Today was an interesting day for me in public transportation; I realized that there is a serious failure in the market for public transportation. Every time I ride the bus, there is always that person claiming that he/she “doesn’t have their wallet,” or “can’t find their monthly card.” At first I thought, “I purchase a monthly pass in order to ride the bus to work, why can’t they?” Well, it’s not just about their lack of fare – there is a social cost that we all pay.
Different from the train, the bus driver has discretion regarding fares. The bus drive may simply say, “Okay, but bring it next time” upon hearing the excuse. I overheard a passenger in conversation with another passenger about how this passenger never pays the fare because he can always sweet-talk the bus driver. This is a problem that creates a social cost for all of us who ride the bus.
Let’s see – the government (regulators of public transportation) must know that the bus drivers often allow non-fare riders to take public transportation. The price-setter of the public transportation authority takes this fact into account when setting fares and sets a higher fares on average. The non-fare riders cause higher fares for all of the passengers in order to pay for the average cost of transportation. Simply said, you and I pay for the non-fare passengers. In Economics, this is a social cost – a cost paid by society for a market transaction, impacting others besides the buyer and seller of the good. The market transaction is between the bus driver (seller) and the non-fare rider (buyer). The social cost is the bus space used by the non-fare rider (which can be large during rush hour) and the higher average fare.
Do you have any thoughts? I welcome your comments. Best, Nonthruths