A couple of years ago, on a bus that made the route between Lisbon and Ericeira, as we were travelling across the hills between Loures and Malveira, I could not help but overhear an exchange between two tourists that went like this:
Tourist 1: This is beautiful, but would you be capable of living here?
Tourist 2: It is, but probably not. You can’t live here without a car.
Tourist 1: Indeed.
Much has been said, both by supporters and opponents, about the new passes for public transportation in the metropolitan areas of Lisbon and Porto, regarding its undeniable costs, potential effect on traffic congestions, redistributive effects from the rest of the country to these cities and barriers to effectiveness, among many other things. Today, I would like to add two more points to the discussion:
First, setting up any public transportation network requires a great initial investment. While in the great urban areas there is some guaranteed level of demand that might compensate for this, that is not the case in the rural areas where population density is much smaller – and these also exist within the region that benefits from the new system; there are places where on business days the number of buses passing by a certain village is no more than two or three each way, and on holidays and weekends there are none at all; even then, these are often empty, except for some secondary school students (to whose school’s schedule the bus schedule was purposefully adjusted) and, on its best days, a handful of elderly people with enough time to afford making their day adjust to the bus schedules.
Given these circumstances, in those areas nobody with a relatively busy life ever dreams of relying on public transport in their daily life; the costs in terms of time and convenience are too large, which further reduces demand and any incentives for companies to increase their supply. One can think of this phenomenon as a simple static game between the firm and the consumer: while the transport company wants to offer low supply if consumers choose mostly to use their individual cars and a slightly higher supply if they were more likely to choose the bus, for the consumer choosing the bus always carries a very large disutility in terms of price and comfort, and probably also reliability, making choosing the car a dominant strategy. In equilibrium, then, bus firms offer low supply levels and consumers ride their own cars. If, instead, we treat this as a dynamic game where the transport firm chooses supply level in the first stage and then the consumer responds by choosing whether to take the individual car or go by public transport the outcome will be the same.
However, the introduction of the metropolitan low-cost passes can, in one specific situation, change the scenario: in higher demand routes (mainly the ones connecting the largest city – Lisbon or Porto – and larger towns – the municipalities’ capitals and some other relevant locations) transport is much more frequent and reliable, and frequently it also has the bonus of being operated by privately-owned firms (making them less susceptible to the strikes that frequently cause great disturbances in the largest cities’ state-owned transport networks). In the limits of the metropolitan areas – which have become increasingly referred to as the “big cities’ dormitories”, referring to the phenomenon of people who live there but spend their day working in the largest city, needing to commute every day – the reduction in consumer prices can easily surpass €100; this reduction in monetary costs can surpass the inconveniences brought by public transport and cause, in some of these commuters, a strong incentive to make the bus not a substitute, but a complement to the individual car: like a system of hubs, driving to the larger town and from there taking the bus to the city might become a reasonable alternative; however, for shorter routes, it is unlikely that the private car will be, in the foreseeable future, replaced.
A simple, real-life example: take the town of Barril in the northwest corner of the municipality of Mafra, which is as far as you can get from Lisbon and still be able to have the Navegante pass, and which has become one of “Lisbon’s dormitories”: a two-way trip to Lisbon, between gas and toll fees, costs around €15, plus parking. Then, if there are 20 working days per month, monthly expenses for commuters is €300. The nearest relevant “bus hubs” to Lisbon are Torres Vedras (which is not included in the Navegante pass), Ericeira and, a bit further away, Mafra. Before the introduction of these passes, the monthly pass from Ericeira or Mafra to Lisbon (allowing to move also in the Lisbon transport system) cost €160 or €140, plus commuting to these places, which we can estimate as up to €50 to €90 per month, respectively; the difference between taking the car and the bus is €90 per month, at most, and still not including parking in Lisbon. (In Mafra and Ericeira parking is mostly free).
Then, with the introduction of the Navegante pass, bus pass costs are reduced by at least €100, which doubles savings from taking the bus instead of the car all the way to Lisbon. This is a significant change, but how significant to overcome inconvenience costs and make people change their habits? Only time will tell.
The second point is merely a technical curiosity: since I do not expect that people will move from their home for the simple purpose of benefiting from these passes, and they are attributed based solely on place of residence, we can think of this program like some sort of lump-sum transfer; if the example follows to other types of goods and social benefits, this can help to fight the “poverty trap” in which, in the upper limit of income allowing for social benefit schemes, working more actually results in a loss of income. But the impact of this measure, in itself, is probably limited, particularly taking into account that literature (such as Spiegel ) has proposed public transport to be an inferior good, and even with the arising of environmental concerns the recent developments in electric mobility have probably not changed this.
In evaluating these measures, the job of economists is to isolate and identify distinct effects and try to estimate the impact of each so as to perform a cost-benefit analysis; however, the actual results will be dictated by the market, and we wait to see the effective impact of this measure, both the good and the bad. But nevertheless, I do not think I am wrong in thinking that people will still not be able to live without a car; especially those who live away from the urban centers.
Author’s note: This article was written before the strike of dangerous goods’ truck drivers between April 14-18, which caused massive shortages of fuel all across Portugal. The widespread contempt arising from the fact that minimum services for the general public were initially restricted to Greater Lisbon and Greater Porto, where public transport is generally more available, seems to be evidence in favor of the final conclusions of this article. Some people will still need individual cars, which does not mean that they cannot be complementary to public transport.
Spiegel, U. (1994). The case of a “Giffen good”. The Journal of Economic Education, 25(2), 137-147.