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May 10, 2008

Gas Prices Up, Public Transit Usage Up

Category: Political,Save Fuel,Transportation – Tom Harrison – 11:11 am

Ridership on public transit has increased. Gas prices rise, and people react by taking more public transit. In recent posts, I have argued that economics does not work.

Commuter Bus

Based on today’s New York Times article reporting gas prices and public transit are related, you might think I would recant my position.

Congested Highway

Nope. While this is an encouraging change, simple supply and demand curves based on gas prices just don’t work.

Consider, for example this passage from the article:

Here in Denver, for example, ridership was up 8 percent in the first three months of the year compared with last year, despite a fare increase in January and a slowing economy, which usually means fewer commuters. Several routes on the system have reached capacity, particularly at rush hour, for the first time.

“We are at a tipping point,” said Clarence W. Marsella, chief executive of the Denver Regional Transportation District, referring to gasoline prices.

8% is pretty significant. And it certainly is a tipping point … but tipping from what to what? Recall the recent silliness by various politicians who want to reduce gas prices … somehow.

So yes, in the absence of any action on the part of government, a few people have started taking public transit. But many people don’t even have public transit as an option, so doing something about gas prices is the obvious solution. Right?

Economics is Dynamic, and it is Never Simple

The problem is, doing something about gas prices will affect all those people who have changed to public transit. The tipping we are hearing a lot about is how we “have to do something”, not that we’re on the verge of any significant and permanent change. Having more riders means there will be fewer drivers on the road, thus less demand for gasoline (which is good). But plain old economics says: reduced demand causes prices to fall, all other things being the same.

The quote from the article also reports that systems are reaching capacity. Which means trains and buses are crowded and probably are less likely to run on schedule.

I know we can’t install train tracks overnight, and in many rural situations, they don’t make sense. Buses are certainly easier. How about car-pooling? Vans? Convenient commuter parking lots? Big companies should offer transit options to their employees. With a little public policy changes we could use this opportunity to adjust the imbalance.

Reward People for Doing the Right Thing

And instead of further subsidizing drivers, we need to reward the people who take a less convenient, but socially beneficial means of transit. We also need to help the organizations like towns and cities and companies that make an effort. We need to build a little infrastructure to ease the inconvenience.

As a country, we have an opportunity to seize: people are using public transit more. So let’s take that momentum, and extra money going into the transit systems to help improve them so that when gas prices fall again (or even if prices stay steady), everybody doesn’t rush back to their cars.

2 Comments

  1. Imagine a place where a man working from his workshop in a town almost no one has heard of could revolutionize how people light their homes.

    Comment by Michael Ejercito — May 12, 2008 @ 2:28 am

  2. Economics didn’t work very well for that guy :-)

    Comment by Tom Harrison — May 13, 2008 @ 8:55 am

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