As you may or may not know, the pollution levels in Paris have been above safety levels for the past week now. The air pollution is a result of heavy industry and excessive usage of motor vehicles. This is a classic example of market failure where we’d have the Marginal Social Costs being greater than the Marginal Private Costs, creating a welfare loss to society, an undesirable equilibrium and therefore, market failure.
What does the Parisian government do? That’s right, they ban cars. The policy states that on one day of the week, if the car driven has its licence plate ending with an even number, it will be allowed to drive on the road. On the other day (the next day), they won’t be allowed and it will be time for the ones with odd numbers to go out on the roads. At the same time the Parisian government has cut the price to consumers of public transport to 0 (yes, it was free of charge). An interesting move by the government, as economic theory would suggest that the ban, and a reduced price of a close substitute should lower the demand for people wanting use motor travel, and the government would pat themselves on the back for a job well done.
You’ve probably realized by now that it’s a pretty stupid policy, and if you haven’t, here are a few reasons why it’s bad:
1) The fine for those who break the law is 18 euros. Since behavioral economics is on the spec, this seems like a good time to consider it. Some drivers do not want to opt for the free public transport offered by the government, and are prepared to pay the 18 euro fine because they value the solitude and comfort of their car to be worth the fine. (I’m also curious as to how the government can actually track which people are in violation of this law. It would require a lot of police officers and street cameras that’s for sure, and it wouldn’t be cheap to supply them)
2) Many companies heavily rely on delivering items via motor travel. By only allowing people to drive on alternate days, the businesses are losing revenue and therefore losing profits every day this policy is in effect, since they won’t be able to make as many deliveries per day as usual.
3) From a political point of view, to implement such a policy (which annoyed the majority of the Parisian population), with mayoral elections only a week away, is not a wise way to try to get voters on your side.
This is isn’t the first time this has happened though in Paris. The BBC article below mentions that the policy was tried before in 1997. So perhaps the Parisian government should consider focusing on reducing long-term air pollution levels, as opposed to the quick fixes it’s opting for now:
1) The government could pass regulatory laws on pollution from heavy industry since they also contributed to this mess. The laws would have to push the companies down a green-energy path, and reduce the levels of pollution they emit,
2) They could opt for the ‘London’ approach. London has a slightly different policy with cars, in the sense only heavy vehicles are banned during certain time periods of the day (last I heard, I’m not sure if this is still enforced or has been altered slightly). It keeps the average population happy, whilst it encourages people who drive these massive lorries to find better environmentally-friendly ways to transport their goods/services. The city also has tight laws on the roads, and heavy fines to back them up (not just pollution violations of course, it covers all types of road violations like passing red lights). This has significantly reduced congestion on the roads as consumers have switched to the more appealing London Underground system which is a highly efficient and relatively cheap way of getting around the city.
3) An official mentioned that a day of rain would be a better quick fix than a day of banning cars (Of all policies that could have been suggested, waiting for it to rain is what’s recommended (Y) . In all seriousness, the government should focus on long-run investment rather than short-term. Not only will it reduce pollution levels in the future, but it will keep the population happy, and improve standards of living).
That’s all I have to say on that really, it’s no surprise that the ban was stopped after 1 day lol. Both are excellent articles as they highlight market failure and government intervention.