Are Car Ownership And Prosperity Correlated?

Governments across the world see housing as one of the most important needs. Often, the need to house everybody is considered more important than almost everything else is but in the real world, houses are goods that compete with other goods. For example, how easy is it to say whether cheaper transportation is more important than cheaper housing? In fact, housing standards are abysmal, partly because transportation is very expensive. This is an interesting way to look at it, because many intellectuals have called the car a “house on the wheels”. If automobiles and fuel were cheaper, more people would have been able to afford larger houses.

Why is car ownership so low in India? Why is car ownership so high in, say, the United States? US is a prosperous country, but that does not fully explain this. In Manhattan, mass transit usage and walking is far more common than in the rest of the US. But residents of Manhattan are far more prosperous than people in the rest of the US.

There are many reasons. About one-fifth of the people in Manhattan are between the ages of 25 and 34. This is a substantially large fraction, when compared to the rest of the country. As Harvard economist Edward Glaeser points out, when people age, and have children, they are more likely to move to suburbs and drive to work. Moreover, it is easier to get around Midtown Manhattan by foot. Car ownership in Manhattan is much lower than in the rest of the US. There are more important reasons. Manhattan is densely populated and with the existing state of technology, in the absence of congestion pricing, roads are likely to remain very congested in densely populated cities. When a city is densely populated, there are strong enough incentives for more people to walk or take public transit because road congestion can be worse than congestion inside trains or buses. This explains why the correlation between car ownership and prosperity is not perfect.

There are other reasons. In countries with long history of car ownership, like the US, people are more likely to travel by car. People get used to things. This is why public transport usage is very high in countries like Singapore and Hong Kong and many other Asian cities that recently became prosperous. Even though these cities are prosperous, the history of car ownership is not as long as in the US.

Another reason is, large Asians cities are very dense, and density is a preference. Asians have a strong preference for density and lower aversion to crowding while on the other hand, Americans tend to have a stronger preference for space and greater aversion to crowding. This may be partly because car ownership has been high in the US for many decades. Suburbanisation started long ago, and people became quite used to space. This also implies that cheaper housing and cheaper and efficient transportation are not goals which are in conflict with each other.

Many European cities are almost equally prosperous, but as the history of car ownership is not as long as it is in the United States, the preference for space is not as strong. The downtown of cities have more appeal over people, and the rich in European cities are more likely to live near the downtown than in the US. So, it seems that the link between car ownership, density and prosperity are not as obvious as it seems.