Who cares about golf balls in the foothills? I do because they’re white. Insanely white! They’re so white that you can spot one from 250 yards away, which is what’s intended when you’re on the course. Having so many white golf balls in the view is not as advantageous, though, when you want to admire Idaho’s natural beauty. So, my first thought was, let’s pick them all up, which we did. My second thought was how did they get here?
It turns out that one of my neighbors loves golf so much that he enjoys launching golf balls from his backyard into the foothills. Sounds like fun, I must admit. But there’s a problem—he doesn’t pick them up! That’s where economics comes in. He doesn’t pick them up because there is zero cost to him for leaving the balls in the foothills, with the exception of the risk of being caught in the act.
The golf balls in the foothills are an example of what economists call an externality. An externality occurs when there are two people (or groups of people) and the actions of person No. 1 have an impact on person No. 2, but person 1 does not take these “external” impacts into account when making decisions.
At the end of the day, externalities occur because the total impact of one’s actions is not taken into account when decisions are made. If a way exists to charge my neighbor for the cost of picking up those golf balls (my sons’ going rate is $1.00 per ball), he may be less likely to launch them, I suspect, and go to the driving range instead (10 minutes away).
You probably know where I’m headed given the title of this piece. Traffic is, in many ways, a result of externalities. In the world of economic development, the benefits of new construction projects are quantified, including jobs created and tax revenues generated from construction and operations. These benefits are assigned dollar values. Some costs are assigned dollar values as well, which are then used to offset the benefits and obtain a net impact. Critically, though, some impacts are difficult or nearly impossible to quantify with any degree of precision and, as a result, are not quantified at all.
The problem—a big one—is that by not measuring difficult-to-quantify impacts decision makers essentially assign them a default value: $0. That means we ignore it, which leads to suboptimal decisions.
The zero-dollar assessment would not be much of a problem if it pertained to just small things, like golf balls. In fact, externalities often apply to our most important societal issues—clean air, clean water, and most anything to do with environmental impacts.
It also applies to traffic. The issue of traffic is complicated for sure. But one reason our roads are jamming up is because we, as a society, have implicitly assigned a dollar amount to our collective time sitting in traffic: $0/hour.
We need to start valuing our time if we want to see better outcomes. For new development downtown, this means quantifying the additional time motorists would spend in traffic as a result of a new project and assigning a dollar amount to this time. We also need to start valuing our environment. For new development in the foothills or near the Boise River, this means quantifying in dollar terms any detriment to our surrounding environment: harm to wildlife, lost access to open spaces, and negative impact on our quality of life.
A full accounting of costs will help ensure that Boise’s economic development actually improves public welfare as it’s intended to do. Until then, be prepared to spend more of your time sitting in traffic.
Kevin E. Cahill, PhD is a senior economist with ECONorthwest in Boise. The views expressed in this article are those of the author and do not necessarily reflect the views of ECONorthwest.