Why we subsidize bikesharing

In light of the criticism they received, Reason's Nick Gillespie has a new post defending their attack on Capital Bikeshare's subsidies as wasteful assistance to the well off.

He tries to distances himself from the deceptive implications that Kennedy made when she claimed that the subsidies were meant to "address the unique transportation challenges faced by welfare recipients and low-income persons seeking to obtain and maintain employment." Deceptive because that made up only a small portion of the total subsidies given so far and the program that was to be funded by that money hasn't started yet. Will Somner of the CityPaper charitably called that "cheeky", to which Gillespie only replies:

Cheeky isn't the word I'd use.

OK, so what word would you use for something so obviously deceptive? I'd call it lying.

Am I alone in finding it telling that he places this bit of criticism - the most stinging in my opinion - at the end of his defence. And he never responds to the accusation that they're being deceptive except to say that he'll be glad to check in on the program next year to see how much things have changed. How about running a correction on the previous story? Wouldn't it be good journalism to note this fact? But Gillespie sees nothing wrong with it. 

He equally brushes aside legitimate criticism that the other pillar of their report - the survey - is highly unscientific.

according to Bikeshare's own survey (which some defenders of the program point out relies on web replies, is self-selecting, uses months-old data, etc.) that zero percent of current users have only a high school diploma. 

That isn't just a parenthetical. It is a critical point. The survey is limited in these ways and in that the survey is only of long-term members, not daily members, which may represent a very different group of people. To state these concerns, without replying to them, and then continuing to use the data is irresponsible at best. 

But even if we let that go and focus on what Gillespie sees as the thesis, things don't get any better.

The video makes the bold and apparently novel argument that while biking is fun and wonderful and all kinds of awesome, there is no good goddamn reason that cash-strapped taxpayers should be subsidizing the preferences of elites.

Well, "argument" is probably too strong a statement. I would call it a "claim" because it is never one they pursue. They never ask Chris Holben and they never look at reasons for the subsidy. If they did, they'd see that there is a very good goddamn reason to subsidize CaBi.

Primarily it can be summed up as this: the cost of the subsidy to Capital Bikeshare is exceeded by the benefits of the subsidy.

Capital bikeshare has caused a mode shift in transportation toward more biking.* That is a mode shift from dirtier and noisier forms like driving, taxis, buses and even rail; and, with the exception of walking, from more sedentary modes. In so doing it has helped to reduce congestion and freed up parking (or land previously needed for parking). It has also increased transportation options, enabling trips that previously weren't deemed worthwhile. According to estimates that MWCOG submitted with their TIGER II application, these benefits are worth about $1.50 per mile, meaning that we've already reaped about $3,000,000 in external benefits from the program and should continue to do so for some time. And since CaBi is earning a small profit on operations, even the real cost of the program is less than the $16M in subsidies that Gillespie cites.

To put this into the sense of an equation, if A is the subsidy, B is the external benefits that exist because of the subsidy and C is the benefits that users gain because of the subsidy. The good reason for the subsidy is that A < B + C and the even better reason is that A < B. With the latter almost surely being true.

Gillespie's logical fallacy lies in pretending that the only beneficiaries of bikesharing are the users. That isn't true. 

And this is really the flip-side of DeBonis' point that "Taxpayers subsidize every mode of transportation in some measure." Not only do we subsidize every mode directly, but by not charging for air, water and sound pollution; contributions to global warming; storm water runoff; resource consumption; congestion; while using eminent domain, creating parking minimums, providing for an insurance/legal system that transfers crash damage liability from users and exempting gasoline from the sales tax we provide real subsidies that are 20 to 30 times as large as the direct ones. Capital Bikeshare doesn't need any of those subsidies, so on a user by user, mile by mile or trip by trip basis, Captial Bikeshare is a total bargain.

In a sense what DeBonis is saying is we're going to pay people to travel no matter which mode they take, if we can pay people $1 to bike, and keep from paying them $5 to drive, then that is the better choice.

Gillespie would prefer to ignore the reality of that choice. He writes with sarcasm:

it is a red herring to point out that the folks using a tax-subsidized program could afford to pay for it on their own.

