Last night we had a faculty meeting.  One of the issues that came up was parking congestion.  The University is growing, and this year there have been some problems finding parking spots.

More parking was suggested, but the number of parking spaces isn’t the problem.  The problem is that the University gives parking permits for free, and zero is always a bad price.  By charging for parking rather than building new parking, the University could increase revenues instead of increasing expenses.

It is very unlikely that the University will start charging a parking fee, and if they do, the fee will probably be too small.  One of my colleagues argues that parking demand is inelastic, that is demand will not be reduced by an increase in price.  That may be true for a very small fee, but it surely wouldn’t hold for something substantial.

The reason a parking fee is not likely to happen is that faculty would see it as a pay cut.  Of course, the money raised from the parking fee could be used for salaries, or perhaps incentives for quality teaching or research or some other worthwhile activity.

Another possibility is to raise faculty salaries by the amount of the parking fee.  This would have a net cost to the University, but people could find parking.

Unfortunately,  proposals for allocating scarce resources by price are often not well received, and that can make economists unpopular on campus.