Geordie Lad wonders about unintended consequences when it comes to fare *decreases*. Omnibuses welcomes contributions
As the euphoria and mutual back-slapping over South Yorkshire ITA’s decision to abandon its quality contract scheme dies down, I began to wonder if the dreaded law of unintended consequences was about to rear its head again.
Received wisdom is that bus fare increases drive passengers away, so the logic must be that bus fare decreases help attract people back to buses from their cars. Hence the warm welcome for cheaper fares in Sheffield for more than a third of the people near the routes in that city.
The section that appears to get overlooked is the bit about ‘the income effect.’ The theory goes something like this: imagine you’ve got a family on modest means that hypothetically spends about 20 per cent of its income on fares. At the end of the week, again hypothetically, they are left with 10 per cent of their income that might be called ‘disposable’. They can spend it on a few luxuries. Along comes a well-meaning PTE that halves bus fares overnight. Now the same family only spends 10 per cent of its income on fares and its disposable income shoots up to 20 per cent. And what happens when families have more disposable income? They buy cars, they desert their bus services and patronage falls, because, as economists will tell you, car users view buses as an ‘inferior good’. Thus, the views of the Joesph Rowntree Foundation are fulfilled.
Now, here’s an argument that you won’t find any PTE spouting, but it does make me wonder if the policies of our PTEs over the years, however well-meaning, might actually contributing to decline rather than reversing it.
Geordie Lad—staring wistfully into his Broon