Yes, in that it's an trivial observation that ignores the critical question of who will provide it.

First of all, users ARE paying for it on their own . In the first year, the system turned a profit on operations and it has continued to net revenue above costs - that's without considering the external benefits listed above. When you consider those, the taxpayer is getting quite a bit for their dollar. And users are "paying" even more for the system with reduced pollution and congestion and lowered healthcare costs.

But if not for the government subsidy, no company would move into the market on its own, and I say this because no one has. Businesses can't pay stockholders with cleaner water, and the operation of bikesharing doesn't make enough of a ROI in cash to attract business owners. While there are private companies doing this, it's paid for with advertising revenue from free use of the public space. They'd be just as happy to put ads on the streets without bike-sharing systems attached. The right to advertise is the subsidy. So the reality of the situation is that no business will move into the market without a subsidy, which is the response to one of his later questions.

if you can afford to rent a bike, why not do so on your own dime?

Because no private company will provide you the option. In order for a private business to make enough money to make it worth the risk, they'd need to charge so high a rate that it would drive users to one of their other options - the other subsidized transportation options that DeBonis mentioned. That's another reason the "everything is subsidized" point is relevant.

Gillespie also makes some crazy-wrong claims like the claim that few poor people will use Bikeshare "to get to and from work in an area known for some of the most unpredictable and disgusting weather on the Eastern Seaboard." I'm not sure it is known for that, but the claim ignores the fact that people already bike commute in DC, including poor people. And people bike commute on Capital Bikeshare. The time to make the argument that no one will bike to work in DC or no one will use CaBi to do so has passed. It's like he's still arguing that LeBron James doesn't have the toughness to win an NBA title. The question is already settled.

He also tries to cast support for the program as some sort of moral failing

I get that the folks above dig the program and don't mind commandeering some of our money to help them feel good about things.

Which is, of course, not the reason that anyone has said they support it, and is not the reason the program exists. In fact, as Kennedy did in her video, he continuously miscasts the purpose of the program and then attacks it, poorly, for not fulfilling that purpose.

But if we're going to spend a million bucks on subsidizing commutes for poor people, why not just buy them bikes?

Because, once again, providing bikes to poor people isn't the only goal of the program and even if it were, a helicopter drop of bicycles isn't a particularly cost effective method to meet the goals. The program so far has served more than 140,000 unique users. There is no way you can buy and maintain that many bikes for $16M.

He ends with a question that reveals his complete misunderstanding of economics

If even such a minor and fanciful outlay as subsidies for a bike-renting business elicit such pushback, is it any wonder that we're so fucking broke at all levels of government?

I don't think bikesharing, a profitable program with benefits to everyone in the community, is emblematic of the problems within our government's fiscal condition. Tax cuts that don't achieve the stated goals of paying for themselves, wars that cost a trillion dollars more than promised, and tax loopholes written by and for certain industries, with dubious benefits to taxpayers are far more accurate symbols. Whatever fiscal problems we have in this country, bikesharing - even when the start-up cost is subsidized - is not the cause. But it can be part of the solution. 

*Before someone criticizes me for using the same survey I criticized Gillespie for, let me note that while I think the methodolgy probably skews the demographics, I doubt it skews the mode-shifting. At worst, the actual mode shift might be less pronounced, but it would be incredible if a complete accounting of users and their post-CaBi choices showed that they didn't bike more and use other modes less.

Comments

[T]

I will grant them that it was disingenuous to apply for the seed money under the auspicies of benefitting lower income people (remember they do essentially require a credit card to use). However, outside of that I don't find the program to subsidized. Quite the opposite, it's a fee-for-service model loosely akin to a toll road--a concept supported by most libertarians.

I think you sort of jumped off pace with your hit on tax cuts and wars. The libertarians would agree with you on that point. They would say most tax cuts (especially funded by debt) are subsidies. Most of them would say they're against war too.

Anyway, back to the point at hand, the simplest response to them is when can taxpayer's elected officials subsidize something (road, bridge, etc) that would in fact benefit nearly all of them? Ultimately they should appreciate the people voting for politicians against "traffic" and so when someone suggests a toll-esque philosophy to take drivers off the road (and shoot, improve their health while they're at it) then why should they bemoan it? They're bemoaning a one-time subsidy because it was poorly written--I would laugh and say cry me a river.

