The Seen vs. the Unseen; J. Semmens

John Semmens THE SEEN VS. ~ ;~~I .~ ,-~' . ~ It 2 THE UNSEEN: :J A Modern Example ACROSSthe country, state after state is chafing under the imposition of the 55-mile-per-hour speed limit. Self-appointed critics of the wisdom of the American public shake their heads knowingly, remonstrating against this ((typically shortsighted return to pre-crisis energy profli gacy." The Federal Highway Ad ministration weighs in with its own threat to withhold Federal aid to those states not abiding by the 55-mph edict. The intent, of course, is to force us to conserve precious resources. What isn?t realized is that the 55-mph speed limi t does not conserve re sources. A strictly enforced 55-mph speed limit would result in a sub stantial increase in the resources Mr. Semmens is an economist for the Arizona Depart ment of Transportation. consumed in order to produce the same output of goods and services.

Even more ironic, though, is that the original enactment of the re duced speed limit set in motion a chain of events which has led di rectly to the accelerated deteriora tion of the highway system. It is a classic case of the seen vs. the unseen that was first portrayed by Frederic Bastiat in the early 19th century. On the surface, it is plain to see that vehicles driven at 55 mph will generally consume less fuel than vehicles driven at faster speeds. Less obvious is the fact that reducing the speed limit from 70 mph to 55 mph decreases efficiency through in creased travel times of up to 25 per cent. In the bosom of the bureaucracy, time may have little or no value. 467 468 THE FREEMAN August However, in the real world ((time is money." People ordinarily must be offered an inducement to get them to spend their time. If we are to make a valid analysis of the advan tages and disadvantages of lower speed limits, we need to consider the element of time consumed or saved, as well as the amount of fuel used.

If the 55-mph speed limit were en forced to achieve 100 per cent com pliance, the maximum fuel saving would amount to only 18 per cent. Matched against the time loss of 25 per cent, this does not seem a very good trade-off. When we pursue the analysis further to take into account the relative prices of fuel vs. time, the consequences of this public pol icy appear even worse. In terms of the value of human time consumed in the trip alone, for every $1.00 of fuel saved $1.50 in time is lost. The above analysis does not even begin to go into the question of the consequences of reduced transpor tation capacity. On the one hand, the reduced transportation effi ciency will raise the cost of trans porting goods more than would have occurred if greater speeds were al lowed and more fuel burned. In ad dition, less efficient transportation would increase the incidence of business inventory ((stockouts," un less inventories are enlarged to compensate for increased transpor tation delay. Financing enlarged in ventories in today's expensive credit markets puts even more upward pressure on interest rates.

Another answer to the problem of reduced transportation capacity un der the 55-mph speed limit is to in crease the size or number of long haul trucks. Increasing the number of trucks requires major capital in vestment to produce power units and trailers. Even so, the manufacture of more trucks does little, if any thing, to lower the per trip operat ing costs. Therefore, it should not be surprising to discover that the op tion most attractive to the long haul trucking industry was to increase the size of the vehicles. Fueling their case with fumes of the energy crisis, the trucking in dustry persuaded Congress to in crease the allowable limits on vehi cle size and weight. In January of 1975 Congress raised the weight limit to 80,000 pounds. This enabled the heaviest long haul trucks to in crease their operating efficiency po tential by nearly 10 per cent. Every body went home happy.

Little noticed in this valiant effort to reduce energy consumption and improve motor carrier operating ef ficiency was the potential impact on the highway system. At the same time that the increased vehicle size was producing a 10 per cent effi ciency gain for truck operators, it was also producing a 40 per cent in crease in pavement wear and tear caused by heavy vehicles.

1981 THE SEEN VS. THE UNSEEN: A MODERN EXAMPLE 469 Now, eight years after the de·· crease in highway speed limits and six years after the increase in allow·· able vehicle weights, we discover that the roadways are deteriorating at a faster pace than was anticipated when they were designed. The con sequence is that these roadways will require heavier maintenance out lays and many will have to be re· built at a cost of multiple millions of dollars per mile. The whole episode is a classie demonstration of what can go wrong when government seeks to resolve ((crises" by overruling market-based decisions. The time honored market solution to shortages is a rising price. The rising price serves the twofold purpose of dampening demand while stimulating supply. Yet, this most efficient equilibrating mechanisrn was rejected and upset by the gov· ernment's determination to find a ((better" solution, one that would be less costly to the society than letting fuel prices rise.

Of course, there is no ((less costly" solution than a free market for meeting the material needs of a so ciety. This fact has become painfully apparent over the last eight years. Self-Reliance Fortunately, many of the emergency energy rules have been dismantled or abandoned. Unfortunately, some of them, including the 55-mph speed limit, are stubbornly still in place. Perhaps, though, there is a silver lining in the whole sorry episode. The legacy of prematurely deterio rated highways can serve as a poi gnant reminder of the folly of tampering with the allocation func tions of the market. Making use of this lesson will not be easy. Current discussion of the accelerated road way deterioration problem conveys the impression that it is something that (Just happened," or worse, that it is merely a result of inadequate taxing and spending. But, the causal chain, lengthy and complex though it may be, is there.

It can be traced and documented. The accelerated wear and tear on the nation's highways is an end product of a chain reaction set into motion by the government's attempt to suppress the energy resource al location mechanisms of the market. It is a high price to pay, but it won't be a total loss if the experience serves to keep. us from making the same mistakes in the future. ® IDEAS ON LIBERTY If it were ever true that we grow strong by bearing burdens, it's true today. It follows, and is equally true, that we grow weak and flaccid when our burdens are taken away. VOLLIE TRIPP IN THE VIEW of most concerned professionals, zoning legislation is a necessary bulwark against chaos in urban land use. Without zoning, it is contended, external diseconomies will abound: pickle works will come to rest next to single family homes, glue factories beside country clubs, and oil refineries in proximity to restaurants. Moreover, it is feared that rapacious land developers will erect, profit from, and then abandon buildings, placing undue strain on the capacities of municipal services.