People, people, people, everywhere

Dr Madsen Pirie wishes to remind us all of Bastiat, the unseen, or that there are always opportunity and third party costs:

The weekend saw the Cambridge half marathon; many other similar weekend events are held in various towns and cities. They are no doubt good for the health of those who participate – the occasional death notwithstanding – and they benefit charities with the money they raise, and sponsors with the publicity their backing secures.

Not everyone gains, however. Local shops and restaurants lost out in Cambridge because with so many streets closed off, customers could not reach them. Taxi drivers lost business because they could not navigate the closed-off routes. Council taxpayers lost because several parking bays were closed for days in preparation, and they will ultimately have to fund the cost of workmen putting up barriers and taking them down afterwards.

When London streets are closed for “fun” events, it causes massive disruption by way of traffic jams, as well as lost business for the shops, restaurants, pubs and wine bars unlucky enough to be affected. It is probably the same in other cities. Although money is raised for good causes, many such events must make a net loss when the down side is included. They are, in effect, a transfer from local businesses and taxpayers to the charities involved.

I am by no means suggesting that such events should be stopped, but it would make sense to hold them in places and along routes that take account of the losses and the difficulties that they otherwise cause to others.

The correct answer is a Pigou Tax on runners. Who is brave enough to suggest that?

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  1. One of the reasons why, when I was looking around to see if our town could hold a marathon after the “sucesses” of having the Tour de Yorkshire coming through, I planned the majority of the route along a picturesque dismantled railway line to the next town.

    A few years ago I was amazed that I could book my favourite holiday cottage right on the TdY route one day before the tour came through. It turns out that a huge majority of the spectators turn up for the day and then go home, hardly any of them actually book into accommodation and stay there. Shops get a boost for the day, but accommodation bookings actually goes down.

  2. Oh no, this is one of those insights that I accept but half wish I hadn’t been exposed to. Hadn’t thought about lost business and disruption for street events. I was already somewhat of a curmudgeon about people touching me to fulfil their personal ambitions, marathon, skydiving, taking a year off and touring around Europe on their bike despite their charitable alibis.

  3. Ah, but such events may raise economic activity on/around their happening: runners and their families may need somewhere to stay, runners want to buy photos and other tat from the event, runners buy more shoes so they have the right shoes for an event, runners get the munchies afterwards, and – in my club at least – can drink their own weight in beer, etc. Perhaps businesses have externalities that they’re not paying for, eg congestion and pollution, so temporarily banning them brings some benefit to the community to offset the loss of economic impact. And, to jgh’s point, if businesses can’t capitalise on a thousand or so new strangers coming to their area, what are they playing at? As someone very wise said on Twitter only today, it’s the net effects we’re interested in.

  4. Dear Tim, don’t be suggesting new taxes, even tongue-in-cheek. Meme theory suggests that once expressed, released into the environment, an idea like that will not go away until some damn fool makes it reality.

  5. Or perhaps the Pigou tax should fall on those who find they think better of a town that rises above the meanest material calculation, and better of themselves that they live in a world where non-monetary values can find some communal expression.

    Sure, it’s worth having a fuller idea of the immediate costs of these things, but the longer term reputational effects (even the monetary ones) just are not measurable. The choices require judgment under unavoidable uncertainty.

  6. I chanced through Edinburgh the afternoon of the Marathon. The station and environs had sold out of cakes, baguettes, bacon sandwiches, hot chocolate, the lot feeding the hungry on their way home. I had to refuel later at Greggs in Newcastle which is no bad thing, but I wish price gouging had been permitted by the retailers. It would have been worth it just for the reactions, and at least the produce wouldn’t have sold out as quickly.

  7. Is the economy there for the benefit of the producers, or the consumers?

    If fun runners need to pay a tax for the inconvenience of streets full of runners to shopkeepers, do shopkeepers also need to pay a tax to compensate for the inconvenience of streets full of shoppers to fun runners? Or do they already? Who owns the streets, anyway?

    Interesting question. Thanks for being so thought-provoking.

    • Said shopkeepers already pay such a tax, usually known as property and sales taxes. Although it is really the customers paying the tax. The difficulty comes in calculating how much higher taxes discourage the customers’ buying.

  8. But of course these taxes, Pigouvian or not, already exist. If you think they don’t, try to organize a fun run or similar involving closing off roads to traffic etc without large sums being transferred from you to your local council or similar. Let me know how you get on. They may not be used to benefit the inconvenienced shopowners etc, but that is hardly the runners’ fault.