Burgess COMMENTARY
What is the right price for free transportation? ... OR ... What is the right policy for transportation

This is about people transportation ... the transport of goods is another matter.

The following article is thought provoking and makes clear the need to think outside the box ... the part about the full scope of transportation especially caught my eye:

'It may seem surprising to most readers of World Streets, but this classic and still largely dominant definition of “public transport”, does not include things like taxis (exclusive or shared), paratransit, carsharing, ridesharing, car pools, slugging, cycling, works, school or hired buses, goods delivery, and, of course, walking. And to that should we also include various forms of telemobility, telework, etc., in which electronics takes a lot of pressure off the physical transport infrastructure. But of course all these and more are part of the “option to cars” global public transport system that our cities and governments should be trying to understand and deal with.'

What is the 'purpose' of economic activity. Many will say it is to make money and create wealth, but this is not a very useful description of purpose and is basically wrong. The purpose of economic activity is to satisfy needs and help to deliver quality of life to people.

Transportation is an economic activity that fits into this broader purpose and enables all sorts of critical economic activity essential to a viable society and economy.

If I was the CFO (Chief Financial Officer) of a money profit business providing public transportation I would likely use money profit as the core metric for analysis of the business, and typically the aim would be to maximize revenue (that is the product of fare times number of passengers) while keeping costs as low as possible.

Of course, this completely ignores the purpose of transportation. Also it likely treats cost only as the money cost that is the norm of money profit accounting rather than the full value destruction or resource use cost that reflects triple bottom line thinking. To analyze this question in a meaningful way there needs to be analysis around triple bottom line value concepts or something like TrueValueMetrics Value Accountancy.

The money profit equation of 'Revenue minus Cost equals Profit' for the economic activity and organization needs to be revised along the lines of 'Value Creation minus Value Consumption equals Valuadd' for the economic activity, the organization and the community ... with Valuadd should be optimized and money profit (cash flow)should be positive.

An economic activity may be free of price to the beneficiary, but an economic activity cannot be free of cost, that is, any economic activity has value consumption or resource use. The metrics should reflect this.

An economic activity should have a positive money profit outcome, or at the least a positive cash flow assisted with external funding that may be government or private if need be. In terms of society and the economy, and in terms of policy, transportation should be optimized for the social valuadd. Are people getting value from the system of transportation available to them, and is it the best possible.

Everything in transportation is part of a system, and the policy options should emerge by consideration of all aspects of transportation, not just one single component.

I am guided to some extent by old fashioned economics, but cautiously:

The laissez faire free market system that was described by Adam Smith (in his famous book Wealth of Nations published in 1776) provides a simple way of discovering price, and it remains true today that an efficient market does this very well. The problem is that most modern markets are no longer efficient, and in many cases the 'market' has been eliminated. In almost all aspects of modern society the price is determined by the seller, and the buyer can 'take it or leave it', nothing more. When there is mass 'leave it' the seller may choose to reduce the price or may decide to junk the inventory, and this is a market at work, but it is inefficient.

What is forgotten about the Adam Smith marketplace of the 1700s is that the economy was a 'shortage economy' and in that era money flows and value flows were somewhat similar. This has changed significantly over the years today there are huge differences between the money flows and the value flows. Furthermore the economy and the market were very much simpler and the choice was very limited. In the modern economy there are many different ways to do the same thing ... but also in hte modern economy that is huge concentration of economic power so the market cannot be efficient for price determination.

• No transport: In money profit analysis, a situation of 'no transport' has no cost, but in value accountancy the situation of no transport means that quality of life of people is seriously compromised. A person or community with no transport has a substantial 'deficit' in its value state balance sheet.
• Bicycle: A bicycle has low cost. There is no consumption of fuel, and little need for large scale infrastructure. It is faster than walking, and practical for shortish distances like 5 miles in a flat area, less in a hilly region. Weather is a negative for bicycles.
• Motorbike: A motorbike has higher cost than a bicycle both in terms of initial purchase price, but also consumption of fuel. Better roads are required. It is faster than a bicycle and practical for longer distances. Weather is a negative for motorbikes.
• Car ... owner driver:If anyone believes in market economics, the success of the automobile suggests that the car is the best value there is in transportation. It is reliable, easy to use and very convenient. The user is the driver and comes free. This is important because the driver is one of the big costs in most other forms of transport. For many car users, the money cost is higher than public transportation, but the value of convenience trumps this higher cost. The value chains associated with the car are important. There is the car manufacturing, the retail sale of cars, the supply of fuel, the provision of maintenance services and the building of roads, bridges and parking garages.
• Rental Car:
• Time share car rental: ZipCar in the US is an example of this. The service aims to make it convenient to have and use a car when needed without having any of the hassle of car ownership. Works fine until need for car exceeds availability of car, and the user is left totally stuck.
• Chauffeur driven limousine:
• Taxi:
• Ride share:
• Bus: In money cost terms a bus carrying (say) 50 passengers and moving well ... that is, not stuck in traffic ... is very cost efficient. The cost efficieny is between 10 and 100 times better than a car. In both cases the issues are at the beginning and end of the journey. Where to park the car? Where to get on and off the bus? Both need good roads. A traffic jam causes both to lose efficiency.
• Light rail: A light rail system has some of the same economic advantages as the bus. The capital cost of light rail is not higher than the capital cost of road, but the light rail lines are only used by the light rail while roads are shared with trucks, cars, etc. Light rail has the potential to be automated in ways that the bus cannot be. An example of this automation can be seen in services like the SkyTrain serving New York's JFK airport and similar systems at other airports.
• Train: Train technology is both archaic and modern. The train is an efficient way of moving a lot of people, but the capital costs are high and the rigidity of the service is a terrible disadvantage. The money cost of train is higher than most other forms of transport, but there are value issues that make train a desirable option. Commuter rail enables worker travel to city center worksites without car use that would completely clog the road system and pose impossible parking problems. InterCity rail can be convenient train station to train station but inconvenient from point of departure to point of final destination.
• Commercial Air:
• Charter Air:
• Ferry :
• Ocean liner :
• Cruise ship:

A community needs transportation. There are different ways that transportation may be provided each with different value consumption (costs) and the community can forgo transportation altogether in which case the value consumption is zero. Each of these alternatives has an associated value creation ... with the situation of no transportation resulting in value destruction rather than value creation.
Peter Burgess

Free Public Transport! (But hey, are we talking about the same thing?)

