As published in City AM Wednesday 31th January 2018
The Transport for London (TfL) bus experiment has proved to be overwhelmingly unpopular.
Supposedly at every bus stop (but more usually once the bus has pulled away) a disembodied voice informs the passengers that the bus is about to move.
The hated announcement is being run as a trial for four weeks. TfL will then evaluate its effect on the number of accidents on the buses themselves.
A conflict between inpidual and collective welfare is exposed by the reactions to the experiment.
Collectively, we do not want it to continue, but inpiduals have little incentive to stop it in an effective way.
For example, public spirited inpiduals could fall down and claim that this was due to the motion of the bus. The statistics would then show an increase in accidents. Even the most obdurate bureaucracy would find it hard to persist with the experiment.
The “victims” would bear costs as inpiduals, such as the time spent reporting it, plus the risk they might actually injure themselves. But they would create a benefit for everyone else. The voice on the buses would be switched off.
The concept of the winners compensating the losers has been a fundamental principle of economic theory for at least 100 years. It is important in public policy making, in the cost-benefit analysis which is carried out to decide whether a public infrastructure project should go ahead.
This is the rationale for the soon-to-be-abolished tolls on the Severn crossings, for example. The users benefit from a much-reduced travel time, but the non-users lose by having to pay taxes to build the bridge in the first place.
In general, the problem with implementing this in full is that the gainers are small in number relative to the losers. They tend to object vociferously to the charges levied on them, so that they rarely pay the full amount of their benefit to compensate everyone else.
With the bus scheme, the reverse is the case. Large numbers benefit from the ending of the scheme, and only the small number simulating an accident would lose.
But a public body such as TfL could hardly be expected to set up a scheme which would undermine its own experiment.
We might then ask why a market has not emerged to compensate those willing to simulate a fall. In a market, inpiduals could be paid the full costs they incur.
With social media, setting up such a market would be easy. But there would be two main problems.
The first is that of trust. How would participants be reassured that the relevant monies would be paid? The issue of institutional trust is a fundamental reason why markets are difficult to set up in many contexts.
There is also what economists call the free-rider problem. How many of those who dislike the voice would simply leave it to others to make the payment? There would be no coordination mechanism for ensuring that everyone paid.
Annoying though it may be, the bus experiment shows that even everyday issues often raise fundamental aspects of economic theory.
Image: London Bus via Pixaby is licensed under CC by 0.0
Written by Paul Ormerod, Cowry's Chief Economist and a visiting professor at University College, London, and author of Positive Linking: How Networks can Revolutionise the World.