21 January 2009

The Stupidity of Price Controls

First Bus have announced a fare increase in Greater Manchester and the predictable knee-jerk response from a number of simplistic/opportunistic local politicians has been to call for the local passenger transport executive to introduce price controls.

It's a prime example of the common politician's fallacy of supporting a course of action based on the positive effects, while completely ignoring the negative effects.

In this case, one of the most likely side effects is that some of the less profitable routes will cease to be viable if the operator is forced to charge lower fares, resulting in services being withdrawn. I imagine that this is not what the politicians in question want. It will probably result in protests from passengers, at which point the same politicians are likely to push for a subsidised service to replace the one which has been lost. The end result will be a service which is no cheaper, but where a proportion of the cost has been moved off the customer and made up with tax revenue.

That's a poor way of running a service, because it becomes less responsive to the demands of the customer and more responsive to the demands of politicians. Buses become less likely to go where customer demand is and more likely to go where it is politically expedient for them to go.

The basic premise of any service should be that its success or failure is determined by the custom it gets and that can only happen if politicians stop interfering
.

1 comment:

AntiCitizenOne said...

> That's a poor way of running a service, because it becomes less responsive to the demands of the customer and more responsive to the demands of politicians.

Not if your a politician!