back of a spreadsheet; back of the net

I took an interest in the women's world cup (or, as the USA won it, I suppose we have to call it the World Series of Soccer Playoffs.

And I noted the complaint by the USA team that they are not paid as much the men's team despite winning the World Cup 4 times in total, a 50% win record and with back to back to back winsin 2015 and 2019.

I am entirely in favour of equal pay for equal, or equivalent work. it's both fair and economically efficient - making it a moral imperative in my view. People should be paid the same for doing the same job.

There's one exception I make and that's for performers. I think it becomes difficult to pin down exactly what the job is and exactly what function the remuneration package takes.  Specifically, where you are providing units of entertainment rather than units of labour or units of tightly defined output and in effect have a partnership share in the revenue or profit from that entertainment.

So I wanted to do a bit of digging in to the state of the men's and women's soccer game in the USA. There are some notes below

Major League Soccer

24 teams (rising to 27)

Average attendance 20,000 - third after NFL and baseball

MetroStars sold in 2006 for $100m

Average salary $373k, lower than the average salary in England's Championship.

Salary cap at $3.845m per team ($92.25m overall but NB Designated Player rule allows the cap to be set aside for 3 players per team (David Beckham on $6.5m per annum)

3 players on say $7m a year per team is $500m plus $100m from the Salary Capped Players is $600m on players' wages.

Average valuation of a franchise $240m

TV revenue is about $40m per annum

20,000 tickets per game at $20 a ticket is $400k in ticket revenue per game (tickets for LA Galaxy in a range between $15 and $200 and I have been told that the worst seats for an Ohio  State American Football game sell for $120.)

Average ticket price for Cincinattie is $19 rising to $25

https://www.wcpo.com/news/insider/taking-a-look-at-what-major-league-soccer-teams-charge-for-tickets

Each team plays 34 games (so 24 times 34 divided by 2 is 408 games per season plus play-off - $1.6bn in ticket revenue. Say overall revenue of $2bn

Players wages making up $600m / $2,000m or 30% of revenues. (I think that's low compared to European soccer or the NFL - suggests I've made an error somewhere.)

National  Women's Soccer League

9 teams playing 24 games each. (3 games against each team) is 108 games plus playoff

Minimum roster is 20 players, minimum salary is $17k, max salary is $46k plus allocated national team players from US and Canadian national teams. So, say an average salary of $36k. 20 players in 9 teams is $6.5m in salary costs.

There doesn't appear to be a TV deal.

Average attendance is 6,000. Tickets between $15-$30, say $20 average, gives revenue of $120k per game, over 100 games is about $120m overall ticket revenue, say total revenues of $200m or 10% of my estimate for total revenue for the men's game.

NB salary as a % of revenue here is about 3.25% - a factor of ten less than the % of the men's game that players take home. Quick check against fixed costs. Assume women take home 30% of the revenues after fixed cost. Implies surplus over fixed costs in the women's game is $22m and fixed costs are $178m. Not sure that really flies. Looks like women are taking home proportionally less then men. They are probably due an order of magnitude pay increase at some point soon.

https://www.forbes.com/sites/billconerly/2019/06/10/earnings-parity-in-womens-soccer-a-long-kick-away/#757b95c276bb

Women in the national team tend to make more of their salary from their place in the national squad than men.They are often on a national team retainer. Lots of women in soccer are on part-time contracts. Men are mostly paid for by their clubs and released to the national team.

Which makes it a bit difficult to pay the women's national team the same as the men's national team as it looks like the USian public value the women's game at about 1/10th the value of the men's game despite their significantly better performance on the international pitch. What is the job that is being done here? Accurately kicking a ball in concert with other people in order to place it in a net or providing an emotional and entertainment response from spectators?

Which is not to suggest that the difference in value in the two games isn't based on gender discrimination. Women's sport, and women in sport are consistently treated as less valueable, less interesting and less important than men's sport. That assumption that women's sport is lesser than men's sport rolls through all aspects of the economics of sports. Men do valuable sports. Sports that men do are valuable. Men in sport are valuable. Not so much for women. It is a salutory statistic that for a long time the highest earner in women's tennis had never made the quarter-finals of a major tournament and made most of her money selling lingerie and such like services.

