Is Uber Making the Taxi Market More Efficient?

The Economist analyzes the microeconomics of Uber's controversial "surge" pricing model, in which users are charged significantly higher prices during high-demand times:

There is some evidence Uber's surge pricing is improving taxi markets. The firm says drivers are sensitive to price, so that the temptation to earn more is getting more Uber drivers onto the roads at antisocial hours. In San Francisco the number of private cars for hire has shot up, Uber says. This suggests surge pricing has encouraged the number of taxis to vary with demand, with the market getting bigger during peak hours.

However, the inflexibility of Uber's matchmaking fee, a fixed 20% of the fare, means that it may fail to optimize the matching of demand and supply. In quiet times, when fares are low, it may work well. Suppose it links lots of potential passengers willing to pay $20 for a journey with drivers happy to travel for $15. A 20% ($4) fee leaves both sides content. But now imagine a Friday night, with punters willing to pay $100 for a ride, and drivers happy to take $90: there should be scope for a deal, but Uber's $20 fee means such journeys won't happen.

Why Does Airport Pickup Cost More?

We are arranging a car to take us from our flat to Heathrow Airport early Saturday morning, then return us on Monday evening.  The price going to the airport is ₤28, the price returning is ₤38.  Why the difference?

One possibility is cost-based price discrimination: the driver may have to wait at Heathrow, since the plane and retrieving our baggage may be delayed.  Another is that the prices are set to match the differential set by metered taxis to reflect waiting time for fares at Heathrow (although I would think that competition among car services would eliminate that differential).  I don’t see how this differential could arise from demand-based price discrimination; and neither of the other explanations seems very satisfying.

(HT: DA)

Democracy: Should We Bother?

What could be less controversial than the principle that the public should be consulted about transportation policy? In future posts, I’m going to write about why puppy dogs are despicable and why we should all root for the Miami Heat, but for today I’m going to question this seemingly unquestionable proposition.

There is good reason that one of modern transportation planning’s most fundamental precepts is that the public should be consulted on policies large and small, from constructing a new subway line to changing a humble bus schedule. This is the product of very real abuses, particularly during the creation of the Interstate Highway System. At that time, government had virtual carte blanche to displace residents and bulldoze neighborhoods. For example, for Los Angeles’s Harbor Freeway in the late 1940s, the condemnation resolution for the right-of-way was approved by the court the day after it was filed by the state. The following day, every piece of property along the route was posted with a fifteen day notice to vacate. And less than three weeks after the filing of the condemnation resolution, the Division of Highways began clearing the property.

The Free Harbor Fight: Transportation Meets Chinatown

Unlike its natural rivals—San Diego, San Francisco, and Seattle—Los Angeles is a rotten place for a port. But that hasn’t stopped the city known for inventing and reinventing itself from becoming the busiest container traffic hub in the US. The story of how L.A. transformed itself into one of the world’s great shipping centers is rife with corruption, power politics, double-dealing, bribery, and betrayal. It’s a story that could only have dripped from the pen of one of the city’s Hollywood hacks--if it weren’t true.

Despite its worldwide association with sand and surf, Los Angeles began life as an inland community. Its original port was at San Pedro, roughly 25 miles to the south. But San Pedro had been cursed by nature. There was no shelter from waves and wind; it was far too shallow to accommodate shipping; and its bottom was mudflats, making construction of heavy piers or breakwaters difficult. Bringing cargo ashore meant transferring it to longboats from ships anchored several miles out at sea, rowing it ashore, and then hauling it by hand across a rocky beach and up a steep slope. The only alternative to this difficult operation was to beach the ship, an even more challenging undertaking. Writing in his 1834 account of his time as a sailor on a ship plying the California coast, Two Years Before the Mast: And Twenty-Four Years After, Charles Henry Dana called San Pedro a “hated… thoroughly detested spot.”

Is Your City in the Right Place?

An article on VOX by Guy Michaels and Ferdinand Rauch looks at whether towns in France and Britain are "poorly located." The authors explain that being in the wrong place -- with poor access to world markets and resources, or vulnerability to natural disasters -- has dire economic and social consequences. Examining historical evidence from the Roman Empire and the Middle Ages, they found that towns in France stayed put, while those in Britain moved:

Medieval towns in France were much more likely to be located near Roman towns than their British counterparts (Figure 1). These differences in persistence are still visible today: only three of the 20 largest cities in Britain are located near the site of Roman towns, compared to 16 in France. This finding suggests that the British urban network shifted towards newly advantageous locations, while French towns remained in locations, which may have become obsolete.

