Driving U.S. 95 and studying Econ 101

On a late August day a few years ago, we were going to the lake. When we go to the lake for an extended period of time we often take two vehicles to carry the gear, the dog, the food and the beer. It’s also nice to have two vehicles for rescue purposes. I’m an economist. I drive cars until every last drop of physical utility can be squeezed from them. Breakdowns happen. Old cars also magnify imperfections in the road surface, something we all know about in the Inland Northwest.

On this late-August day I was driving our 1986 Isuzu Trooper. I love this rig (that’s what we call SUVs and pickups in North Idaho), but we allow it to go out of town only if we’re going to the lake. At nearly 170,000 miles the Trooper’s front end is a little loose and wobbly, so much so that ruts in the road can cause sudden and significant sideways vehicle thrust. As I drove west briefly on Interstate 90 from U.S. 95 to Idaho 41 to head further north, I held the steering wheel firmly to negotiate the rutted road. While other causes like big trucks might share some blame, rutted roads and highways come mainly from studded snow tires.

In Idaho we don’t have enough resources to do the study, but right next door the Washington state Department of Transportation estimates that studded tires do about $11 million of damage to state roads each year. In addition to the sudden sideways thrust problem I experience in my Trooper, water collects in ruts in the pavement and can cause hydroplaning. We no longer let Miss Budweiser or Miss Thriftway on our lakes. We reserve hydroplaning for cars on Interstate 90.

Elsewhere, damage from studded tires is so bad that the severe-winter states of Minnesota, Michigan and Wisconsin have banned them. Washington restricts studded tire use to the period Nov. 1 to April 1. In less-regulated Idaho, we can use studded tires from Oct. 1st April 15.

Using studded tires generates what economists call external cost. This is cost borne not by the generator of the cost, drivers with studded tires, but by the driving public and taxpayers at large. Markets don’t work well in the presence of external cost. In fact, external cost is one cause of what we call market failure, and market failure is a possible justification for government action to reduce studded tire use.

Few economists would recommend banning studded tires, however. This would likely reduce the benefit of studs by more than the cost of them, a normative economic no-no. But a special excise tax on studded tires would make economists’ hearts soar like bald eagles at Lake Coeur d’Alene, especially if the tax were set equal to the marginal damage of the studs in the tires.

Had I been driving west from Spokane on that late-August day, this vignette on external cost and market failure would now be complete. But in North Idaho in August and September, we can incur a unique double whammy of external cost, rutted roads that are hard to see through the clouds of smoke.

In North Idaho we grow a lot of grass seed. Part of the production process for grass seed is field burning, and when the wind is blowing the wrong way, as it was on our way to the lake, you can see no more than a few hundred feet in front of the hood of your car as it thrusts left and right from tire ruts. Mario Andretti would have trouble negotiating these driving conditions.

After intervention by the Saint of Old Trooper Drivers I finally made it to the Highway 41 exit and headed north. But now the traffic had virtually stopped. The smoke was so thick that police officers were stationed at intersections to direct traffic. I didn’t think I would ever get to the lake. This is yet another example of external cost. Grass growers benefit from field burning, and pass some of the cost on to the public at large, in the form of slow and dangerous driving, smoky days at the Coeur d’Alene Resort, and respiratory illness and death.

Because the costs are external, the market does not generate the right amount of field burning. Too much field burning is the result of improper incentives. Economists recognize time and time again that when generators of an activity don’t bear all the costs of that activity, they do too much of it.

Yes, North Idaho is a unique place. In the winter, we can have studded tires on our cars longer than anywhere else. And we can grow grass seed and burn the fields to save money. But in August and September, we bear the external cost of our unique North Idaho activities on the smoky, rutted road on the way to the lake.