My Ride-sharing Soap Box

This post will be longer than I’d like most of my posts to be, but I imagine this is one cost of starting a blog a considerable amount of time after being born. I have a lot of old ideas I would like to reference, but since I’ve developed them elsewhere, the blog needs to be caught up before I can develop them in a more incremental, and palatable, manner.

Last month, Bryan Caplan posed this question to his students: how to spend a billion dollars most efficiently and, alternatively, in such a way as to maximize utility. Part of the idea was undoubtedly to distinguish utility from efficiency by proposing plans that differed in their espousal of each principle. Another part was to see whether students could actually identify any low hanging fruit: is there something we obviously could and should do that we haven’t already done?

My proposal would be that we pay ~8 million Americans to become casual cab drivers. Here it is important to qualify “casual;” no one is leaving his job to drive people around, in fact, they’ll be asked to go no more than a few minutes out of their way. Smartphones have made it incredibly easy for people to impersonally coordinate time and locations, why not pay someone a trifling amount to take you to work when you’re right on their way?

There are two general reasons why it wouldn’t work, one preferential, the other structural. The preferential case revolves around general insularity (stranger danger, social awkwardness, misanthropy) and is more difficult to predict as it’s unclear at what prices people would be willing to shrug it off. The structural case is simply that a widespread and reliable ride-sharing network needs a big push and it’s hard to see how you could get the gains from such a scheme to accrue to the source of the push. I think a billion dollars simultaneously remitted to to a few million active participants in a handful of major cities would be sufficient to get the project off the ground and its evident convenience would sustain it from there.

There are a litany of potential benefits. Most immediate is the relief of traffic jams in major cities, perhaps to the extent that it eliminates the need for congestion charges which are a net social gain, but privately costly in terms of time/money/planning. Secondly, its short term labor labor-saving effects would free up cabbies and public transportation workers/dollars while providing people with a lower cost service across the board (t/m/p). The long-term gains are by far the largest. Ownership of private passenger vehicles is the second largest expense most Westerns face in their lives, in many cases approaching one third of the median income (consider these figures for the US). If there were a convenient, reliable way for commuters travelling in the same direction to ride-share, I’m keen to entertain estimates of how many active vehicles could be taken off the road in 15 years.

In the interest of quantifying the efficiency gains, I’ll say that we can reduce the number of passenger vehicles by 15% in 15 years (Ceteris Paribus). There were 255 million registered passenger vehicles in the US in 2007. In the interest of conservatism, I’ll suggest 265 million as a current figure. At roughly $9,000 per car per year the annual expenditure hits $2.835 trillion. 15% of that?  ~$358 billion per year. Say my plan has a low probability of success, or the reduction in car ownership wouldn’t be so great, how low would it have to be and how small would the change have to be? Even if there were only a 3.5% chance of the strategy reducing the number of cars on the road by 1%, you’d still get your principle back in savings every year.

While it may not be the most efficient way to spend $1 billion, it is perhaps the one most highly relevant to the everyday lives of Americans. Also it’s much more easily quantifiable than the promotion of natalism, unspecified scientific breakthroughs, or immigration.

I think I’ve done enough to answer Bryan’s prompt and don’t wish to make this post any longer, though I have much more to say on the topic. For those curious about how far private money has gotten in this endeavor, look in to Lyft and Uber, two services being developed while I’ve been day dreaming.

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