Now if they started questioning farebox recovery from Metro or other mass transit then I may give them some more credence given Metro's horrible mismanagement, planning and operation with every-increasing prices and subsidized heavily by local jurisdictions.

So, ReasonTV, recognize that not all cyclists are liberals, let alone rich white liberals. It's a silly name-calling notion that wastes time.

[washcycle]

T, the money that will be used for lower income people will be used for the Rockville program. It was not used for DC or Arlington. And it will get around the credit card issue by giving away memberships.

"The bike sharing program is one of eight regional projects to receive funds under the Job Access Reverse Commute (JARC) program of the Federal Transit Administration. These funds must be used to improve mobility options for low-income commuter.

Low-income workers who meet program guidelines will receive a free, one year bike share membership; coverage for a certain level of user fees; a bike helmet; bicycle use and safety training classes; and assistance with finding safe bicycle routes.

The JARC grant will provide $1.288 million, and the matching portion is $688,000, of which the City of Rockville will contribute up to $200,000 for both capital costs and operation costs. Costs associated with the program include streetscape improvements or bike path links. Capital costs associated with the program include streetscape improvements or bike path links."

[washcycle]

Also, low income people do have credit cards, just not in numbers that high earners do.

[washcycle]

The libertarians would agree with you on that point.

That's fine. I'm not arguing with them on that. I'm merely saying that those should be the poster children of our fiscal mess, not a program that has so far met or exceeded all of its promises and returned benefits that exceed costs.

[Shawn]

Capital Bikeshare is a pseudo-public good. There seems to have been a market breakdown that nobody knew about - that people wanted to bike more and seemed to 'lack' access. The evidence? Its success - the fact that demand for this good is rising (up to a point in the future, sure). But that's what governments sometimes do (successfully) - correct for market failures.

If they want to get all free-market on CaBi, maybe they should kick themselves in the asses for not thinking of it first.

That said...lots of subsidies go to the 'well-off.' Look at the Senate's new Farm Bill for evidence. But without CaBi, there'd be no CaBi to donate to homeless people, as has been done. I'll side with anybody who says it needs to be expanded to grant access to more of the poor and homeless, to give them a healthy transportation alternative to the bus or metro. But I really doubt that's Kennedy's and Reason's point behind starting this kerfuffle.

[washcycle]

If they want to get all free-market on CaBi, maybe they should kick themselves in the asses for not thinking of it first.

Or, they could offer to buy the system from DDOT and Arlington County.

Most people agree that the program should find ways to become more accessible to the less affluent. CaBi even has programs underway that seek to do that. But there are other factors (the poor might tend to be older and sicker; and/or live in neighborhoods where biking is more difficult) that will make complete equity impossible.

[Eric_W.]

Why don't we call a red herring a red herring. This is really just an attempt to vilify anyone who does not fit perfectly in the narrow ideological world view of the people who run the Reason organization, an amazing misnomer for such an intellectually lazy bunch of cheeky, deceptive liars.

Maybe CaBi members even speak foreign languages at a rate higher than the national average, or, *gasp* even are foreigners. Now, this evil plot to bring socialism to the US is even throwing taxpayer money at foreigners, who may or may not be here legally.

This whole discussion is pointless. If the focus of CaBi had been on underserved populations, then "Reason" would make this the focal point claiming that it's the welfare state run amok.

This episode highlights a well-known fact: You cannot argue with children, drunkards and Republicans/ libertarians.

Meanwhile, the puny little part of the transportation bill actually designed to provide Americans with real transportation choices and alleviate congestion is under the most serious attack by, you guessed it, the GOP in the House and the Senate.

[oboe]

Tax cuts that don't achieve the stated goals of paying for themselves, wars that cost a trillion dollars more than promised, and tax loopholes written by and for certain industries, with dubious benefits to taxpayers are far more accurate symbols.

You forgot to mention one of the most wasteful, redundant, rent-seeking-riddled medical service models on the planet. But you pretty much nail it.

