage ensues; many lottery winners simply enter in an attempt to ultimately make a hefty profit.

Halfway across the world, China faces a similar situation. Due to the large population and expanding middle class, the roads in China are congested with cars. Such unbearable traffic stifles efficiency, from the time wasted on travel to the increased pollution in the air. In response, Beijing issues a strict annual quota for issuing license plates. Just like at Queens College, a lottery is held, in which “only about one in 725 out of 2.7 million applicants [are] granted a license plate.” Also just like in Queens, (semi-legal) loopholes arise to circumvent this limitation. For example, people either obtain licenses from other cities, or they rent the plates from other individuals. Though put in place in order to increase efficiency, it leaves many people, for whom public transportation is not an option, unable to commute.

Enacting such a rule in a country that is home to the world’s largest car market will also impact business growth. Uber, ubiquitous in New York, has a presence in China, too. For those who do not win a license plate in the lottery, having the option to hail an Uber is a new and convenient alternative. Uber faced competition with the local ride hailing company Didi Chuxing and, earlier this week, sold its China wing to Didi. This left the Chinese company with a staggering market valuation of $35 billion! A behemoth with a monopoly in a market that has increasing demand, Didi Chuxing is poised to become one of the most powerful companies worldwide.

As the World’s Worst Parallel Parker, I have no qualms with walking or taking the MTA. With new modes of transportation emerging, from Uber to self-driving cars, it seems that the economics behind driving is rapidly changing. Look out (for new innovations) ahead and drive safely!

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Published in: on August 3, 2016 at 3:18 am Comments (0)

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