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Economics, Mr. Trump, Carrier, and a Parking Garage

I love it when those not schooled in parking try to use our business as an analogy to some other business.  Justin Wolfers, a professor at the University of Michigan and writing in the New York Times gives it his best shot, but I think misses the target.

Basically his column says that President elect Trump’s actions with Carrier is useless in the intergalactic scheme of things.  It will make no difference. Here is how he compares it to a parking garage:

Think of the American economy as a 10-level parking structure or garage, where each car represents an active firm, and the seats in the car are the jobs available. A well-managed business like this is usually pretty full. But it’s also in a state of constant flux, with new cars entering as some people arrive, and previously parked cars leaving as others head home. Every hour, around a tenth of the cars leave the lot, just as a tenth of existing business establishments close each year and leave the labor market.

The deal at Carrier is akin to Mr. Trump’s intercepting a driver on his way to his car, and trying to persuade him to stay parked a little longer — perhaps by pointing to the enticing Christmas specials at the nearby stores.

It’s an approach that no parking business bothers trying.

But you might look at it another way.

Prices in parking garages are set based on how long a parker stays, and often on when they entered or left. They purpose is to attract parkers to stay based on their self interest. If someone knows they are going to stay all day, they park in a garage that has a lower all day rate (perhaps an early bird.)  The garage owner may want cars that are long stay, to keep his facility full.

In another garage, the charges may be based on the availability of space at a certain time. If the garage is empty, the price goes down, if it is full, supply and demand pushed the cost up and perhaps parkers go there because there is no alternative.

These pricing techniques are like labor costs, taxes, energy costs incentives, labor availability, unions, and regulatory policy.

The deal at Carrier is like Mr. Trump adjusting the pricing to entice more parkers into the garage when there is space available (perhaps a space being a worker). If we were at full employment, there would be no need to cajole companies to keep their factories where they are.  However we used incentives (different types of pricing) to get customers into our garages. Sure in the global scheme of things, its a drop in the bucket, but perhaps its representative on a tiny scale of what can be done. The goal must be to provide an environment where companies WANT to stay.

It seems to me is that the government has many tools at its disposal to jump start the economy and keep jobs parked in the USA.  A bully pulpit is only one. Its useful, political, and important, but there are others needed too.  A less onerous tax code, favorable regulations, and an educated and engaged work force can help too.

But what do I know – I don’t teach at a major university.

JVH

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