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ChineseBus Riders Union destroys transit. Here’s mathematical proof.
[tags]peter mcferrin, bus riders union, bru, fare[/tags]
Peter McFerrin, blogger of Clueless and Slightly Slack, comes through once again with an interesting analysis of the fare increase. He does a back-of-the-envelope calculation and shows how much ridership would increase or decrease and what revenue would be raised.
He uses an American Public Transportation Association figure of -0.4 elasticity. Basically, it means Metro’s $2 proposed fare, a 60% percent increase, would result in a 24% decrease in ridership and a 21% percent increase in revenue.
Now for the yellow-shirts’ plan. Reducing fares to 50 cents would yield a 24 percent increase in ridership. But, it would result in a revenue loss of over 50 percent. Perhaps the BRU believes mathematics is a bourgeoisie conspiracy devised to preserve and enhance its own class privilege. Eric Mann must now explain how to handle a surge in ridership (even a single-digit increase, as L.A. had been seeing for the past few years, is difficult to manage) while revenues fall in half.
As bad as most people think Metro is, remember than Mann ran it for 10 years, and he’s in a big part responsible for the looming fare hike. Like he should be lent credibility again.
Discussion
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Please keep discussions civil: exercise Troll Controll.
So I like what Mr. McFerrin has done here, but I know that demand elasticity is different over a range of prices. It might be inelastic at lower price levels, but then become elastic when the price goes over a certain level.
As long as demand is inelastic, revenue will increase if you raise the prices. But, if you pass that point where price becomes elastic, then any price increase will decrease total revenues.
So…my only question is: do we know what that price level is where the elasticity changes from being inelastic to elastic?
The only way we would know is to implement it.
My disagreement with the fare hike is that it calls for a large hike down the road.
Hike the fares now, but in 25 cent increments. Even a 25 cent fare increase will lead to some decrease, but that might be mitigated if Metro continues to add service (rail, Rapids, etc.), gas prices continue to remain high and the economic climate does not turn rotten.
The fare increase should be done incrementally. The plan to raise fares was not specific but said it should be raised to $2 by 2009. That is still below what it should be. Most viable transit systems similar in size to Metro have a fare around $2.50. I think they would be able to charge that fare but have free transfers.
I think the BRU is a joke. They appeal to people who absolutely know nothing about transit. Transit should have a business mentality with the bottom line in mind but also attracting riders. Increased services should be paid for by consumers not only through taxes but the user fees, which are the fares.
The “transit-dependent” (GOD I hate that term)population will always ride transit no matter what the cost. Gas prices will continue to rise and there will be those who will make a transition to transit eventually.
So a 24% drop in ridership will only hurt in the beginning. Time for the BRU to disband.
though i agree to a point, the bottom line is never met, and therefore, though the bottom line is always in mind, the overall quality of the system should be the main goal.
So no-one is going to address the variability of demand elasticity over a range of prices? its critical to the validity of the argument proposed in the link above.