Wednesday, July 16, 2008

How Cab and Bus Fares Would Work in a Free Market

Talifaitasi W. Satele


One of the first requirements for a free market in public transportation would be the freedom of drivers/owners to set their own prices. However, there are a number of reasons it’s in drivers’ best interest to invest in either meters or some system of ticketing that allocates prices to the distances they service.

A customer can refuse to pay in which case the owner would need evidence to prove his case in court or with the Commerce Commission. Setting rates can also make consumption easier, much like price labels at the grocery store, when customers become more confident about their purchases. But bus owners can’t make such an investment without being able to pass such costs along to consumers in the form of higher prices, which is currently against the law.

Initially, prices will be higher without price controls. Much higher nowadays because of gas prices and a high demand for public transportation. But higher initial prices will do two things: it will lower demand for public transportation and pay off investments owners have made in their businesses. Both will put pressure on prices to come down again as bus drivers would try to entice customers to come back and their investment costs have been paid off. And of course, competition will have its own part to play in the process.

Such adjustments in our public transportation system will never happen as long as the Commerce Commission exists to cap fares. And as long as bus and taxi cab drivers continue to absorb higher costs without being able to legally raise their fares, the more will see the sort of opportunistic behavior that seeks compensation through fraud.

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