Loyola University New Orleans has a graduated pricing policy for annual faculty and staff parking fees.
The higher the income you earn, the more you pay. Specifically, the expenses are as follows:
Earnings Fees$70,000+ $500$50,000-69,999 $400$20,000-49,999 $350$10,000-19,999 $280$0-9,999 $130
At first glance, this may sound like a good idea.
After all, there are some people who earn much more money than others; why shouldn’t they have to pay more to park their typically far more luxurious automobiles and late-model SUVs than those of lesser means? (Full disclosure here. My own income places me in the top category).
The Society of Jesus is predicated in no small part upon the idea of helping those less able to help themselves, and this pricing policy for parking certainly seems to be in keeping with that mission.
In a free society, of course, the owner of any property is entitled to charge whatever rates he or she wishes.
Loyola University New Orleans is, thank God, in private hands.
Therefore, it is legitimate for the owners to impose a pricing mechanism upon customers on whatever basis they choose.
But is it wise? Is it moral? Given that the university has a teaching role to perform, what sort of message does this send out to impressionable young minds? To the community at large?
Sometimes, in order to fully comprehend a policy, it is helpful to see it writ large.
Let us generalize from this principle in two ways: one internal to the university, the other as applied to the outside world at large.
Suppose, first, that this sort of pricing were applied not only to parking, but to everything else sold by Loyola University New Orleans.
That is, when you walked into the bookstore, there would not be one price for each item, as at present, but at least three.
For example, poor people might pay $1 for a paperback book or a Wolfpack T-shirt, the middle class $10 and the rich $100.
Similarly, a meal in the cafeteria would set back a poverty-stricken person $2, someone with a comfortable income $8 and a wealthy man $50.
Let us abstract from the sheer pragmatic difficulties of imposing different prices on different customers: the inconveniences, the costs of checking up on income statements and the resultant chances of cheating.
Perhaps these difficulties could be overcome by issuing ID cards in five different colors, to facilitate the functioning of the system along the same lines as parking.
One problem is that students who come from wealthy families, and their parents as well, might begin to resent this policy.
Some might transfer to other institutions of higher learning or not come here in the first place.
Another difficulty is that invidious distinctions on the basis of income would continually be made.
No longer would someone be merely a student, faculty or staff member.
Now, he would also be identified as belonging to a certain income class. Might this not create embarrassment for some? Perish the thought, a “hostile environment?”
Further, there is the problem that, at least for faculty, parking fees rise with salaries, not total income.
What of a professor with a small paycheck from Loyola but large remuneration from outside sources? Some would say that he benefits unfairly from the present system.
Then there is the issue that faculty members in some colleges earn more than others.
For example, other things being equal, a finance professor will typically draw a bigger paycheck than one in poetry.
This is, of course, due to market forces. But, to the extent that this policy has an impact, it will result in too many poets and too few financial analysts.
Suppose, now, that the entire economy adopted a facsimile of this Loyola University New Orleans policy.
Namely, all people would pay not an absolute price for a good or service, e.g., $10.75 or $510.78, but rather a given percentage of their income for everything.
For instance, a poor student, a middle class person such as myself and a wealthy individual such as Bill Gates would pay 0.1 percent for a book, 20 percent for a car, 300 percent for a house.
Again we abstract from practical difficulties, in order to focus on the essence of the plan.
One problem is that this would set up a bias among most sellers against the poor. Why sell to a poverty-stricken person at a low price when you can reserve your wares for the rich?
If somehow this roadblock could be overcome, there would be an even more serious underlying objection.
At the end of the day, Bill Gates, the poor student and myself would have exactly the same amount of goods and services; society would have obtained absolute income equality.
But under this system, no one would work hard in order to improve his lot in life, to get more for his family.
We would all be guaranteed the same standard of living no matter how hard or how well we labored.
The only economic incentive would be benevolence; no longer would selfishness be harnessed to the common good, a point made by Adam Smith in his doctrine of the “invisible hand.”
If I pulled this stunt on my classes, and told then I would give them all a C no matter how hard or smart they worked, there would be a rebellion.
If I persisted in this folly, my dean would fire me, tenure or no tenure. If I (and every other professor) were allowed to get away with this outrage, it would spell the death knell of the institution, as customers fled in droves.
If the graduated parking fee system is a good one, it deserves to be applied not only to all goods and services provided by Loyola University New Orleans, but to the entire Gross Domestic Product as well. But, of course, it does not.
Charity is certainly a virtuous activity. But why not do it directly, giving to those who deserve it?
In this way, the poor could be helped without following a policy which might be (mis)interpreted by some as perverting the price system.
When established by their owners, graduated prices based on income are indeed market prices. But they will be misinterpreted by some as an attack on free enterprise.
Given that the university has an educational function in all of its decisions, not just in the classroom, it is important not to be misleading in this manner.
Prices have an important role to play in the free enterprise economy, as many of us have learned since the demise of the Soviet system.
Walter Block is an economics professor and department chairman.
