Market Urbanism

Liberalizing cities | From the bottom up

“Market Urbanism” refers to the synthesis of classical liberal economics and ethics (market), with an appreciation of the urban way of life and its benefits to society (urbanism). We advocate for the emergence of bottom up solutions to urban issues, as opposed to ones imposed from the top down.

Bike Shares and Public Goods

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Yesterday, Maryland Governor Martin O’Malley announced that seven jurisdictions in Maryland will be receiving grants to start bike share programs. The money for these grants comes from the Maryland Department of Transportation’s Federal Congestion Mitigation and Air Quality, so these bike shares will be federally subsidized. O’Malley says of the program:

“As we celebrate Bike Month, these grants will help bring Bikeshare stations to Maryland,” said Governor O’Malley.  “Bikesharing allows Marylanders an affordable option for short-distance trips as an alternative to public transportation, driving or walking.  By getting out and taking a bike ride, we also learn to enjoy more of Maryland’s natural treasures, help reduce the impact on the land, improve our fitness and well-being, and enhance our quality of life.”

The program would be of a similar model to DC’s Capital Bikeshare with capital costs covered primarily with federal grants and some local contributions. I am not much of a bicyclist myself, but I can clearly see the appeal of bike share systems. They provide the convenience of riding a bike to a destination without having to ride it back again, introducing additional flexibility to this mode of transportation. Also, the bikes are better-quality than what many cyclists would buy for themselves.

The problem with the politics surrounding bikeshares is that bicycles are not public goods, but elected officials such as O’Malley like to paint them as such. As Adam has previously pointed out, no transportation investment is a public good. The two characteristics that define public goods are nonexcludability and nonrivalrous consumption. Bike shares are perfectly rivalrous and excludable. Because no more than one  person (maybe two people) can ride a bike at a time, bicycles are lower on the public good scale than transit or roads.

Greater Greater Washington cites a study that publicly-supported bicycle shares are, shockingly, not making money, but GGW says this doesn’t matter since bicycles provide so many benefits to their riders. In a system of better incentives, though, both a private company and cities with bikeshare programs could make money if the private company leased public space for docking stations.

TBD points to a study that analyzes the demographics of Capital Bikeshare users, unveiling the regressive nature of this program. About 80% of CaBi annual members are white, over 80% have college degrees, and 43% have graduate degrees. But from a politician’s perspective programs don’t get much better than this. The capital costs are spread across all US taxpayers through CMAQ grants while the benefits are narrowly concentrated on a population of likely voters.

Lydia DePyllis reports on a pilot program that would bring CaBi access to 10 homeless people who are willing to jump through major hoops, and new proposals to require developers, rather than federal taxpayers to pay for new docking stations. Both of these programs could make CaBi somewhat more equitable. We could provide targeted benefits to low-income bicyclists though with a voucher system for a privately run bike share and achieve greater benefits at a lower cost.

By leasing sidewalk space to private companies to have bikeshare docking stations, these programs could easily become an all-around win for customers, companies, and cities, but as it stands, they hurt everyone except for their users, a government contractor, and vote-seeking politicians.

Compared to other transit modes, CaBi is doing very well, nearly covering its operating costs, but none of its capital costs, with membership fees. I’m picking on this program, because it is currently so regressive and because perhaps it’s new enough to turn over to the market. The private bikeshare system proposed in Los Angeles demonstrates that some investors think there are profits to be made in this industry in an arguably less-bikeable city without imposing the costs of bike sharing on those who don’t use it.

Comments

  1. All forms of transportation in the US are currently subsidised.  Withdrawing subsidy from bikeshare while maintaining it for highways and transit would lead to less use of bikeshare than would occur in an actual open market.

    If CaBi diverts users from overcrowded highways and metro stations it might be saving the government money that would otherwise have to be spend expanding that (subsidised/underpriced) infrastructure, and thus have negative opportunity cost.

  2. “Bike shares are perfectly rivalrous and excludable. Because no more than one person (maybe two people) can ride a bike at a time, bicycles are lower on the public good scale than transit or roads.”

    Doesn’t this presume that the only “good” created by bike sharing is the mobility of the user, including the assumption that the bike trip isn’t substituting for another type of trip?

    Isn’t the removal of a car from the road a benefit that accrues to all members of society whether we ride bikes ourselves or not? Isn’t the increased health and productivity of the bike user a non-excludable, non-rivalrous benefit of bikesharing?

  3. I think it would be more accurate to say that things like traffic and pollution are public bads rather than saying removing cars from the road is a public good. To address this public bad, it would be much cheaper and more effective to implement congestion pricing or otherwise increase the cost of driving rather than providing bike shares.

  4. This seems to be a legitimate use of CMAQ funds, which are intended to reduce roadway congestion and improve air quality. As Michael mentioned, the mobility provided to the cyclists is a purely private interest but the congestion reduction and air quality improvements resulting from a switch to cycling are a public interest. Funding bikeshare with a combination of membership fees and grants seems to hit this balance pretty well.

    As to the regressive nature, this might change as the program grows. It is often the case for many new products or services that the wealthier are early adopters and middle to lower-income users come later, even for low-cost transportation like bicycles. Even so, as mentioned above, providing mobility is not really the federal governments’ role in this case.

