The Economics of Snow Shoveling / by Todd Yarbrough

As a former west-Michigander, I became acutely aware of the many subsequent issues snow creates. One rather menacing issue is the shoveling of sidewalks. For some this can, admittedly, be an arduous task depending on the size of your sidewalk, but failure to shovel your sidewalk can result in fines and what I would assume are very annoying letters from the city gov't. The choice to shovel your sidewalk is supposed to be made for you. Utilizing a negative monetary incentive, the city hopes to keep the sidewalks clear. But does this strategy work?

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Not really... I've spent two winters here now, and both winters brought an extremely varied response to the snow. Think of the amount of snow left on sidewalks after some time as a continuum from clear to untouched. On any given day you'll see nearly equal representation of both extremes, and anywhere in between. And on any given day the local news will run stories reminding us that the city wants us to keep our sidewalks clear. In order to understand why folks aren't so quick to shovel their sidewalks, we can look at the economics of the situation.

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Some might chalk up such non-shoveling as simple laziness. That's a pretty boring answer, but we can unpack what lazy means within the context of decision making. An economist would posit that being lazy is simply an action resulting from utility maximization. Folks are lazy because it makes them happy, at least in the short-run. Still, we can go further. Utility maximization occurs subject to a budget constraint, a budget we can easily think being made up of both money and time.

Consider the idea that our budget constraints allow us a maximum level of consumption of both goods and time-consuming activities. We can formalize making choices as the decision to maximize our level of satisfaction relative to our affordable options. For example, I physically cannot drive to both San Francisco, CA and Bangor, ME in a single day. Further, I may only have the budget for one trip a year, so any trip to any city necessarily costs me the option of traveling to another city. We call this opportunity cost and it suggests that every decision has trade-offs to consider.

My students understand this notion clearly as they have to decide every night whether their time should be spent studying or getting their Netflix fix. The trade-offs here are straightforward, study and you give up Netflix or Netflix and you give up studying. We assess what each will do to our utility and pick the option which maximizes it. For students, the opportunity cost of performing poorly on an exam is supposed to be the negative incentive that induces them to study. And for the most part this incentive works. Students find not only cost from a lack of studying, but also a gain from studying in the form of good grades, good relationships with professors, and the chance for monetary gains (scholarships). 

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Snow shoveling has an additional wrinkle that likely explains why so many sidewalks remain snow-packed during the winter. The private benefits from shoveling your sidewalk may be very low (zero), especially if you're not one to use sidewalks very much. If you're a commuter who drives to work, a clear sidewalk doesn't privately benefit you, but staying in bed an extra hour to avoid shoveling sure does. Also, snow-shovelers experience private cost when shoveling snow, but likely avoid both the social benefit of shoveling (clear sidewalks) and the social loss of benefits associated with a lack of shoveling (falling down). When benefits are public and costs private, we expect an under-provision of the good (too little snow-shoveling) on a private market. 

This is where the monetary penalty comes in. In theory, such a penalty increases shoveling by internalizing the cost of non-shoveling to the non-shoveler, thereby creating a situation where in order for folks to maximize utility they will shovel. However, if the penalty is low enough it won't matter. I suspect that is what's happening. The penalty for non-shoveling simply isn't large enough to induce shoveling. Further, politicians might commit political suicide by suggesting a large non-shoveling tax.

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I would suggest an alternative mechanism. Clearly we have to alter how people maximize utility with respect to snow-shoveling, but what if instead of making non-shoveling costly we make shoveling beneficial? Instead of trying to internalize the social costs of non-shoveling, what if we internalized the social benefit of shoveling? We could do so any number of ways. What if the city got with local businesses to sponsor gift cards lotteries for those homes where shoveling occurs routinely? Leave the penalties in place for non-compliance, but offer a benefit to shovelers as well. Local businesses gain, the city has more clear sidewalks, and shovelers now have reason other than the kindness of their heart to shovel.

Regardless of the particular mechanism created, it is important for policy to recognize that simply punishing bad behavior could be an inefficient and ineffective way to accomplish some goal. Policy must recognize that incentives cut both ways, negative and positive.