Mexico City drivers understand incentives. Regulators…
Posted by Daniel Hall on April 3, 2008
…not so much.
Lucas Davis examines Mexico City’s decision to limit all cars to only 4 weekdays of driving:
In 1989, the government of Mexico City introduced a program, Hoy No Circula, that bans most drivers from using their vehicles one weekday per week on the basis of the last digit of the vehicle’s license plate. This article measures the effect of the driving restrictions on air quality using high-frequency measures from monitoring stations. Across pollutants and specifications there is no evidence that the restrictions have improved air quality. Evidence from additional sources indicates that the restrictions led to an increase in the total number of vehicles in circulation as well as a change in composition toward high-emissions vehicles.
Note that this is not because of problems with compliance. (The police in Mexico City are happy to take your bribe.) The basic story is that drivers purchased a second (usually cheap and dirty) vehicle that allowed them to continue to driving every day of the week:
While it was hoped that the program would cause drivers to substitute to low-emissions forms of transportation, there is no evidence of a decrease in gasoline sales or an increase in public transportation use. Instead, the evidence indicates that HNC led to an increase in the total number of vehicles in circulation as well as a change in the composition of vehicles toward high-emissions vehicles.
Here is another write-up.
Ok, you say, big deal, Mexico City got what it deserved, no benefit for a dumb policy. But surely no one else out there is stupid enough to try this. Erm…
Indeed, since HNC was implemented, similar programs have been implemented such as pico y placa in Bogota, restriccion vehicular in Santiago, and rodizio in Sao Paolo. In total, over 50 million people live in cities with driving restrictions based on license plates.
Similar programs are currently being considered for Monterrey and Beijing. Driving restrictions may seem like a reasonable approach for addressing the difficult problem of urban air pollution. However, this article illustrates the importance of conducting ex ante economic analysis of the substitution patterns likely to be induced by these policies.
Toll roads. Tax gas. Subsidize mass transit. Use prices. DON’T try to ration a valuable resource with arbitrary rules, regardless of how “easy” you think they are to enforce.