Wednesday, September 16, 2009

Greyhound Monopoly; do not pass 'GO,' do not collect 15M

Re: Greyhound Cutbacks

Greyhound this week issued an ultimatum that it would need 15 million dollars to continue servicing unprofitable routes. The company enjoys this position of demanding money for being unprofitable by virtue of its inside deal. In exchange for a government protected monopoly, Greyhound services small communities mandated by the government.

For those of you who have always wondered why public transportation is so expensive look no further. Government protected monopolies created a deficit of transit competition that makes private transportation one of the cheapest options to the chagrin of environmentalists. Curiously, there is a direct correlation to cost per distance of a given mode of transportation, and whether or not its users bear the entire cost. In the US, the cheapest mode of transportation (apart from walking or bicycling) is the airplane at 13 cents per passenger mile followed by the automobile at 23 cents per mile, Amtrak is 56 cents per mile and lastly transit at 70 cents per mile. Of special note is that users pay all the costs of flying while transit at the bottom is heavily subsidized and monopolized. While it stings to have to pay the many airport service fees, at least the costs of air travel are borne by the users allowing efficiency to best evolve the network.

Ending the monopoly inefficiencies would go a long way towards a public transportation system that could be cheaper and more attractive to single occupancy drivers. As with many parts of our economy the problem is not the market. It's that there is no market.

Randal O'Toole has a good article that touches on this at the Cato Institute. The summary and first page appear dry and a little boring but it's a pretty interesting article. Non-libertarians (I include myself here) may need to park the odd sacred cow at the door to let him complete his argument but it's worth doing.


rainswept said...
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and then the_doctor said...

O'Toole also has an interesting article on how recent transportation planning seems to be about behavior changing rather than transportation. Behaviors didn't change and transportation problems are now worse.

Its a pretty thorough visceration of how planning goes awry.

Rog said...

Airline passengers do not bear the brunt of costs, particularly if you include the environmental costs. One of the only reasons airlines can lower airline prices is because they take on cargo. The movement of cargo makes up a huge percentage of their revenue. With the economy faltering, however, these low airline prices won't last long because most airlines are operating at a loss. I think the only airline that turned a profit last year was Airtran. So, this notion that complete and utter privatization or the opposite to that, i.e.: complete and utter government control is nonsensical. there can be a marriage of the two.