I don't know how to undo that sexist dynamic. I'm not sure there is a policy lever that can be pulled that solves the issue over a time period of years. I think we're looking at a generational shift in how women's sport and women in sport are valued.

For sure there is a significant difference in quality between men's football and women's football. However, that's not entirely the point. These people aren't being paid for being brilliant at football. They aren't brain surgeon's where the quality of the inputs is material. They provide units of entertainment. Even in those sports where the gap in quality is narrower there is a still disparity in income. Units of entertainment in sport is a bit of a slipperly concept. It's slippery enough when applied to things like music or acting. I couldn't exactly tell you why I prefer watching Tom Hanks to watching Tom Cruise, or Nicole Kidman to Tom Cruise or paint dry to Tom Cruise but I do. A lot. There's a lot of subjectivity and matters of personal taste. That's true of sport. I prefer rugby to soccer. I prefer tennis to golf. I can't watch basketball.  I prefer watching Tottenham  play than what my mum calls "cloggers up the back park". I prefer Aberdeen to win ugly than Rangers to win pretty. I think I'll enjoy taking the Captain to watch Edinburgh City FC in a top of the table promotion clash with local rivals Berwick Rangers more than I enjoyed taking him to watch Liverpool play Napoli in a friendly. Unit of entertainment are slippery and ill-defined.

So, I'm not really sure where that leaves the salaries of the US women's national team. There is some good evidence that they are under paid as a proportion of revenue compared to men.  They are very good at their job (depending on how you define their job). That is obvious when they are compared to other women doing the same job. Perhaps less obvious when compared to men doing the same job (again this depends on the definition of their job.)  The economics suggest that their industry (women's soccer in the US) isn't providing the same number of units of entertainment as the men's game. They are effectively equity holders in the game rather than purely employees, so it's right that they capture a share of the profit but it's true that the profit is smaller then the men's game generates.

I hope that the interest generated by the recent Women's World Series of Women's Soccer for Women translates in to more interest in the game generally and that this translates in to more money going in to the game therefore in to the pockets of the players but I'm not sure it's as simple as the US women's team have won more than the men's team, they should be paid the same.

I have recently read two monographs (1) that suggest that economic growth, particularly in the West, might be very hard to come by in the future.  That rather than a temporary set back the current economic stagnation is the start of a long, long period of very low economic growth. That 0% GDP growth is the new normal.

Both papers see a different cause for a long term forecast of zero economic growth. It would be easy to ignore both of the papers as a symptom of general depression and pessimism in the economic forecasting community. That the same people who brought you unlimited growth for ever are now chastened in to offering unlimited doom for ever and seeking some justification for it.  It would certainly be comfortable to ignore the papers.  I’m not so sure that that is wise.

Reason one for the end of growth comes from Robert J Gordon of the Cenre for Economic Policy Research.

http://www.cepr.org/pubs/PolicyInsights/PolicyInsight63.pdf

He suggests that the GDP growth rate of about 2% per annum we have become used to since the 1750’s is due to the long unwinding of three industrial revolutions, that of invention of coal powered steam driven engines, that of the invention of electricity and the internal combustion engine and the third one of the invention of information processing by machine. These industrial revolutions have overlapped with each and driven a large number of new capabilities for humans or reduced the need for human labour in many productive processes.

He talks about a number of one off improvements, improvements that are not available to happen again. We can’t re-invent being able to get most of the food we grow to our tables by increasing transport speed and quantity, refrigerating it and using telephones to tell us which market wants it. We can’t re-invent having homes that are a comfortable temperature all year round. We can’t re-invent the virtual elimination of communicable disease as a cause of premature death. We can re-invent the many labour saving devices deployed in the home that allowed woman to be released for non-domestic labour. We can’t re-invent the plane or the train or the automobile.

Gordon’s suggestion is that these industrial revolutions have run their course in the West. That the rest of the world will have caught up in a few decades. That there is no sign of a forth industrial revolution coming that both eliminate large amounts of human labour from productive processes or significantly improve the capability of humans to do things.

If you are going to nullify Gordon’s suggest I think you have to do a bit more than point at the iPhone.  You need to find a way to eliminate about 2% of the time people spend doing things every year for the next century.

