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Parking and Externalities
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January 13, 2012, 01:01 PM
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When I was at UCLA in 1980-82, the place to be on weekend evenings was Westwood, the dining and movie theatre district just south of UCLA`s campus. Everybody drove from the suburbs, paid to park, and then walked around like they were living in a city. Then it went out of fashion. Today, Colorado Blvd. in Pasadena is the new Westwood for today`s well-heeled young people who want to drive somewhere to find a vibrant urban experience (i.e., pretty girls walking around at night). There`s nothing particularly wrong with Westwood these days, it`s just kind of staid and empty compared to the old days.
I`d assumed that this was just natural generational change or a matter of taste. Westwood is mostly modernistic and kind of swoopy-looking, so it still looked kinda cool in 1980, while Old Pasadena is pre-Great Depression-looking, and early 20th Century urban looks are more in style these days. But an article in Los Angeles Magazine by Dave Gardetta attributes the change to differences in government regulation. 
People who once drove to Westwood on Saturday nights now visited Old Pasadena. 
“If you had told people in 1990 that this switch would occur,” says Shoup, “you would have been considered insane.” There are many theories about why Westwood died, and Shoup has his own. “It’s a myth to say Westwood died because of one high-profile homicide in the 1980s,” he says, referring to the 1988 death of a Long Beach woman named Karen Toshima, killed in crossfire. “Westwood had an unbelievably high parking requirement—ten spaces for every 1,000 square feet of restaurant. Old Pasadena had none. Westwood had dangerous alleys, crumbing sidewalks. If you want to know why Old Pasadena succeeded Westwood, parking was a big part of the story.” 
Cole had created the first Shoupista paradise: No parking requirements, parking meters where once there were none. His city grew rich off the notion—and nobody has tried it since. “For 5,000 years,” says Cole, “we built cities around people, and they worked well. For 50 years we’ve built them around the parking lot—a ridiculous use of land, of money, and an intrusion into the intimacy of human scale. Now we’ve painted ourselves into a corner. The saving grace is that the first 5,000 years might come back again.”

What I think this means is that Westwood (which is part of the city of Los Angeles) had onerous restrictions on new businesses, requiring them to provide lots of parking spaces, while Pasadena let entrepreneurs get away without investing in a lot of parking spaces, which attracted newer, more interesting businesses.

The idea behind mandating that new businesses provide parking spaces is to mitigate an externality so they have to meet the full costs. But maybe that degree of fairness slows new businesses down too much?