On 22 June 2010 we posted in these pages an invitation to an open thinking exercise welcoming comments and views on the topic of “Free Public Transport”. Two weeks later to get the ball rolling we followed up with a first article setting out some basic principles under the title “Why Free Public Transport is perhaps a bad idea”. That posting has been among the more widely read here; as of this morning having been accessed 4,503 times. Beyond that it opened up a small Tsunami of comments, reactions and clarifications, a number of which of high interest and thoughtfulness.

But here is the joker: Judging from the responses and conversations that followed it was clear that almost everybody was reading the word “Free” in that phrase as an adjective. But that is not quite what we had in mind. Rather it was part of what we wanted to have views on, but only part of it.

If we read free as an adjective, this roughly is what the implied policy question looks like:

“Is it a good (or bad) idea to let people make full and free use of our city bus and rail systems without asking them to pay anything”.

But suppose we ask you to make a slight adjustment to the syntax in that phrase so as to read the word “free” not as an adjective but as a verb. Which, in this writer’s view anyway, is perhaps a more interesting concept for planners and policy makers.

To which you may well ask, how do you “free” “public transport”?

Excellent question. For starters it means that we need to “free” our minds when it comes to thinking about what “public transport” in the 21st century actually is. And as we do this the process brings us smack up in front of one of the most familiar and universally shared shortcomings in transport policy and practice circles today — this being to stubbornly define city transport as basically a binary system, i.e., with X numbers of people getting around in “private cars” and the rest relegated to the less regal form of “public transport”.

And what then is this “public transport” business? Well it is all but universally interpreted to mean: all those bus and urban rail systems, which have in common that they are one way or another “corporately organized and managed”, largely deficit financed by the taxpayers, often unionised, charging fixed fares to users, and all operating on the principle of fixed routes and schedules. Just like in the larger cities of the western world back in the closing years of the 19th century. Which is we are working here with a basic organizational concept more than one hundred years old.

But here we are, already well into a new and very different century, and yet as we read reports and budgets in most cities and public agencies around the world, it is clear that those in charge are brain-hardened victim to the old thinking. Our too narrow definition of what constitutes “public transport” needs to be rethought.

Time to rethink “public transport”

It may seem surprising to most readers of World Streets, but this classic and still largely dominant definition of “public transport”, does not include things like taxis (exclusive or shared), paratransit, carsharing, ridesharing, car pools, slugging, cycling, works, school or hired buses, goods delivery, and, of course, walking. And to that should we also include various forms of telemobility, telework, etc., in which electronics takes a lot of pressure off the physical transport infrastructure. But of course all these and more are part of the “option to cars” global public transport system that our cities and governments should be trying to understand and deal with.

So now, it is time to “free public transport “of this old and entirely disabling definition, and move on to something else, something far broader and far more in tune with the dynamics, needs, priorities and possibilities of the new century.

And once we have freed public transport in this way, we can then get back to the first reading of the phrase, “should public transport be free?” Hmm. Now things start to get really interesting.

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Thank you all for pitching in with so much energy and so many thought-provoking ideas on this informal crowdsource exercise. Of course we continue to be interested to hear from you with other comments and suggestions on this important transport policy issue.

You may find some interest in the handful of articles looking at FPT from different angles that appear here at
http://worldstreets.wordpress.com/category/free-public-transport/

No Dorothy, it would be nice but there is no such thing as a free lunch. Not even in Kansas. Our cities need money to operate and maintain all the many parts of their hopefully high quality “public transport” systems”, but they also need schools, sanitation, health facilities, elderly care, parks and public spaces, security . . . and the long list goes on. Transport, which can finance itself largely if you have the brains to get it right, should not be poaching from these no-less critical basic needs of the community. More, we need our public transport systems (21st century definitions) to be both freely and extensively used (what is sadder than an empty bus!) — and at the same time build in provisions so that the system is fully equitable as well as efficient.

Preview of coming attractions . . the answer is:

The right price is this: Exactly enough so that the vast majority of citizens will complain that it is too dear — and then buy it and use it anyway. And then we use this carefully acquired “surplus” to ensure affordable, quality transit for all.

We will be continuing in these pages to scrutinize the wide range of potential benefits and costs and disbenefits that need to be brought into the equation. Getting this right requires hard work, a flexible mind and a high degree of openness in the planning and policy process. (If you are lazy or in a hurry for an easy answer, you better get out of the kitchen.)

PS. You may, you surely will, spot an apparent anomaly here. How can a transport system pretend at once to be “free” and then require that people pay for service. Well the short answer to that is that what is most important is that it is PERCEIVED to be free, in a sense that we shall be carefully developing and debating here. But we will be getting on to that shortly.

Also in this we need to bear in mind our greatly expanded vision of the range of mobility services the “public transport” properly defined actually provides (or should provide). More on this at http://wp.me/psKUY-2v4