Why Greyhound Sucks
Gareth Higgens manages to make a movie review for Once into a screed about Greyhound. He rightly identifies the problem, but fails to understand the solution. (If a government program isn't working, all we need is more government programs, right?)
The problem with Greyhound is its monopoly.
But how did they get a monopoly and what is holding it up?
A firm can only get monopoly power if they charge a low enough price that new competitors can't make a profit by entering the market. This should be good for the consumer because they are enjoying the lowest possible prices. This situation would be called a natural monopoly, but there are few instances of these, and none of them represent an economic injustice.
Greyhound is the other kind of monopoly, the kind subsidized by the state.
Some portion of every greyhound ticket is already paid for before a customer walks up to the counter. These subsidies artificially create the availability of low-ish prices. Also, they provide service to locations which otherwise would not receive service at all.
Because Greyhound does not face competition and is promised funding for routes (even if nobody rides) in these subsidized markets they have no incentive to provide good service, or even to run their busses on time. Also, they have to run their busses through every rinky-dink town along the way making the trip especially long. As a result, middle class and upper class Americans chose not to take the bus. They'll fly or drive themselves, in a rental car if they must, instead. Indeed the last time I rode Greyhound was 9 years ago, NC to California on a 2-week student pass. On and off wherever I wanted to go. But I would never take my wife and kids on such a bus. I was a shady character myself, then...
Remove the subsidy and competition will renew. Instead of the huge, wasteful, aging busses, smaller busses would serve the rinky-dinks off of spur lines, and the main lines would become more efficient, inviting use by more time-conscious individuals. As more people ride, the average cost per customer would go down and in the long run prices would become less expensive for everyone.
Where there is heavy enough traffic, competitors have risen up anyway. I have heard some interesting stories about the Chinatown bus out of NYC, and I have seen some of the migrant worker busses here in NC.
Artificially low prices that confuse incentives result in inefficiencies and almost always lower quality service. The same thing is happening in the airline industry lately (anyone lost a bag in the last few months?).
Stop trying to solve problems by manipulating coercive power, the state. Search for voluntary mechanisms which allow for free exchange and contract, the market.
The problem with Greyhound is its monopoly.
But how did they get a monopoly and what is holding it up?
A firm can only get monopoly power if they charge a low enough price that new competitors can't make a profit by entering the market. This should be good for the consumer because they are enjoying the lowest possible prices. This situation would be called a natural monopoly, but there are few instances of these, and none of them represent an economic injustice.
Greyhound is the other kind of monopoly, the kind subsidized by the state.
Some portion of every greyhound ticket is already paid for before a customer walks up to the counter. These subsidies artificially create the availability of low-ish prices. Also, they provide service to locations which otherwise would not receive service at all.
Because Greyhound does not face competition and is promised funding for routes (even if nobody rides) in these subsidized markets they have no incentive to provide good service, or even to run their busses on time. Also, they have to run their busses through every rinky-dink town along the way making the trip especially long. As a result, middle class and upper class Americans chose not to take the bus. They'll fly or drive themselves, in a rental car if they must, instead. Indeed the last time I rode Greyhound was 9 years ago, NC to California on a 2-week student pass. On and off wherever I wanted to go. But I would never take my wife and kids on such a bus. I was a shady character myself, then...
Remove the subsidy and competition will renew. Instead of the huge, wasteful, aging busses, smaller busses would serve the rinky-dinks off of spur lines, and the main lines would become more efficient, inviting use by more time-conscious individuals. As more people ride, the average cost per customer would go down and in the long run prices would become less expensive for everyone.
Where there is heavy enough traffic, competitors have risen up anyway. I have heard some interesting stories about the Chinatown bus out of NYC, and I have seen some of the migrant worker busses here in NC.
Artificially low prices that confuse incentives result in inefficiencies and almost always lower quality service. The same thing is happening in the airline industry lately (anyone lost a bag in the last few months?).
Stop trying to solve problems by manipulating coercive power, the state. Search for voluntary mechanisms which allow for free exchange and contract, the market.
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