They also found coastal access to be important:

A Quick Summary of the 21st Century So Far

From a reader named Kevin Murphy (alas, not the Kevin Murphy):

The Economist just reported on what you covered in the "The Downside of More Miles Per Gallon" podcast in February. It's looking like Oregon is leading the way in possibly charging per mile: "A bill that would have applied a VMT fee to all new vehicles doing 55mpg and above died in the last legislative session; instead, 5,000 volunteers will join a new VMT scheme in July 2015. They will be charged at 1.5 cents per mile rather than paying the state petrol tax (30 cents per gallon)."

How Does the Value of Driving Differ Across States?

Michael Sivak, a transportation scholar at the University of Michigan whose work has appeared on this blog before, released a new study on inter-state variations in economic activity per unit of driving.  His findings are interesting and reflect significant differences in GDP per distance driven among U.S. states:

In 2011, the highest GDP per distance driven was in the District of Columbia ($30.04/mile, followed by Alaska, New York, Connecticut, and Delaware. The lowest GDP per distance driven was in Mississippi ($2.51/mile), followed by Alabama, New Mexico, Arkansas, and Oklahoma. The median value was $4.66/mile. In comparison, the standard federal reimbursement rate for fixed and variable costs of operating an automobile in 2011 was $0.51/mile.

From 1997 to 2011, the largest absolute increase in GDP per distance driven (with GDP measured in current dollars) was in the District of Columbia (+$14.95/mile), followed by Alaska, New York, Delaware, and Oregon. The smallest increase was in Mississippi(+$0.67/mile), followed by Alabama, Michigan. Florida, and New Mexico.

Has the U.S. Reached "Peak Motorization"?

Peak oil? Probably not. But have we reached "peak motorization" in the U.S.?

Michael Sivak of the University of Michigan's Transportation Research Institute says the answer is quite possibly yes:

The absolute number of vehicles reached a maximum in 2008. However, it is likely that this was only a temporary maximum and that the decline after 2008 was primarily driven by the current economic downturn that started in 2008. Consequently, with the improving economy and the expected increase in the U.S. population, it is highly likely that (from a long-term perspective) the absolute number of vehicles has not yet peaked.On the other hand, the rates of vehicles per person, licensed driver, and household reached their maxima prior to the onset of the current economic downturn. Consequently, it is likely that the declines in these rates prior to the current economic downturn (i.e., prior to 2008) reflect other societal changes that influence the need for vehicles (e.g., increases in telecommuting and in the use of public transportation). Therefore, the recent maxima in these rates have better chances of being long-term peaks as well.

But Sivak is smart enough to hedge his prediction:

However, because the changes in the rates from 2008 on likely reflect both the relevant societal changes and the current economic downturn, whether the recent maxima in the rates will represent long-term peaks as well will be influenced by the extent to which the relevant societal changes turn out to be permanent.

An End to the Gas Tax?

When you are a transportation professor, it is your privilege to hear a lot of zany ideas. I have heard about a scheme to create a fleet of intercontinental freight zeppelins (actually, this may not be quite as zany as it sounds). Fifty years after The Jetsons, there are still dogged advocates of flying cars. The most common thing I hear is that we should attack congestion by building monorails down the medians of the freeways. I have no idea how the monorail has bewitched our citizenry (too many trips to Disneyland?), or what precisely is so offensive about the idea of trains that run on two rails, but it’s amazing how beloved the monorail is, so much so that an episode of the Simpsons parodied it. Monorail! Monorail!

Because I love hearing people’s ideas and have no desire to be rude, I engage in an exacting regimen of meditation, yoga, and deep breathing so I can exhibit the equanimity of a lama when hearing goofy ideas. But occasionally something comes up that none of my mantras or self-hypnosis can handle.

To my mind, Governor Bob McDonnell has fashioned one such idea. He is proposing eliminating the state’s gas tax.

From Horse Power to Horsepower to Processing Power

Some thinkers make their reputations by focusing on social justice, economic progress, or global sustainability. I took the low road and went for horse manure. It was my article on filth, flies, and putrefying horse carcasses in the 19th century city that brought me to the attention of Dubner and Levitt and, for better or worse, to this site. FYI, the article is here.

If you do peruse it, you’ll see I ended with the hope that technology will bail us out of our transportation problems just like it bailed us out of those caused by the horse. At that time, a deus ex machina descended from the heavens to improbably solve the insoluble. The savior was known as the automobile, and as it went from obscurity to ubiquity in a few decades it banished the working horse—a primary mode of transportation for thousands of years—to oblivion.

There was only one problem with my call for a miraculous technological fix: I did not have the slightest idea what that technology would be.