I’ll give Matt Yglesias this: He responds to his e-mail extremely quickly. He got back to me in just over half an hour this afternoon with a gracious note:
This “externalities” analysis is a common but fundamentally wrongheaded misconception.
Suppose some brilliant Chinese chef wants to open up a restaurant in Rockville and the owner of Sichuan Jin River gets worried that the new establishment will poach his customers and cost him business. The city council wouldn’t step in and say “hey wait a minute, your proposal for a new restaurant has too many externalities we won’t let you open.” It’s true that it would be more convenient for incumbent businesses to not face competition, but that’s not a public policy problem.
By the same token, some incumbent business owners may be deriving benefit from existing availability of street parking (or other municipally owned parking) and may not want to share that parking with new people. But this isn’t externalities in the sense of pollution.
At any rate, I apologize if you feel that I was picking on Rockville. This is actually something I’ve written about with reference to quite a few cities all across America in a whole variety of contexts and isn’t any particular knock on [you] or on Rockville. If you’re at all interested in a real expert analysis of parking regulations, I’d strongly recommend UCLA professor Donald Shoup and his book The High Cost of Free Parking.