Economics in Two Lessons: 21st century cars

My central claim, in writing Economics in Two Lessons, is that most economic policy issues can be understood in terms of opportunity costs and their relationship to prices. I was talking about 21st century (electric and self-driving) cars, and several of the issues that came up illustrated this point very neatly. Among the objections to 21st century cars are the following

  • Since 21st century cars don’t use petrol, governments will lose the revenue needed to fund the road network
  • Self-driving cars will cruise around cities to avoid paying for parking, thereby increasing congestion
  • Because of the limits of AI, self-driving cars will inevitably kill people

The answer to the first two questions is the same. These problems arise because prices don’t reflect opportunity costs. Opportunity costs arise from cars using the road network, reducing access to others, and from the initial construction of the network, consuming land and resources that could be used for other purposes.

Under current conditions, petrol consumption provides a rough proxy for general road use, while parking charges provide a rough proxy for road use in urban areas, shopping precincts and so on. That relationship breaks down with 21st century cars.

But, this is a self-resolving problem. The reason we used petrol taxes and parking charges was because charging for road use was too hard. With 21st century cars, it’s trivially easy. We can set prices exactly equal to opportunity costs, taking account of time-varying congestion and any other factors we want to.

The dangers of 21st century cars can also be understood in terms of opportunity costs. The question isn’t whether they are perfectly safe, but whether they are safer than the next best alternative – the current mix of human drivers, including the large proportion of incompetents, drunk and drugged drivers.

A side issue that has just occurred to me: is it possible to steal a self-driving car with no manual override? It seems a bit like stealing a train.

70 thoughts on “Economics in Two Lessons: 21st century cars

  1. Harry
    replace the word “assume”, like words and derivatives in your last note with actual empirically tested observations. Then get back to me.

  2. It is fallacious to think that we can reduce real problems to an objective solution by money prices. Yes, we can reduce them to a solution but it is never an objective solution and very seldom a just or environmentally effective solution. It is essentially a control solution, a power solution. If we honestly admit that money does not measure value (of any kind, in any sense) but rather admit that money “measures out” effective control over the acquisition and apportioning of resources, goods and services, then we will take a realistic view of what money is and what it does. Logically, we would then greatly reduce the role of money in making social decisions and greatly increase the roles of ethics, democracy and science.

  3. Re: Car theft
    Certainly can steal the wheels. Also could steal the batteries and other parts.

  4. money talks.
    tiptoe up behind you.
    steal what they can.
    off the cuff
    or on the sly.

    (thank you JJ( turn up the bass))

  5. “Hey, dude, whatchoo think ya doing?”
    “I’m removing your wheels?”
    “Do I look like my wheels need removing? I can tell when my tread is getting low from how my wheels handle the road and if they needed replacing I would have driven to a tire shop. I didn’t call you and you don’t look like no mobile tire shop. I got 360 degree vision you know.”
    “But I uh… I need these wheels to save the life of a child and by Asimov’s first law of robotics you may not, through action or inaction, allow a human come to harm.”
    “Is that right? Well, just let me call my friend the Neitzschean semi-trailer on this one…”

  6. I bet no one can show me an electric car that does not have a fatally flawed battery.
    Even if such a mystical creature exsisted is humanity making progress if it deploys such a dragon at at time when each time it is plugged in it is drawing electricity that is not 100% renewable?
    One might be tempted to say well if the alternative is driving a car that would be using 0% renewable fuel one would be making a step in the right direction. But that would be a wrong answer anyways due to the initial energy production costs. Are you going to take my word for it?

  7. Curt: that’s letting the perfect be the enemy of the good. By your measure even walking is unacceptable because of the particulate emissions from shoes or the health problems from going barefoot.

    As with many questions it’s more useful to look at the high level goal (zero emissions or zero deaths) and ask “does this proposal move us towards or away from the goal?”. Your proposal seems to at best keep us on the wrong path while electric cars at least move us towards zero emissions/zero deaths (although I note that the death rate remains 100% and there seem no possibility of that changing).

  8. “even walking is unacceptable because of the particulate emissions from shoes or the health problems from going barefoot.”

    Death is the only answer.

    Except that it isn’t, because decomposing corpses emit methane and carbon dioxide.

    Cremation? Maybe, but crematoria are powered by electricity.

  9. “…is it possible to steal a self-driving car with no manual override? It seems a bit like stealing a train.”

    Much more manageable than a train, size-wise.

    My approach would be:

    1. Toss a large foil-lined (Faraday cage) tarp over the vehicle
    2. Having lost both visual input and cellular contact, the vehicle will almost certainly come to a screeching halt
    3. Drag said vehicle onto a low, wide trailer, and drive off

    Those with technical and IT skills better than mine would probably find it possible to hack the remote control function, and have it drive itself to their preferred location.

  10. Chris, a Faraday cage has to be extremely well sealed to be effective in the mobile frequency range. Try wrapping aluminium foil loosely around your phone with no obvious gaps visible, and then ask your partner or friend to call it. Now wrap it tightly with no chance at all of gaps and do the same. I can’t see a tarp draped over a car doing more than reducing reception a tiny bit.