The second reason, put forward by Dr Tim Morgan is that we have run into problems with our energy economy.  He restates the economic problem as not a problem of where money flows but where surplus energy flows.  He suggests that the history of economic growth is one of finding new ways to produce surplus energy and apply it to solving problems. Unless you have surplus energy in your economy then you have no growth.  The problem, as Dr Morgan sees it is that the Energy Return On Energy Invested for future energy projects is too low.

Energy Return On Energy Invested (EROEI) is the ratio of the energy that you get out of a particular project to the energy you have to  put in to to get that energy. A simple example; imagine you live in the country, a long drive from the nearest petrol station.  If you have to use half a tank of petrol to drive too and from the petrol station you only have half a tank of petrol left for running errands. (Your EROEI is 2:1.) If the petrol station is further away, so that you have to use a full tank of petrol to get there and back you don’t have any spare petrol. (your EROEI is 1:1).  When we first started pumping oil out of Saudia Arabia the EROEI was about 100:1. We got 99 barrels of oil for every barrel of oil we spent digging oil of the ground.  The figure today is closer to 20:1. For North Sea Oil the ratio for new reserves is closer to 5:1. Similar stories for coal and gas. As we dig up the easy to reach stuff it becomes more energy intensive to dig up the not so easy to reach stuff. (2)

This ratio lies at the heart of economic prosperty.  With an EROEI of 100:1 for every unit of energy we put in we have 99 units to do all the other stuff we want to do.  At 5:1 we only have 4 units of energy to play with.  As more energy has to go in to our energy gather system the cost of energy become greater. We tie up more capital in energy infrastructure and more of the energy we produce is used to run our energy systems.  We have less energy to do other stuff. We are poorer.

Dr Morgan suggests that at an average EROEI of 15:1 bad things happen to your economic growth. We are currently quite close to an average EROEI of 15:1. At worse figures a lot of accumulated growth unwinds as you stop having enough energy to transport food around and people start dying.

The combination of the two factors has a grim irony. All the innovation we are putting into renewable energy, if only moderately successful, just gets us back to the same average EROEI we have enjoyed for the last hundred years. We remain rich but we get no richer.

These factors affect different parts of the world differently.  If you live in China or India or Africa you probably still have large amounts of accumulated technology and associated capital to get hold of.  If you live in the US or Europe you are more likely to be at the technology frontier, a frontier that Gordon suggests might have stopped moving. The EROEI problem is more universally spread.

The message is clear but depressing. Unless we can come up with a fourth industrial revolution that is as potent as the invention of steam power and electricity and reverse the falling proportion of energy we have to spend on ourselves we are in for no economic growth, or even economic contraction.

So what can be done?

Well, we could get used to living with economic growth at the rate of mundane innovation and low levels of capital accumulation, 0-0.5% per annum.  That has some social implications that I’m not sure we are quite ready to address yet.

What’s out there for industrial revolution number 4? My brain storm throws up the following. None strike me as compelling.

Routine Innovation but BIG. The background rate of innovation outside of an industrial revolution is a drip, drip of marginal improvements.  For the last 200 years pretty much only the populations of Europe and North America have been playing because most of the rest of the world has been behind the technology frontier and not prosperous enough to divert significant labour to R&D.  What does routine innovation look like now that we have a population of 7 billion supporting it rather than 1 billion?

Big Data. With low cost computer processors are we able to do things with the huge volume of data we can gather and analysis about any activity?  We need to be reducing human effort significantly to get any real economic gains.

Quality.  We actually waste a huge amount of the effort we put in through poor quality. Defective goods, poor service, bad ideas. Goods that don’t last as long as they could.  What happens if we apply total quality management to everything we do?

Managerial revolution based on new understanding of neuroscience. Most organisations appear to be only tolerably run and the applied understanding of positive psychology appears poor. What happens if we work out how to get everyone to do a really good job and then let them get on with doing a really good job?

Peace dividend.  NATO targets for defence expenditure are 2% of GDP.  What happens if we stop shooting other people and invest this effort in building productive capacity?

Reverse the EROEI problem.  If we can improve the effectiveness of renewables we might be able to unlock a period of steadily falling energy costs instead of the long run of energy cost increases we’ve seen. We might get a similar, shorter term boost from energy efficiency programmes.

