Venice, the one in Italy that is, is to charge day trippers €10, or $11 or so, to visit the city. This may or may not be a good idea, trying to limit the number of people who come to see the place. But if you are going to try and ration something doing so by price is always – at least very nearly always – the right way to do it. Here, rationing by price is quite obviously better than the only other way of doing it, rationing by congestion.
Think it through for a moment. For most North Americans or Northern Europeans $11 is about an hour of wages. Actually, it’s more like 30 minutes of median wages. So, how long does it take to get into – or how much extra time does it take to navigate through – an overcrowded Venice? If it’s anything more than 30 minutes then those tourists are gaining from the deal – assuming the tax reduces the number who come. Plus, obviously enough, the people collecting the money are too.
So, we end up with a previously costly but expressly uncosted form of rationing, queuing or congestion, transformed into a costed one, rationing by price, and we manage to make everyone involved better off in the process. Yup, sure looks like rationing by price is the right thing to be doing.
[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Nearly 30 million people set foot in the canal city each year, according to the Italian tourist bureau. But not even a third spend a night in one of its more than 1,500 hotels and B&Bs. Those who do stay are charged around $5 extra per night as part of the city’s seven-year-old tourist tax. Now, thanks to a measure included in Italy’s 2019 budget that was passed over the weekend, the rest—primarily cruise-ship passengers who sleep on their boats—will now have to pay, too. As part of Italy’s 2019 budget, which was passed with a parliamentary majority, Venice has now been given permission to charge tourists who do not spend the night as much as $12 a day for just setting foot in the canal city. But implementing the new tax may prove a logistical nightmare. Water taxis traverse the canals from the airport far outside the city center, meaning it might be easy for those flying in to avoid the tourist tax if they arrive directly in the city center, though city officials argue that anyone flying in is likely also spending at least a night. [/perfectpullquote]Actually, this is trivially easy. Any and every taxation system has leakage, the question is always how much are you prepared to pay in order to plug such and thus collect more tax. Here the answer is simple enough. We don’t actually care about those making it in under their own steam, there aren’t all that many of them.
But the cruise ships? That’s thousands of people a time. It’s also easy to tax them. Ask the captain of the ship “How many passengers do you have?” then demand that times €10 as the docking fee. Job done.
Rationing by price is almost always the best manner of rationing. And when you’ve got a simple charging point like this in Venice with the cruise ships it becomes a no brainer. Charge the tourists, you’re making them better off by doing so.