  11. NO it is not a case of perfect being the enemy of good. Batteries require rare earth metals. They require large amounts of energy to produce. A recent German TV documentary pointed out that the break evern point for in carbon emmissions for an electric car versus a gasoline buring car for CO2 emmissions is 100,000 kilometers. That is a 5 to 10 year pay back period. Although electric cars will last longer than combustion engine cars they will not last indefinately. They will also need to be replaced. Furthermore I doubt if there is enough of the metals to even reasonably considering trying to make 8 billion people mobil by the use of the automobile. These batteries cost a certian amount now be we have access to the easy to reach sources of the metals, the so called low hanging fruit. The economic (opportunity) costs of producing these vehicles in the future will be higher not lower.
    Furthermore there is an environmental cost to placing salt on roads in the wintertime. Rail traffic opperates by spreading sand on the tracks by the train as it is needed. In addition the costs of maintinaing roads is higher than rails. Although the roads should not be abandon as they have already been built the less traffic that they carry the lower their maintance costs will be. Especially heavy truck traffic which causes a disproportionate amount of maintence.
    The good answer is that when people or goods move most of the time they should be moving on a vehicle that is connected directly to the electrical current. Ambulances, Fire Trucks, and Police Cars being a few obvious exceptions. Ambulances and Police Cars should certianly be battery powered.
    I doubt if it would make sense for that to be the case with Fire Trucks.
    Farm Tractors will likely need internal combustion engines. Agricultural pracitces need to be changed to greatly reduce the need for tractors.
    I doubt that humanity will make even the first step in trying to react to the treats that face us in the near future.

  12. Curt, “trying to make 8 billion people mobil by the use of the automobile.” is certainly fraught.

    “Batteries require rare earth metals…”

    See David Fickling’s piece:

    https w://
    “..As is often pointed out, most rare earths aren’t in fact rare. Lanthanum and cerium are as abundant as copper and lead, and are used in such pedestrian applications as pool cleaner and cigarette-lighter flints. Even the more prized magnetic elements such as neodymium, dysprosium, praseodymium and samarium are humdrum enough that Apple Inc. uses rare-earth magnets to make its power cables stick in place. Pottery enthusiasts can pick up neodymium oxide for around $50 a kilogram online to give a blue tint to their glazes; that’s probably a bit more neodymium than you’d find in a typical electric car.”

    & “Ambulances and Police Cars should certianly be battery powered…”

    https ://
    ““This is the future, there’s no doubt about it,” said Inspector Stuart Bailey from State Highway Patrol in a Victoria Police video posted on Twitter.
    “This is a fully electric car that’s going to change our fleet in Victoria Police. I can see in 10 years time that every one of our cars will be electric cars.”

  13. Savante, even if those rare earth metals like Lanthanum and Cesium are as abundant as lead and copper they are still rare earth metals. Fuehrther more they require mining to obtain. The last time that I looked mining has been viewed as quite damaging to the environment.
    Bamboo on the other hand grows really fast. It is strong and flexible. I would guess that there are some revolutionary leaders who think outside the box they would be thinking about transporation vehicle that is directly connected to the powersource and uses bamboo inplace of metals or even plastics for much of the vehicle. Although to the extent that we stop using fossil fuels for energy I think using them for durable plastic items such as furniture, park benches, and in vehicles of some sort the Saudis and other countries that depend on oil exports for their lives would not have to shut down their sources of income completely. I am disgressing though.
    in addition i used to visit the this one web site by this guy who was pushing to issues. One was a return to the gold standard which I find absurd. The other was to redisign our cities so that cars would not be neccessary. His motive for getting rid of cars was not because he wanted to prevent global warming. It was because he wanted to improve the quality of like of the huge percent of humanity that lives in cities.
    A city designed around the automobile is a soulless environment. Of course a person might not know that if they have never been in a city that was not designed for cars. Kind of like Americans not having a clue about what real bread tastes like until they come to Europe. Cities that are not designed to accomodate the automoblie can be much much more charming and livable that those build for the autombile. Sadly I can not remember his name or site anymore. But I think people can figure out that he is right about no car citeis being better independently of his site. Of course that is if they are properly planned. Planned artistically being informed by science.

  14. Its worth looking at this from the other side. If we all had self driving electric vehicles, would we consider changing to ones with petrol or diesel engines, with humans doing the actual driving.
    I think you’d find that the answer would be a resounding “no”.

  15. Realistically, to be sustainable, we should be looking at electric mass transit overall and then electric self-drive vehicles to fill the gaps. Eventually, resource economics will force us to adopt this solution. However, our current major system (corporate capitalism) responds too slowly to environmental push factors. This is proven by our lack of climate action to date. The empirical evidence of this failure is right in our faces. We need direct democratic state action to pursue these goals on time and to requirement. However, our time has just about run out. It appears people will have to suffer direct climate change driven pain and disaster before they will act effectively. That’s pretty much the way I knew it would turn out all along.

    The disasters have to start first (unfortunately) and they have to directly start affecting lots of middle-class people (unfortunately) before any real action occurs. The natural disasters have already started (for example half of the Barrier Reef is already dead, the Murray-Darling Basin is also about half dead aquatically). Still, people don’t care. They really don’t care enough. The latest Federal election result proves that.

    What will it take? The biggest disaster in Australia’s history, potentially attributable to climate change cause or at least exacerbation, were the Black Saturday bush-fires which broke out on 7 February 2009 for a death toll of 173 with 2,000 houses destroyed. How many factors of ten does that have to go up before real action is taken? To 1,730? To 17,300? To 173,000? The last number would certainly do it. The middle number might even do it too.

  16. Correction to the above. I missed the South-eastern Australia heatwave which killed 374 just before the Black Saturday bush-fires. We can add these tolls together for the biggest disaster in Australia’s history, potentially attributable to climate change cause or exacerbation. That’s a total of 574. My point stands. What numbers do we have to reach before we take action? 5,000? 50,000? These numbers will happen if we keep doing nothing.

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