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Monday, October 13, 2008

Does mass transit really pay?

This calculator purports to show how much you can save by taking mass transit. However, the calculator is a bit underdeveloped as it does not ask you how much your time is worth. If a mass-transit trip takes an additional twenty minutes and you lose the flexibility of having your car at work, why not include those in the calculation?

You can trick the calculator into accounting for the additional opportunity costs of mass transit by changing the cost per round trip. The default is $3.50. However, assume an individual makes $60,000 per year or about $30 per hour, the option value of having your car nearby is $5 per day and the mass transit ride is 20 minutes more than driving (I will assume no more disutility from riding the bus/train other than not having your car nearby).

Here is the calculation given the default cost of mass transit:



The savings are positive, but I am fairly confident that $50 per month is not enough to encourage the lifestyle changes associated with riding mass transit. The calculation tries to sweeten the deal by showing how much you would save if you got rid of one of your cars - and your savings would be even greater if you got rid of all your cars.

However, things change dramatically when you include the full cost of riding mass transit, as the second calculation shows:



Now, the net savings is negative and substantial. Outside of mandating people ride mass transit or artificially increasing the cost of driving (through taxation, licensing, etc), it doesn't seem likely that it will pay for people to ride mass transit and hence they won't.

This is what I find interesting about calculators such as the one shown here. People don't choose to NOT ride mass transit out of ignorance, they most likely have already done their calculation and determined, however roughly, that choosing mass transit will lead to lower utility than driving, even if driving costs more money. One mistake mass transit proponents make is to put everything in terms of money rather than in terms of utility/satisfaction. If people don't want to ride the train with a bunch of other people, they won't do so even if riding the train would save money. Environmental concerns attempt to shift the mass transit decision away from money towards saving the environment, but saving the environment evidently yields very little short-run utility for most people.

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Comments:
"saving the environment evidently yields very little short-run utility for most people"

That's true, but I suspect that major changes are taking place in certain parts of our culture that will make that statement less true in the future.

Among the affluent, I have observed a trend toward green behavior. Affluent individuals in certain locations are gaining social brownie points by appearing to care more about the environment. They brag about their green non-conductive windows and scoff at anyone who drives a Hummer.

It's true that I know few affluent people on buses or trains. Perhaps, however, there is a market for first class buses or trains that price out the riff raff.
 
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