"f even such a minor and fanciful outlay as subsidies for a bike-renting business elicit such pushback, is it any wonder that we're so fucking broke at all levels of government?"

If half the folks on the political spectrum think that the nation's fiscal problems can be solved by cutting things like effectively neutral bike-share programs, is it any wonder that we're so fucking broke at all levels of government?

[oboe]

I think you sort of jumped off pace with your hit on tax cuts and wars. The libertarians would agree with you on that point. They would say most tax cuts (especially funded by debt) are subsidies. Most of them would say they're against war too.

I buy $5000 worth of electronic gadgets, bike stuff, and clothing every month, but...God damn it! How are we supposed to pay our bills when my wife keeps dropping loose change down in the sofa!?!

[dynaryder]

Wish I'd bothered to take the CaBi survey. I prolly could've won a prize for being the only subscriber with a HSD.

And after reading the comments section of this latest Reason article,I'm beginning to wonder just what earning a degree gives you. I don't think I read one genuinely intelligent comment out of all 165.

[Michael H.]

I don't know about anyone else, but I was totally convinced by his arguments when he used the F-word. That always wins a debate in my book. Yes sirree, Bob.

If he's so concerned about the financial problems of governments at every level, how about tackling programs that receive hundreds of millions or billions of dollars in subsidies each year instead?

There's also the fact that the U.S. wastes billions of dollars on healthcare spending to treat avoidable conditions related to sedentary lifestyles and poor nutrition. (People who are sedentary also tend to eat badly, so the two are usually related.) Getting people off their rear ends will help to cut down on that massive wasteful healthcare spending and make the economy much more efficient and productive, for both the public and private sector.

[Crickey7]

Clearly, the only good government program is a bad government program, if you're a libertarian.

[Stephen]

In true libertarian form, I own my own bike so I've never used CaBi. I love the fact that it's there though, and I'm really glad people are using it.

I'm more interested in biking infrastructure improvements especially in the 'burbs. I'm all for limited gov't spending, but damn we could use a bike lane or two out here in the hinterlands of Fairfax County. Or at least some wider shoulders.

[dcbrewer]

Washcycle, all I can say is I am *amazed* at how calm and reasoned your responses were on their message board. Nicely done!

[charlie]

The problem with externality arguments -- and most people miss this -- is valuing an externality.

It is a linked argument -- if you can create a market for an externality then you can measure it and reward people.

You can't create a market mechanism for the externality of using bikeshare. You can try to set a value --- as MWCOG did -- but that number is largely junk.

[washcycle]

charlie, the trick is to come up with an agreed upon, neutral referee - like CBO. [Of course, that can be gamed as well]. I'll agree that externalities are difficult to value - how much is the joy of seeing art in the public space worth? - but so what? We can't ignore externalities either. So we do the best we can. If you think MWCOGs numbers are wrong, then make your case, otherwise you're just wasting our time. It's like saying we shouldn't try to plan for the future, because no one knows what will happen in the future. It's true no one knows, but that doesn't make the conclusion correct.

[Rob]

How about running a correction on the previous story? Wouldn't it be good journalism to note this fact?

This would go to show that Reason is not in the business of doing journalism. They're in the business of pushing ideology and disguising it as "journalism".

[charlie]

@washcycle; actually, no. That is exactly the problem, which you and the Dave Alperts of the the world are missing. Talking about externalities is pointless UNLESS there is a market attached to it. In fact that the failure of Coase's theorem -- it isn't the transaction costs that are preventing markets, it is some thing (your public art) don't have a price.

It's a cute concept that liberal people have jumped on to to try and value public benefits. There isn't one. But it's a fool's game.

Going back to REASON:

" there is no good goddamn reason that cash-strapped taxpayers should be subsidizing the preferences of elites"

We fund elite preferences all the time. Just look at the Pentagon. Or NASA. Or, hell, the NSF.

The issue isn't elite prefernces. It is successful programs that target middle class taxpayers and give benefits to them. That makes Republicans sweat, because that is the real secret of govenement expansion.

[washcycle]

charlie, I disagree. Somethings have value even if they don't have a price. And ignoring that value (or cost) is foolish.

