Abolishing Public Parking: The Economic Case

The economic inefficiencies of in-kind government benefits are well-documented. One of the most egregious examples is public parking. By providing free or subsidized parking spots, governments are conferring an in-kind benefit that is often worth far less to citizens than the actual market value of that land.

The “gift card fallacy” illustrates this dynamic. Imagine an employer offering a $100/month parking spot. If an employee would only be willing to pay $70 for that spot, there is $30 in “dead weight loss” — the benefit is worth $70 to the employee, not the full $100 that the employer is spending.

In this case, a more efficient solution would be for the employer to simply give the employee $90 in cash. The employee receives $90 in value instead of just $70, while the employer spends $90 instead of $100 — a clear win-win.

This same principle applies to public parking. Citizens may only value many public parking spots at a fraction of the land’s true market price. By selling or renting out those spaces and providing citizens the cash equivalent, governments could unlock significantly more economic value.

The transition could happen gradually. Governments could start by instituting a land value tax on public parking, using the revenue to fund a universal basic income (UBI) or broad-based tax cuts. This would allow citizens to decide how to best utilize the value, rather than being locked into an in-kind parking benefit.

Importantly, this approach is more equitable than the status quo. Public parking subsidies disproportionately benefit wealthier car owners, while lower-income individuals without vehicles receive no such benefit. Converting to a cash-based system would be effectively progressive.

Furthermore, eliminating public parking opens the door to numerous secondary benefits. It would improve pedestrian safety and urban livability, as car owners pay the full cost of car ownership rather than having it subsidized. It would also free up valuable land for more productive uses.

Many countries, like Japan, have already largely abolished public parking, recognizing the inherent inefficiencies. As governments seek to maximize the value of public resources, eliminating public parking in favor of a cash-based system is an idea worth serious consideration.