Service sector labour efficiency. Can we find a way to make the same labour savings with service jobs as we have with manufactoring jobs? (And what are we going to do with all the people?)

None of the these struck me as particularly robust. I wouldn’t want to bet the whole of Western civilisation on them.

(1) One is by Dr Tim Morgan of Tullett Prebon

http://www.tullettprebon.com/Documents/strategyinsights/TPSI_009_Perfect_Storm_009.pdf

The second is by Robert J Gordon of the Cenre for Economic Policy Research.

(2) figures for renewables are circa 20-15:1 for wind and 5:1 for solar PV.

The inestimable Andrew Ducker pointed me towards this article on Sundrop Farms. Sundrop farms use solar energy to desalinate seawater which they then put in a hydroponic greenhouse. They have a small proof of concept farm near Port Augusta in South Australia. I’ve been to Port Augusta so you don’t have to. It’s pretty arid land. They are expanding this to a 40 acre £8m facility that will produce 4  millions kg of vegetables a year. Which I think would supply fruit and vegetable for about 5,000 people.

 This is great. Fantastic and if I won the lottery I would totally have one.  The article was touting Sundrop as an end to world hunger. I was left wondering if it was.  It’s easy enough to set up one of these facilities right next to the sea. But there is a limited amout of land within a stones’ throw of the sea.  What happens if you have pump the seawater inland to the farm?

Based on data from here

Here from the NSW department of agriculture

 And

 here from a website on small scale solar arrays

 and Here from a long paper on building a very large water pipeline from Turkey to Jordan.

 I estimate the additional capital costs for putting a Sundrop type farm 10 kilometers from the coast to be about $10m US. That about doubles the cost of a Sundrop type farm from £8m for 20 acres to £16m. 

That’s going to cost about $600k in interest costs to service per year. Or about 2.4m lettuces.

The pipeline is the expensive bit.  I estimate about $0.5m per kilometre of pipe.  The cost estimates in the paper on the Turkey to Jordan pipeline have a low cost estimate of $1.5m per kilometre for 2.1m diameter pipe.  So, I’m reducing that by a third for the much smaller bore pipe needed for relatively small market garden farm using 10,000 litres per day. (Not sure if this is the current demo-farm usage or the usage planned for the 40 acre production site.)

Bit of sense check.  $500,000 per kilometre. Assume half of that is materials. $500 of materials per metre including hire of diggers, forklifts and so on. Not crazy.  So $250,000 for labour. Assume half of that is grunt pipe bashing work rather than expensive specialist control instrumentation or surveying. So $125,000 to spend on actually constructing the pipe.  A kilometre is 100 ten meter sections.  Assume two teams of 4, one building the support struts, one connecting the pipe, so 8 people on site. They cost a $1,000 each per day in total.  So that’s 15 days to build a kilometre of pipe. Or 6 ten-meter sections per day. Or one every two hours.  That seems not crazy to me.

You need two lots of pipe. One to carry the salt water in, one to carry the waste brine out.

The costs of the solar panels to provide energy to pump the water are comparatively little.  The NSW Department of Agriculture guide implies that it takes 500 kwh to shift a megalitre of water with a head of 120 metres. The 10,000 litres of water Sundrop need a day is 1% of this. So were talking 5 kwh generated over about 10 hours per day. Let’s allow for losses and power to run the controls and so and say we need about $40k of solar panels to power this system.

A caveat here that I was having some difficultly following the energy usage figures so I could well be understating this significantly. But even if I’m out by an order of magnitude then the rounded figure is still about £10m for every ten klicks inland.  

A thousand kilometre stretch of coast cultivated to a depth of 10 kilometers is about 5% of the UK’s agricultural land use.  They are using hydroponics so the yields should be higher than soil based agriculture.  I’ve seen yield improvements touted of 5 times. I’ve also seen improvements of 30 times.  Five times would take a 1000 kilometre by 10 kilometre strip to this being about equivalent to a quarter of the UK’s agricultural base. The UK meets about 60% of its food needs domestically. So we need 1.6 UK’s to grow all the food we consume, or we’d need about 6 and a bit of these coastal slots to support us in the manner to which we have become accustomed. 