[Crickey7]

It does not follow from the conclusion that assigning a specific value to an externality is practically impossible to the conclusion that we should assign no value. We make careful, conservative estimates, with assumptions made explicit.

[Richard Layman]

The framing device for bike sharing for technocrats like me is about choices in how to manage transportation demand and supply in urban centers.

But that isn't an argument that would resonate with most people.

But it's how I see it. I have no problem with cities managing districts to reduce vehicular traffic.

It's true that bike sharing benefits the middle class. If you stick with just Rawls' arguments, then you only are justified in spending money to help the less well off. That isn't how the world works.

Do I think we could do better by mobility for the less well off. Sure. That's another argument. Biking can and should be an element of that.

[washcycle]

Richard, I agree. As someone else mentioned: "Since they're so concerned about mobility for Washignton's poor, how much additional funding are they prepared to support for Metro Bus?"

[charlie]

@Washcycle; value, yes. Absolutely. Pricing, no.

Take another step back. What the economic radicals (Coasians) want is reductions in transactions costs, because they claim that will create markets, and once you have a market you can do something about an externality.

And when I saw "reduce transaction costs" it really means "lets corporations do whatever they want"

Now, to RLayman's point on congestion management, that is great. A side issue with I'd love to explore with him is whether the future of bikeshare is large cities -- or small ones. If he's familiar with Grand Haven, MI, for instance, that is a town begging for bikeshare.

Bikesharing ultimately isn't a great D(income equality) or R (deregulate) issue. It's a new thing, which is why idiot libertarians have a have time figuring it out. And Felix.

[oboe]

If you stick with just Rawls' arguments, then you only are justified in spending money to help the less well off. That isn't how the world works.

Sure but if your stated political goal is to shrink government to the point where you can "drown it in a bathtub", eliminating all services for anyone who's not desperately poor is a good start. Once every government program is for marginal people, the battle's pretty much over.

[Don]

If you'll forgive the metaphor, you're arguing about the right call on the play with people who don't even acknowledge there should be goalposts.

Nobody at REASON will ever acknowledge the value of subsidies and government programs; it's antithetical to their religious obsession with Rand. Trying to discuss the finer points of implementation of something they believe should not exist at all just legitimizes them.

[washcycle]

charlie, I don't understand what you're trying to say.

[SJE]

OK, I can agree with some of the theoretical reasons against subsidies: they have all sorts of deadweight costs, andfighting one subsidy with another subsidy is perverse, and prone to all sorts of meddling.

But in the real world, we have this huge subsidy for other transport (esp cars) and for people to live in exurbs. It is not feasible to remove those subsidies immediately, so the next best thing is to build alternatives, while we wean people off cars. Building bikeshare is a smart way towards less subsidies.

[Richard Layman]

charlie, wrt bike sharing in small communities, if you have a high amount of trust then you don't need to have the super-hardened systems a la Bixi/Bcycle/what I am trying to sell (Urbikes).

In places where you don't have to worry too much about vandalism, you can have a much less costly system like the Tulsa Townies system or the Zotz system on the grounds of UC Irvine.

I don't know the price difference exactly, but it'd be at least $2000 probably as much as $4000 cheaper on a per bike basis.

As far as Grand Haven goes, I hate to admit that I have limited experience with the western part of the state except for the Traverse City area and some trips to Kalamazoo (ex-wife was from there). I am Southeastern Michigan born and bred.

There is another variant too that we are still trying to roll out, to multiunit buildings. Again, while there is high quality bike parking, there isn't the kiosk/dock set up. (In our system a kiosk is $8-10,000 each and the docks are about $1000 each. The ad-map frame is pretty expensive though, up to $9K if you want 4 sides.)

[Richard Layman]

Oh, you'd definitely have to subsidize the operations of the system too. Unless the area is a big tourism destination, you need at least 15-25 members per bike to break even. Advertising revenues are minimal. Sponsorship and partner revenues decline over time as the system is no longer "new". (This is an issue in Denver.)

[Jack]

Gillespie's rebuttal piece probably helps BikeShare. He quotes a lot of criticism from a lot of reputable writers. The reader can't help but think it's Gillespie, not all the other writers, who's wrong.