Obama, meet Ronald Coase

I usually am not a kind of writer who loves dragging a topic, but I am very compelled to post an extension of the previous post about global warming. I am currently doing a small project (for my school) to think of an idea to reduce pollution caused by private vehicles (cars)and would like to share my thought here.

One of the Obama's main campaign promises was he would push more environmental-friendly policies out from the White House. One of his policies regarding private vehicles is to reduce the number of high carbon emitting cars (trucks and SUV kind of cars I guess)circulating and replace them with hybrid or other low carbon-emitting cars. I have no problem if it is done efficiently. But, again, another typical liberal kind of solution, Obama forced the auto industries that received government bail out to produce hybrid cars that nobody wants to buy (okay, maybe there are some people out there are still willing to buy them, but how many? If the market demand is there, the firms will produce them long time ago without any government regulation). There has to be a more market-oriented solution to reduce pollution from cars.

Well, Mr. Obama needs to have economic advisors like Ronald Coase. Coase believes if the property rights are well defined and the transaction cost is low, the market would define its best outcome (please refer to "Coasian Theorem"). One of the applications of the theorem is the "cap and trade" regulation that is already imposed by the city of Los Angeles to reduce pollutants from factories.

Few modifications of the Coase's "cap and trade" could be applied to limit the number of cars circulating in the congested area. Rather than trying to limit the number of vehicles directly, we could make driving a less convenient experience for the drivers by limiting the parking space. For every business buildings (e.g. office, factory, warehouse etc) will be given certain “rights” of parking space provided for their employees. One could not provide a parking space or structure more than a certain area (or maybe volume since it is possible to build skyward). Thus, for new buildings that are easier to adjust to new rules could sell their “rights” to old business buildings that are more efficient to just buy additional rights of parking rather than re-construct the whole parking space. Then, by increasing the "cost of driving cars," (by reducing the convenience points) more people will choose to take public transportation to go to work and eventually will reduce the number of private cars being driven at least during the rush hours.

The biggest problem would be in calculating the efficient area for parking space. In the real world, the benefit and cost analysis would not be as clear as the one that economic students have in the class and government is not necessarily more knowledgeable than regular economic students either. To add the matter to the analysis, the lobbyists might sway the government's decision toward their favor as what usually happen in the politics.

I know I don't have any statistical evidence to support this idea. However, I believe it is worth to consider.
God bless