The Mysterious Parking Garage Market
Tea party activists and Randians and market fundamentalist miss some things about the real world. One is the distinction between free markets and competitive markets. Free markets are for one-off deals with buyers and sellers who don’t know each other, have equal power in the market, will not see each other again, and don’t convey any information about the transaction to the rest of the market. One-off deals are the métier for people like our current dear leader. Except for the equal power in the marketplace bit.
All competitive markets have some rules. Rules evolve, perhaps without the intervention from government regulation, and the system works repeatedly. Supply shows up, demand shows up, demand and supply are satisfied, and markets clear.
This is a good story. There are some details that get glossed over, however, and one of them is in whose interests the rules of the market are written. And this is really about power – not just market power, but sometimes physical power or power to withhold service or power to delay.
Fundamentalists on these matters can claim that even the rules of the market are market-driven – that is, there is some discussion, bargaining, negotiation, over the rules.
And that is true. As long as supply needs some demand, there must be a way to make the demand come back the next time. So “market-friendly” rules consider some of the needs of the buyers in the market.
But, caveats. Sometimes, the supply in the market does not create its own demand – Say, as we say, is wrong. Say's Law (Yes, I know, Say was talking about a general glut of products, and later changed his view. Here, I am only concerned about a general glut of parking spaces, with waiting demand, and … the market fails to work).
Sometimes, the supply could not care less about demand, because the supply exists for reasons other than to meet demand. We don’t always see the reasons, but they certainly exist, even if shrouded in mystery. Sometimes, artists just like to make art. But there can be more prosaic reasons that excess supply exists in the presence of obvious demand.
Parking garages near the Hangzhou Pregnant Women’s Hospital are a good example. The hospital, and two other big hospitals within two blocks, are all located close to xihu, the big lake that is the focal point of Hangzhou. This is not really downtown, in the sense of lower Manhattan downtown, but it is Columbus Circle downtown, in terms of people on the street, taxis, bikes, motorbikes, buses, trucks, with the added challenge that it is China, and only free market rules about which side of the road to drive on, or walk on, or just stand still on.
There are thousands of people, sick, healthy, family, friends, doctors, nurses, garbage trucks, food supply trucks, medical supply trucks, all trying to get into or out of the hospital in the period 6:00 AM to 10:00 AM.
It is fair to say that parking for cars is limited. In all of our visits to the area, and to the hospitals, I have found only two real public parking lots within, say, a mile. There is other parking, but it is only for customers of a particular hotel, or restaurant, or business. General public parking, for those who want to visit xihu, or go shopping on the street, or go to the hospitals, is tough. The Pregnant Women’s Hospital does have a designated parking garage of its own, but that is for doctors and administrative staff. Husbands of women who have already given birth are also allowed to park there. One of the benefits of having a baby.
The two public lots – actually, they are one big underground lot, with two levels and entrances and exits on opposite sides of the street - are very convenient to the hospitals – about a block away from all three hospitals. And if you get there by 6:30 in the morning, you can drive right in, find a spot (there are plenty of parking lot attendants to guide you to empty spots on both levels) and be on your way. But by 7:30 or so, the parking lot management decides to limit demand satisfaction – to ration supply. They block off the entrances, and limit access to one car every few minutes, from 3 to 10 minutes per car.
One could understand some reasons to ration demand, if spaces are reserved for doctors, or hospital use, or something. But even doctors come to work by 9:00, or 10:00, and the parking lots are still limiting entry, and the doctors would have no other way to get into the lot other than sitting in line with everyone else, so such a rule makes no sense.
I mean, it really makes no sense. At 7:30, or 9:00, or 10:00, there are plenty of available spaces inside the garage. Many. Scores, to hundreds. With no one parking in them. During the course of the workday, the garage never comes close to capacity.
The parking is not free. Not expensive, but you might think that the market rules in this case are being written by the forces of supply in the market, and the rules are written to maximize profit. But that is clearly not the case, with so many available spots and dozens of cars lined up, around the blocks, in two lines, one line for each entrance, waiting to get in. The wait to get into the parking lot, at 8:30 in the morning, ranges from 45 to 90 minutes. (see note 1, below)
So there must be some other rule being observed, or some other principle maximized.
