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Economy

People Respond to Pricing

By David Stokes on May 12, 2008

Incentives and prices matter. As prices change, habits and activities change. Here are two articles relating to how people are making changes because of the high cost of gasoline. The New York Times has a story about the increased use of mass transit in cities throughout America. MSNBC has an article about the booming business at bike shops across the country. The Post-Dispatch has a story about bicycling in Saint Louis. As very few people expect the price of gasoline to come down, these changes may well be long-term. In my opinion, these changes are neither good nor bad, they just are. This is the way it is (and likely will be for the future), and free, educated people will make adjustments.

Now, how does this relate to public policy, you might ask? Well, clearly in lots of ways. Let’s just take mass transit. Randal O’Toole wrote a study for the Show-Me Institute arguing against light rail for Kansas City. While most people who read it focused on the argument not to do something, the study also discussed what he thought Kansas City should do. Randal recommended that Kansas City expand its bus?rapid transit system and embrace competitive contracting for its buses. BRT, when done right, makes buses operate more like light rail at a fraction of the cost, and competitive contracting allows the power of private enterprise into the provision of transit. There is always an important role for mass transit in our cities. High gas prices make that role even more important. As for St. Louis, the potential of competitive contracting should also be embraced for the bus system.

As an aside, I love the picture accompanying the Post article. Nothing says "Share the road with bicyclists" like a biker clearly riding in the middle of the road and blocking two lanes of traffic from passing. With that in mind, this is Bike-to-Work Week and Friday is National Bike-to-Work Day. I have a meeting off-site on Friday, so I am gonna bike in on Thursday. Or maybe I’ll just walk. You worry about the price of gas a lot less when you live one mile from work.

Bike to work

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About the author

David Stokes

Director of Municipal Policy

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