By Tim Redmond
There are lots of problems with the Muni fare hikes, and Paul Hogarth points out some of them. But there’s a larger issue here: Is this really going to bring in more revenue?
Every time Muni raises fares, some people stop riding the bus. That’s basic economics — you hike the price of a product, and you sell less of it. And if your raise the price too high, and enough people stop buying your product, you actually lose money.
That’s called the price elasticity of demand, and it’s a central part of any economics course. It’s hard to run a business without some basic understanding of the concept.
If your product isn’t necessary for people’s lives (and there are available alternatives), the drop-off is faster and sharper — raise airline tickets high enough and people quickly drop discretionary travel and vacation closer to home. When the product is something everyone absolutely needs, like housing, and there’s no substitute, you can raise prices a lot more without losing customers (see: San Francisco rents).
Muni is somewhere in between. For some people, typically poor and working-class people, it’s essential — they don’t own cars and need the bus or train to get to work. For others — those of us who are physically able to ride bikes, or to walk to work or the store, or economically able to afford private cars — the price elasticity of Muni is much higher.
There are all sorts of studies on this (here, for example, but trust me, unless you’re really into economic theory and lots of strange numbers, don’t even think about it.)
Suffice to say that in San Francisco, a small city with typically good weather, a fairly wealthy population and a lot of people who enjoy walking and biking, the price elasticity of demand for Muni is relatively high — that is, when prices go up, people who can will seek other alternatives. Nobody knows exactlyat what the price point Muni starts to lose money — when fare hikes become counterproductive — but I suspect we’re approaching it. The largest rate hike in half a century is not only regressive, counter to the city’s transit-first policy and environmentally stupid — it may be a financial mistake.
Now contrast that with raising parking prices. For starters, most drivers who park downtown can well afford to pay a couple bucks more for parking. Second, check out the streets — parking is so hard to find that it seems very likely that demand exceeds supply by enough of a factor that raising prices won’t impact use and will bring in more revenue.
And what if some people decide that parking costs too much and stop driving? Isn’t that what the city wants to accomplish anyway?
This decision to raise fares more than parking is nuts, on every level.