Maybe the parking lot management wants to raise fees, and is waiting to build demand before implementing a rate change. But with so many cars waiting outside, every day, for months on end, that makes no sense.
It is China. Maybe spaces are being reserved in case Hu Jintao (this was written in early 2012) or somebody, wants to come inspect the parking garage, and there will be 50 or 100 spaces waiting to satisfy demand from the entourage when they show up unexpectedly. But even in China, that makes no sense.
It is China. Maybe the parking lot attendants, unbeknownst to the management, are doing a little business on the side, taking some cars in before others, in exchange for a little hui lu- a bribe. But again, there are no cars coming in any side entrance, or going around the other cars in line. So that makes sense, but does not seem to be happening.
It is China. The parking lot underground is really big, and on two levels, and the attendants are not using radios to communicate, so perhaps, in consideration of the customers, the attendants are making sure that there are spots available before letting the next car in. Maybe there is a communication problem – the guys directing cars into spaces have to tell the next guy down the line that there is still another spot available, and that information gets passed to about six people, and takes about 3 to 10 minutes, before it gets to the guy who removes the “parking lot full” sign for the one next car. It is China, and that could make sense, but even in China, the attendants would probably show enough initiative to count higher than one, and allow two cars in at a time.
Perhaps the vacant spaces are reserved for individuals, who own the space and would want to have it always available. Perhaps. But I don’t think ownership of parking spaces would work in a location such as this, and in any case, there were always scores of empty spaces. Wouldn’t some enterprising parking lot manager make some deals?
Unlike my suggestions above, there could be simpler, even stupider explanations – air pollution regulations limit the number of engines running within the garage at any one time (sure); the parking lot management is concerned about pedestrian safety (to exit or enter the garage, people on foot have to mix with the car traffic on the ramps, a no-no in the US) – (right – although it is certainly possible to receive such an explanation, given with a straight face); the government of Hangzhou, in attempts to limit traffic, provides limits on parking garage access – this is actually sort of plausible, even if ridiculously stupid. The heavy traffic jams within two blocks all around, due to cars lined up to get into the garage, would be eliminated with more “market friendly” access policies.
All the times my wife and I visited the hospital I parked in this lot, so I have some experience. The 45 to 90 minute wait after 8:30 is no joke. But parking is extremely tight everywhere. One of the most ingenious ways of getting around the restricted supply of parking spaces was undertaken by a woman right in front of me in the line. We were both sufficiently close to the entrance gate that no other car could pass us or take our space. We were on the downward slope into the underground garage. But the woman had no intention of parking in the garage. She had an errand to run – perhaps ten minutes, or fifteen. She waited in the line of cars until she was almost in the garage, then got out of her car, took the keys, and went and ran her errand. Got back, nothing about the line had changed. She got back in the car, did a u-turn in the combined entry-exit driveway, drove out, and was on her way. Free parking. I think this is what Bob Hariman, or James Scott, calls local knowledge. Fabulous. This is something about making the system work to your advantage.
About the parking lot - I confess to being at a loss. I always say that there are many ways to solve any problem, but …. It is a mystery. I would like to demonstrate the intricacies of the market, or of China, but I am stumped. The point I want to make, though, is that in this market, such as it is, the supply makes the rules, and the demand can only choose to respond or go on driving around the block. The rules don’t seem to be in the interests of the supply, either. It is a puzzle. A mystery. This sort of thing should be undefined. And it is at this point that Chinese themselves shrug their shoulders and utter the standard comment - you know, it is China. It’s fuza - complicated. Say’s law is clearly wrong – there can be a general glut of parking spaces in this garage, even in the face of excess demand. Somewhere, money must be involved.
Note 1- the line of cars waiting to get into the parking garage for the hospitals has plenty of precedents. For many shopping malls - I am thinking of yintai near xihu (bastardized English as InTime), or the xichen square mall on wensan lu, or even MixMall in the new CBD, there can be a line of twenty or more cars waiting to get into the underground garage, on a normal evening at xichen, or weekend anytime at yintai or MixMall. The parking lots can and do fill up, and the wait can be ten to twenty minutes even before the lot is full.
One has to question the design - it is not as if cars in modern China just appeared five years ago, and the shopping malls are very high standard in terms of store quality. No one is walking in, or even taking a motorbike. But there too, it is fuza - complicated.