The pipeline costs probably don’t scale with size particularly.  So you might well be able to pack 60,000 farms into the 10 klick strip with much more efficient pipe construction overall and not end up doubling the overall construction costs.  This might let you move a further 10 klicks inland. Maybe 30 klicks before you’ve doubled the cost of the installation again. As an aside, if you were able to move 30 klicks inland and assume 10 workers per farm and that each farm worker has .25 dependents and that each farmer needs one additional person nearby to provide support services like education for children, health, beer services and so then the population of this strip of South Australia goes from about 10,000 to about 3-4 million people.  

But the energy costs do scale.

(major caveat – these are pretty much back of the envelope figures which I did in a hurry over lunch. If you think they are wrong, you might well be right. If you are planning to base any form of anything on them I would do your own figuring out.)

I’m going to talk a little bit about the rail franchise issue, public sector finance and public sector pay.

I don’t work for the Department for Transport and I’m not a hardcore modeller but I have spent a bit of time in the public sector finance teams and some time working with hardcore models. This is some educated guesswork.

I suspect that what’s happened with the rail franchises is a modelling failure.  When I use the word model I mean an excel spreadsheet which seeks to replicate the terms and conditions, prices and costs of a particular business or contract as a way on understanding how various decisions and events will affect the financial performance of that venture. The more complex the undertaking the larger and more complex the model. These are not simple spreadsheets.  They are about as far from back of the envelope as you can get.

The model I used to work with was for a power station.  The power station had four large contracts, each of which was over 100 pages long.  2 for power sales, 1 for gas purchases, 1 for maintenance of the gas turbines.  It also traded gas and power and carbon certificates in the open market and participated in a very technical power industry thing called the Balancing Mechanism. These all interacted with each other. As did the air and water temperature, rainfall, air pressure, water quality and a dozen or so other variables.

It even contained a model of what the contracts looked like from the other side, so we could guess what our counterparties would do.

Every business, contractual or operating decision was run through the model. It had to be able to answer any question asked of it.

The model ran to about 50 sheets on excel and weighed in at about 100 mb.

You put one number or one formula wrong in 1 cell out of several hundred thousand and your model will tell you lies.

I think the rail franchise models are going to be no less complex. The contracts involved are at least as big as a power station, perhaps an order of magnitude bigger.

In my experience working with models like this they are a full time job. You have one modeller working full time on one model.  If you are modelling one of these bad boys you live in it constantly.  It’s a very difficult job.  The skills and the attention to detail required are rare and hard to acquire. The introductory course in how to do it costs £2k. It takes months to build a model. It takes months to learn how to work with one.

Modellers at my old employer cost in the region of £70k a year, salary, pension, bonus and benefits.  A team of five of them were managed by a director level post who cost about £100,00. These are not cheap individuals to employ. However, compared to getting it wrong and costing your employer, say £40m, paying this money might seem cheap. In hindsight. (Which is somewhat defeats the point of a model.)

As I say, this sounds to me like a modelling failure. It sounds like either some duff information has been fed into the model, or the contracts involved haven’t been properly understood, or the  architecture of the model, the way it calculates different elements of the franchise agreements was built incorrectly. It could be that someone has just put a decimal point it the wrong place. These things happen. Everyone I know who has worked with models has made one howler and found someone else’s howler.

It may be the case that one error is to blame for the whole franchise problem. That the first model had an error buried deep in it and this was carried to each subsequent model and that the Department of Transport’s modelling team are entirely competent, just really, really unlucky.  Or it could be that the modelling team have been systematically under-staffed, with team members coming and going, staff not properly trained, or trying to handle too many models, with insufficient help, leadership and support. In which case, a howler was bound to happen, and probably had already and been ignored.

I don’t know for sure but I’m willing to bet that anyone who was good at modelling the rail franchise contracts for the Department of Transport was offered a modelling job somewhere else for more money. Probably, by one of the rail operators.

Here government are undertaking complex contractual arrangements which are difficult and therefore expensive to manage.  The public are rightly concerned that something has gone wrong.  I’d make this comment.

You can complain about the government’s ability to manage complex contracts and the costs of getting them wrong.  You can complain about public sector pay.  You can’t complain about both.

