The Environment Writer

Recently, I traveled to Amsterdam on a course designed by the Foresight Design Initiative to make a comparative analysis of sustainable innovation in Chicago and Amsterdam. Both cities are doing fascinating work in the environmental sector, but one of the most simple yet striking features of sustainability in Amsterdam is the bicycling. I probably don’t need to spend much time describing why bicycling is one of the most sustainable, healthy and freeing modes of transportation, but the cultural pervasiveness of bicycling in Amsterdam and the Netherlands can certainly teach us some lessons. The following is a short excerpt from my presentation at the Chicago Green Drinks about our bicycling tour Amsterdam:

There are several reasons why bicycling is so popular in Amsterdam: like Chicago, it’s a flat city. They have very little space (a reason which motivates many of their environmental initiatives), so they have to embrace alternative forms of transportation (perhaps even alternative forms of bikes). The city has a history and culture built around bicycling which leads to the development of policy and infrastructure around the bicycle. The combination of culture, policy and infrastructure make this a very practical and comfortable form of sustainable transportation.

On what must have been one of the coldest days of the year in Amsterdam, not so different from the weather we left in Chicago, our group went for a morning bicycle tour with Pascal van den Noort, director of the organization Vélo Mondial, an international non-profit that promotes cycling.

Some interesting features of the tour included dedicated and separated bike lanes with their own stop lights, features like the award winning Nesciobrug pedestrian and biking bridge and other newer developments incorporating features like bike lanes between buildings and traffic diversion to the periphery.

On the topic of making bicycling a practical, comfortable and safe experience, I was interested to see the lack of bicycle helmets – I don’t think I saw one the entire trip. While personally I’m a fastidious helmet wearer in Chicago, this contrast really exemplifies the ease of biking in Amsterdam and the stress and danger of biking in Chicago. The biking culture and environment in Amsterdam really does promote a safe and relaxed environment for riding that can be utilized by everyone from men and women to small children to the elderly.

One last plug has to be made for our excellent tour guide Pascal and his organization. Vélo Mondial promotes cycling as a positive mode of transportation and sustainable mobility through global conferences, projects and events. I hope there could be a potential to involve the organization in the promotion of biking here. In Amsterdam, a city where Pascal described one of the main problems as “not enough bicycle parking,” I have high hopes that Chicago can and will learn a great deal in terms of making sustainable mobility a practical, comfortable and typical activity in the city.

Bicycle Parking (from velomondial.blogspot.com)

There has been much ink spilled over the environmental and economic costs and benefits of the federal government’s “Cash for Clunkers” program (officially known as the Car Allowance Rebate System)- whether the higher gas mileages outweigh the benefits of new raw material use, whether the foreign automobile sales really helped the American economy or whether the money spent there would have been spent elsewhere anyway.

But a certain economic aspect of the program I have not heard frequently addressed frequently is the resulting deadweight loss from the economy in the long term because of the inefficiency resulting from taking an entire segment out of the used car market.

For simplification, I will disregard the requirements and break vehicles into three segments based on economic value in a hypothetical regular market:

Group A. High Value: > $4,500

Group B. Medium Value: $1,000 to $4,500

Group C. Low Value: < $1,000

Here it is important to pose a new vehicle to purchase in our hypothetical example, and we select the cheapest to find out what the minimum cost to the consumer is in this program. The Hyundai Accent GS Base is the cheapest new car on the current market, running around $10,000. In the highest rebate Cash for Clunkers category, the consumer can receive a $4,500 credit. This leaves the consumer paying, at a minimum $5,500 to participate in the Cash for Clunkers program.

Minimum Vehicle Cost ($10000) – Maximum Rebate Allowance ($4500) = Minimum Consumer Cost ($5500)

Group A, the highest value used cars, are not worth trading into Cash for Clunkers because they are worth more on the market than the value of the rebate.

Group B, the medium value vehicles, are the most useful for Cash for Clunkers, because the economic return to the consumer is greater than the value of the car. Additionally, individuals owning cars valued at $1,000 to $4,500 are far more likely to be able to afford the minimum consumer cost of $5,500 for a new vehicle, unlike:

Group C, the low value vehicles. Like Group B, the economic return is greater than the value of the car, greater even than those consumers in Group B. However, these consumers are much less likely to afford the minimum $5,500 necessary to take part in the program.

The clincher comes when one considers what Group C will do 1-5 years in the future as their low values cars necessarily need replacement. Normally, consumers in Group C would move to cars in Group B that have reduced in value enough to become affordable to them. However, many of the Group B cars have been taken out of the market due to the program. The result is a future bottleneck as demand outstrips supply of Group B cars as Group C begins to need them.

Group B vehicle prices will increase. However, because having a vehicle in the US is rather inelastic (ie, necessary, so the demand will not change much) consumers in Group C must either spend a higher percentage of money on these vehicles (at the cost of something else) or suffer the potential economic, employment and social consequences of not having a vehicle, which are rather great in the United States. Many on the edge of affordability will not have a choice and will be forced to take the latter.

This scenario, which government and consumers have gladly bought into in the Cash for Clunkers program, is called ‘deadweight loss’ a term describing an economic inefficiency when goods and resources are not allocated efficiently. When we talk about efficient resource allocation, we are also talking about environmentalism. Although we must use natural resources to live, environmentally conscious living uses the least resources for the greatest gain, which is also economic efficiency.

When doubts about the ostensible environmental and domestic financial short term gains from the program are put into the equation, we will only be able to look back at the Clash for Clunkers program with regret.