  5. That’s fair, and that assessment would also apply to lots and lots of policies pushed by liberal urbanists.

    But I do think my framing (that, as GGW mentions, the fairly modest subsidies for bikesharing reflect its positive externalities) is more or less the perspective of most urbanist fans of bikesharing.

  6. Is there much of a difference between creating a public good and removing a public bad? Whether I create more road space by building extra road or taking a car off the road, the end result is that motorists waste less time in traffic.

    Additionally, I’m not sure that bikes are necessarily lower on the public good scale than any other tangible asset. Sure, only one (maybe two) people can be on one bike at a given time, but the same is true for space on a road or sidewalk. no one can stand where I’m standing. The only difference is that roads and sidewalks are continuous rather than discrete, but if my car is sharing its space on the road with another car, that’s a traffic accident.

  7. Just read the link regarding public goods. I can see now that removal of public bad is not the same as a public good. However, the benefit created by removing a car from a road is equivalent to creation of road, which floats between club good and private good.

  8. For this to work, you must assume that trip mode substitution in the form of private auto to bicycle exists represents a sizable reduction in private auto trips. The only decent study was of Montreal’s BIXI and presented at the TRB meeting a couple years ago. The authors found virtually no private auto to bicycle substitution (taxi trip substitution was also extremely small, but several times greater than private auto substitution). Most of the BIXI trips were from: 1) people who walked/biked already; 2) people who used existing mass transit; 3) new trip generation. In other words, subsidizing bikeshares are a terribly inefficient use of CMAQ dollars (reducing air pollution and congestion) when compared to value pricing, etc.

  9. Interesting. Did the Bixi study take into account the general increase in the convenience of low-car transpotation in a city that offers bikesharing? Seems clear to me that bikesharing improves the quality of a foot or transit trip.

  10. From what I recall, they were analyzing unlinked trips, and this improvement you speak of would only show up when you’re talking in terms of linked trips. The problem with this approach is very few transit agencies even attempt to collect data on linked trips (think about it). That being said, the purpose of programs like CMAQ is to reduce public goods. The improvements you speak of are private goods. And given the essentially trivial impact on regional travel and all that results from said travel, bikesharing boasts public goods of approximately zero.

  13. I believe users should bear all costs associated with their use (i.e., remove *all* subsidies, which is not politically feasible at the moment). But one thing that strikes me with bikeshare systems (especially CaBi) is that the classic equity argument in favor of transit subsidies (serving the transit dependent, not the transit-by-choice) is that the system is set up so that it excludes low-income, unbanked persons. Last I checked, 12 percent of D.C. is unbanked, with most of these potential users residing in minority-majority neighborhoods east of the Anacostia River where density is lower and cycling-friendly infrastructure is poor. The service only works if you have a credit card/bank account, which many, particularly minority, low-income, transit-dependent residents lack. Of course, there are attempts to remedy this problem (see, e.g., 
    http://capitalbikeshare.com/bankondc), but they are rather crude and unrealistic. The equity concerns are great, yet APTA et al. deny they exist, which is completely absurd.

  14. Of course there are other positive benefits, such as influencing perceptions of the urban environment, and thus future development in the direction of a denser and more walkable environment (as opposed to cars, which push things in the opposite direction).  Bicycle travel is vastly more compatible with pedestrians than SOVs, so what’s good for one is often good for both.

    Such things are of course long term and hard to measure, so I suppose many people would ignore them, but that doesn’t make them unimportant.

  15. Of course it would.  Unfortunately, taxing problems is less politically palatable than subsidizing solutions, even if the solutions are sub-optimal.  For-profit bike sharing would likely be more financially viable given better pricing that included social costs for car use, but Congress won’t let us have that.  I don’t see how leasing sidewalk to private bike share providers is going to make the program somehow more profitable and less regressive. If anything, given the relationship between fixed and variable cost, I’d say bike share looks like a pretty good example of a natural monopoly, which would carry with it a lot of the same pitfalls of a public program even if it was totally private.

  16. Why is the race of relevance?  Furthermore, if it is of importance, consider the racial make up of the workers in the area served by the bicycles.  Is it 80% white with a college degree?  Then surely it is representative and not exclusionary.  In addition, what is the racial makeup of the taxes received?  are 80% paid by such individuals?  Then there is no transfer, from one race to another.  In addition, in certain cities bus ridership may be racially different, is that of importance in determining the success of a program?  Surely, the question is whether such provisions are reducing usage of cabs, etc. and congestion.  The problem facing public transport, especially trains, is the last mile.  How do I get from the terminus to the office.  If the person cannot carry a bike or some other form of transport on the train, as in Holland, how do I get there?  This is far cheaper than building undergrounds, new bus routes, etc.  In addition, the health benefits of such exercise append to both the individual, and society in reduced healthcare costs relating to obesity.
    Incidentally, highways are not subsidized.  Fuel taxes, sales taxes on new cars, and, taxes on oil companies raise over 8 times the amount spent on such infrastructure.

    How is it regressive, if those, college educated, who pay the most in taxes, receive a benefit?  If you wish to persuade such individuals as to the wisdom of increases in taxes, perhaps WIFEM (what is in it for me) should be observed.  If your aim is simply redistributive, then why be surprised when they act rationally, and leave your reach?  Surely a more pleasant downtown, populated with higher earners brings new revenues to all?

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