EDITED: to add

And it looks like the problem lies not in the modelling per se but in the assumptions going into the model.

http://www.bbc.co.uk/news/business-19816359

and a further Peston article on the capital requirements assumptions. via andrewducker
http://www.bbc.co.uk/news/business-19881240

My series of blogposts on the Ten Pillars of Economic Wisdom has been in hiatus over the summer but I have a quite afternoon and long lunch to devote to the next in the series.

Actually, I’m going to take the next of my Ten Pillars articles out of sequence and go to Pillar Number 8, Creating Jobs and Creating Wealth are not the same thing.

If you lost your job it would be a disaster. If you lost your job but got to keep all the stuff you would consider yourself to a lottery winner, to be really wealthy.

What is Wealth?

You might define it as material things, including the technology embedded in them. Or you might count the amount of labour required to produce the objects. You could include services that are rendered to you. Some where in between goods and services are things like clean air and clean water.

You could include some good things like a reduced fear of crime.

You might say that wealth was about mental well being. That people don’t buy products they buy solutions to problems they have.  You might think about Maslow’s Hierarchy of Need and see wealth as a continuum from meeting basic material needs up to meeting our desire for self-actualisation. You could include in this issues of choice and control. You could equate wealth with good mental and physical health.

I’ve always liked the idea of wealth as a set of solutions to problems. And the less labour that is needed to solve my problems the better.

In a kind of self-referential implosion I’ve seen wealth defined as things of value, as defined by their ability to be exchanged for other things of value. Wealth is what you think it is.

It’s your money, pick your own defination.

What’s clear to me is that wealth is not the same as a job.  A job is something that allows you gain access to wealth. Other things that enable you to gain access to wealth are owning capital, social transfer payments and crime.

For me a job is labour that is exchanged for wealth through it’s ability to contribute to wealth for other people. Wealth and job are not the same. A job is just one way that we gain access to a share of the wealth that we collectively create and own. And in some ways they are a waste of time. I’m going to talk briefly about driverless cars (1). Specifically taxis and I’m going to assume that you, like me, find chat from taxi drivers to be of limited value. If I wish to get in a metal box and be taken from Waverley Station to where I live I could have a taxi, with a driver or I could soon have a taxi, without a driver. I will arrive at my home in the same time. I’m indifferent between the driven or the driverless cab. But one technology involves a human being having a job.

I’m no better of for them having a job. In fact, if I weren’t paying for a human driver my cab ride home would have been signifcantly cheaper. (2) I could have spent the saving on a nice coffee from Starbucks. I’d have been better off.

There is a familiar pattern in the Developed world over the last few hundred years of mechanisation, of work that was done by human beings being done instead by machines. Often the machines are better at it. A mechanical pump can pump more water from a coal mine than all the humans you can fit in the coal mine ever could.  Often the inventor can take the skills needed to do the job, embed them in a  machine and then run that machine faster than humans can work. In any event, work that once was part of someone’s job is now done by a machine.

That process of jobs disappearing as new technologies build machines that can do them better has been going on for centuries. Many of the jobs, most of them, are of no loss to the job holder, so long as they can find another job – in order exchange their labour for a share or wealth.  Who misses going to the well to draw water and would tear down the aquaduct? Who misses spending a month’s wages on a hand knitted jumper shirt when a machine can knit it in minutes?  Not me.

More stuff is available for less overall human effort. What happens to the person who used to do the job? What happens to my taxi driver once I tell him that I no longer care enough for his chat to pay for him time? Unless he can find another job he loses access to wealth, and some measure of dignity.

This is the crux of the discussion about creating jobs.  Without a job most people have no way of accessing the wealth that is being created. The agenda behind talk of job creation is a desire to avoid having a conversation about reallocating capital or continuing to widen and deepen social transfer payments. We’d rather pay someone to dig holes in the road and then pay someone to fill them in again than create a fairer society or admit that we’ve got plenty of stuff and share it around a bit more equally.

