Doctors should stick to medicine.

A recent article in the Vancouver Sun makes us believe that Dr. Rajendra Kale went to the Hugo Chavez School of Economics (see our previous blog). Dr. Kale has proposed the abolition of parking fees at B.C. hospitals and care facilities. Like President Chavez’s implementation of rent controls, the reduction of parking fees will only result in a shortage of spaces. Where patients are now worried about having to feed the meter, at a zero price they will have to worry about finding a parking spot in the first place.

Any time that prices are set below the market equilibrium, a shortage will exist. When a shortage exists, potential buyers incur “search costs” – which is the value of the time they have to spend searching for something. Significant search costs only exist when there is a shortage. For example, we use Vancouver General’s parking rate of $7.50 per hour and a person that earns a wage of $15 per hour. If parking is “free” and it takes a half hour to find a parking space because there is a shortage, that person has spent $7.50 worth of their time looking for a “free” spot. Economists have a saying: “There’s no such thing as a free lunch”. It means that in every decision, something has to be given up.

For people with wage rates higher than $15 per hour, the opportunity cost of searching for a parking spot will exceed the $7.50 per hour that the hospital is currently charging. It is a nice idea to have volunteers do valet parking, but how much will it cost to do the criminal record checks? I doubt that I would just hand over my keys to someone that offers to park my car for me. We could always pay people to work as valets at hospitals, but the minimum wage is $10 (or soon will be) and no doubt the union will require a wage much higher than that. Perhaps that wage, and the $14 million lost parking revenue will come out of the doctors’ pay, though we doubt it.

There is no indication whether doctors are willing to give up their reserved parking stalls to provide patients with more access to free stalls. We doubt they will, and will argue that their time is too valuable to be looking for parking. Yet this is exactly the argument we are making above. Paying $7.50 to park is less than the time cost that would be incurred in searching.

We could argue this point forever, but since the Doctors are busy playing economist, we have to go prep to do some open heart surgery …. the instructions are on the web somewhere … aren’t they?