Sunday, October 6, 2013

Mass Transit, a followup

In my previous post I started talking about the costs of different modes of transportation, and here I want to elaborate on the type of necessary economic analysis that is needed when making such crucial decisions.

Let's assume we are talking about a city where there are 1 million potential riders in a city and each rider rides an average of 35 miles a day and they will do this 300 days a year. This yields 10.3 million passenger miles. This is the input information and everything changes from here.

Option 1 is to have each person drive themselves. Let's say the average miles per gallon is 30 which is more or less standard for sedans. Some cars will be Priuses, some cars will be SUVs, and it will average out in this example to 30 MPG. The cost per gallon is $3 per gallon (to be generous) and parking is $10 for the whole day (to be extraordinarily generous, I should probably say something over $50 but it isn't necessary for this example). The average person is going to use 1.12 gallon and spend $3.36 on gasoline, for a total cost of $13.36 to get to and from work every day. The total cost to society is $4,008 a year per person and $4,008,000,000 for society. (1,000,000 people * 300 days * $13.36)

Option 2 is to have buses which go as fast as cars. Each bus gets 20 MPG at $3.00/gallon and pays the driver $25 per hour. The bus gets caught in traffic so it takes one hour to go the 35 miles (which is pretty normal for buses). Each bus carries 50 people so you will need 20,000 bus routes per day. Each bus will use 1.75 gallons of gas per route, at a cost of $5.25 per route, which means each route will cost $30.25 for every route. The total cost for this is $181,500,000 million for society, or $181.50 per person. This is a $3,826,500,000 stimulus to the local economy over the course of a year compared to everyone driving. Imagine if you got an extra $3,826.50 in your pocket every year because that is what converting a million commuters to buses does.

Option 3 is to use light rail to cover these distances. The average train costs 20 cents per passenger mile and goes 35 miles per passenger 300 days out of the year for 1 million passengers. This costs (1,000,000 passengers * 35 * $0.20 * 300) $2.1 billion a year in maintenance. The driver of the train earns $25 per hour (to be consistent). The train will go 80 MPH (which is reasonable for such a route) which means it will take 26.25 minutes to do the distance, which means it will cost $10.94 per route for the driver. Each train will carry 100 people which means you will need 10,000 routes per day. This yields a cost of $2,032,820,000 for society which seems like a lot of money because it is. This is why accounting methods are inaccurate. However, this is going to save people roughly 45 minutes per day which means if the average person is worth $20 per hour that saves $4.5 billion for the economy (1 million passengers per day * $20 per hour * .75 hours * 300 days = $4,500,000,000 saved). If you take this time savings into account rail turns from the least affordable to option into a $2.467 billion stimulus without taking into the dollar account for the other options, which in reality is a $6.475 billion stimulus for a local economy. Who wants $6,457 in savings and extra income per year? Opportunity cost makes the difference between being in debt and being rich. If we did this in our hundred largest cities the increase in efficiency will be large enough to significantly raise our GDP.

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