Friday, November 01, 2013

Unaffordable Recreation and the Ratchet Effect

What has caused the cost of recreational activities to rise far faster than wages or official inflation? There is not one cause but many.

Recreational activities that were once affordable to just about every family with earned income have slowly but surely become unaffordable to all but the top 10%.

Longtime correspondent Kevin K. responded to my recent blog entry on recreational vehicles with an eye-opening commentary on the skyrocketing costs of what were once working-class and middle class recreations, boating/fishing and skiing:

"I was just talking to a friend about how expensive it is to go boating. As a kid in the late 70s my great uncle took me fishing in Lake Tahoe in his boat and probably spent a total of $5 (including sandwiches and bait). Last year when I borrowed a friend's boat I was amazed what it cost just to use it for one day:


  • Tahoe inspection $55 (NA in the 70's)
  • Tahoe decontamination (guy pouring some bleach in the bilge) $25 (NA in the 70's)
  • Launch Fee $39 (Free in the 70's)
  • Parking with Trailer at Launch $20 (Free in the 70's)
  • Fishing License for one day $14 each person (Not sure of cost, but we didn't get them)
  • Gas for cars around Tahoe $4.60/gallon (<$0.50 in the early 70's)
  • Gas for boats on the lake $7.00/gallon (<$0.65 in the early 70's)
  • Sandwiches and bait (a lot more than the 70's)
  • Today (depending on how far you drive and how much fuel you burn in the boat) it will cost $100 to $300 for just one day on Lake Tahoe fishing with one kid. 
    In the same time period (the late 70s), my Dad (a hero to other parents) would drive me and my sisters and two friends each up to Squaw Valley in our '73 Dodge Van for the day.
    At the time adult lift tickets were $13 and kids under 12 (or who were 13 or 14 and and said they were 12) skiied FREE. We always had peanut butter and jelly sandwiches with dried fruit (that my Mom dehydrated herself with her food dehydrator) and a bag of mini Snickers for lunch. On the way home we would stop at Burger King in Auburn for dinner. 
    Today the average family makes about 3x what they made in the late 70's but if an Adult wants to take 9 kids skiing at Squaw last year (I looked and the new rates are not posted yet) it would cost almost $600!! (46x more) at $99 for Adults and $55 for kids ("peak season" tickets last year were over $100 and over $60 around Christmas). 
    In High School I bought a new pair of ski boots for $53 and used them until well after college when I bought a new pair in the 90's for ~$300. This past winter I went in to the "Surefoot" custom boot shop in Squaw Valley thinking I have had my boots for over 15 years and I'm doing OK maybe I'll look in to some custom boots. When the guy quoted me $1,300 I walked out thinking that even if I was worth $50 million I could not spend $1,300 on a pair of ski boots...."
    What has caused the cost of recreational activities to rise far faster than wages or official inflation? There are many factors in play; let's examine a few of the primary drivers of higher recreational costs.

    In a follow-up email, Kevin referenced the Ratchet Effect, a dynamic I've often covered in the blog: costs advance incrementally with little resistance but any decline faces enormous resistance.

    As noted in the blog entry on RVs, one factor is consumer choice: people could still choose to tent-camp or use a rowboat, for example, but instead the majority have opted for the comfort (and perhaps prestige/status) of large RVs, trailers, boats, pickups, SUVs, etc. This reflects the power of marketing and America's quasi-religious devotion to comfort/convenience as the highest and most desirable good.

    The relatively low cost of air travel may also be a factor, as cheap airfare (in the early 1970s, air travel was strictly regulated and high-cost) has enabled millions of people to pursue recreation far from home. A rowboat launched on a local lake is replaced by a rental boat on a distant lake, for example.

    Recreation has become name-branded and technologically sophisticated, both of which drive prices higher. Equipment for activities such as golf, fishing and skiing have soared in cost as a result.

    An enormous net of regulations designed to increase safety have imposed higher costs on providers, and the out-of-control cost of healthcare in America has further imposed what amounts to a 15% tax on all labor.

    Correspondent Ray W. pointed out three additional factors:

    1. The need for efforts to protect high-demand public resources from environmental degradation
    2. The role of higher population and gains in prosperity in greatly increasing environmental pressure on public resources
    3. the shift from paying for government services such as protecting fisheries, water quality, etc. with broad-based income taxes to use taxes/fees levied on users of the service.

    These are important elements in higher costs for recreation. The water quality in Lake Tahoe, for example, has been deteriorating for decades as a result of development, and action is required to safeguard the lake's beauty and ecosystem--the very traits that fuel recreation.

    Lakes throughout the nation are at risk of invasive species hitchhiking on water craft, and inspections are one of the few ways this potentially devastating threat can be addressed in an even-handed, organized fashion.

    But when do common-sense increases in user fees become revenue-enhancement schemes for state and local governments seeking ways to raise revenues without triggering political blowback? When do regulations stop serving the intended goal and become justifications for increasing agency budgets? These are difficult questions, because any increase in regulations and budget is always "needed" by the agencies receiving the funds.

    Is imposing a multitude of fees for activities that were once free really just a user fee? If so, then why don't we impose the same metric on other government services such as schools (should only people with kids "using" the local schools pay for the services provided? How about those "using" the healthcare system? Should they pay in relation to how much healthcare they're "using"?)

    Affordable recreation may not make the list of entitlement "rights" that many demand, but isn't recreation as much a public good and resource as highways? In terms of jobs created, I suspect recreation is relatively high on the list of jobs created with relatively low government spending.

    I cannot shake the suspicion that recreation is an obvious choice for revenue enhancement because it presumes people with disposable income can afford the higher fees and won't complain in politically meaningful ways. We complain privately but pony up the higher fees without questioning their validity.

    If we add up these dynamics, we find them everywhere in the economy. Recreation is simply one egregious example of how costs rising far faster than wages end up crimping what was once affordable for the majority. Luckily, we still have tent-camping (oops, tents can cost a pretty penny now, too...).

    This essay was drawn from the weekly Musings Report 43. 




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