Wednesday, April 16, 2014

Free is cheaper

We started calculating the costs that could be reduced for a city of 1 million in the US if free public transit were adopted. After 3 categories, it is apparent that only minor reductions would amply pay for the "lost" revenues. We will continue working on the spread sheet, and we may not even have to include the costs of climate change.
The first column is the expense that could possibly be reduced by having free transit.
The second column is the fixed cost from sources such as AAA adjusted for a city of 1 million.
The 3rd column, percentage of savings, is the one to change to see how much is needed to make the bottom line zero or greater. After only 3 categories, and a modest estimate of 5 or 6% savings with free transit, we can easily recover the lost fare revenue.

1 comment:

Enrico Gotti said...

Your model is enlarging the cost-benefit analysis from the transportation company (disappearing as a separate entity) to the whole community; if I understood you correctly your assumption is that the community as a whole should use their savings to pay for free transportation. This idea is also coherent with trends of new economy. Am I correct? Six preliminary comments: 1. a positive aspect: through taxation the payment is progressive with income, while the actual ticketing scheme is a flat cost for every citizen; 2. On the other hand it could be politically difficult to have such taxation increase approved by citizen who never had a car accident in that city or aren't using their car in the city;3.car accidents are paid by car insurances; as citizen in terms of costs-benefits the comparison should be based on the savings that they could get from their insurance company if they don't use their car in their residential city; 4. but in order to do it, it would be necessary to forbid private cars circulation in that city (by the way, this would also increase to more than 5% the users of public transportation and may be the benefits of your model, but we can know only after having calculated the cost increase of the public administration for a 100% substitution of car transportation); 5. in principle, since the insurance companies would have their savings (if their premium is not changed) because of the number of accidents reduction, they should be convinced by local government, or obliged by the national government, to replace the related citizen additional tax payment. 6. I would also be interested to know which are the assumptions that you have been using for your 1 M inhabitant city model (in some part of Italy the incident % could be higher). Certainly the local community will have in addition a benefit in terms of quality of life and less people ending in the hospitals for car accidents or pneumonia etc...Thanks for your attention, Enrico Gotti