Jobs naturally follow opportunities to create wealth in ways that can’t currently be done by a machine. I don’t think there is any reason to think that the only worthwhile jobs are created in the private sector but we do have to be careful about taxing some citizens and using that wealth to create jobs for other citizen. That’s just a transfer payment in disguise. (3)  The money taken in taxes would have been spent on wealth for someone. Whenever I hear politicians talking about the state investing in Green-Collar jobs (4) for example I wonder if they can tell the difference between us subsidising a new technology so that we can all enjoy the wealth that might come from cleaner, cheaper, more politically secure energy and subtly taking money out of our pocket using electricity bills instead of taxes so that no-one notices that we’ve given a bunch of wealth to people but not created any additional stuff.

Our aim as humans should be to elimate the need for jobs. To move to a state where everyone one alive could not distinguish between their work and their play and where the reason for doing the work is not because we need a job to buy some stuff but because we need the work to lift our souls.

(1) Who would have guessed.

(2) I estimate between 1/10^th and 1/20^th the price.

(3) Are you Rangers in Disguise?

(4) A neologism which is in the dictionary due in part  to my efforts

http://zenpencils.com/comic/75-l-p-jacks-work-and-play/

I’m fascinated at the moment by two particular technologies and their impacts on the economy and on how we live. 3D Printers and Electric Self-Driving Cars. This post is about a potential second order effect of the widespread adoption of electric self-driving cars; what happens to all the car parks?

There are thousands of car parks in the UK. NCP alone have over 700 with spaces for some 200,000 cars. Most supermarkets have a car park. Most shopping malls have a car park. Factories, out of town offices and retail centres, railway stations, airports and sports grounds have car parks.  With 17 millions cars on Britain’s roads they have to be parked somewhere. In fact, they have to be parked in more than one place; near where we live and near where we are going to visit.

Self-driving cars mean fewer car parks.  Firstly, I think there will be fewer cars.  I think self-driving cars in cities will function more like taxis or car clubs than privately owned vehicles. (1)  With no driver to pay it makes more sense for more people to rent a car for a trip or by the hour than to own one out right.  So the absolute number of cars probably falls. These are cars that don’t have to be parked anywhere.  Secondly, as people’s usage of the car changes they need to be parked near destinations less often.

As an example I offer up a trip to the supermarket. Currently a trip to the supermarke involves driving to the supermarket, parking the car in the car park for an hour of so, and then driving the same vehicle home. If cars operate more like taxis there’s no need to park the car at the supermarket. You take one self-driving car to the supermarket. (2)  Do your shopping. Take a second, different self-driving car home. Or take the car that dropped you off once it has finished its next job. In the hour you are inside the self-driving car you came in could complete 4 return journey of 2 miles. (3)

Now, you may think “I don’t want to take a taxi to Sainsbury’s.”  All well and good but the land that Sainsbury’s lets you park on is worth cash money to Sainsbury’s. Given a choice between having you park there and having you take a self-driving car Sainsbury’s will want you to take the self-driving car. They would rather operate a taxi rank at the front of their building and sell the land.

With fewer cars needing to be parked less often there appears to be a long term over supply of car parking spaces. There are already just about enough car parking spaces in domestic streets and garages to house all the cars we own. If we’re not parking when we go shopping do we need all those car parks.

I’m assuming that the car parking spaces to be liquidated are those which are a) most easy to sell b) those furthest from where the car is going to start its duties in the morning. So the large car parks of out of town retailers will be those that are liquidated.

So what happens to the land?

Presumably the land holders will sell it for the best price they can get for it. It’s worth less and less to them as a car park.

So a stream of realatively easy to redevelop brown field sites become available for housing.

Two follow up questions occur to me.

What happens to out of town or suburban shopping centres when the value of the subsidised parking they offer to their customers is reduced because customers don’t need to park to shop any more?

What happens to council income from charging for car parking?

(1) and I think the cost structure looks something like 31 pence per mile for a standard drive yourself car, 11-18 pence per mile for a self-driving car and £2-3 per mile for a driven taxi cab. I think self-driving cars are half to 1/3^rd the cost of owning and driving yourself and tens of times cheaper than a traditional taxi.

(2) You might of course walk to the supermarket and then ride in a self-driving car home.

(3) At 20 mph urban driving speed 4 return journeys of 2 miles is 2*2*4 = 16 miles plus loading and unloading time. At a charge of 25 pence per mile this would yield revenue of £4, and a profit of about £1. £1 more than the car would generate sitting in Sainsbury’s car park.