I took economics in my college days and this is a very stark example of people who are bad at economics.
Everything costs money. You can relate everything to a dollar amount in business. From labor, to time spent, to equipment and it’s use, the cost of fuel for transportation etc. Knowing the full cost of selling an item including the time spent making it, the supplies used, the failure rate where you need to replace it at no cost to the customer, everything should be able to be factored in. From there you can set the cost of something, taking the overall price for all involved aspects of creating the thing, and adding some profit margin.
Spending a dollar to make a dime is adequate. If your economic costs are a dollar and you sell the thing for $1.10 then you make money. Sell enough and that’s business.
With all that being said, the cost of transit fares should be set with the expectation that there will be unavoidable times where people will ride for free. Whether that’s because of gate jumping, or other fare avoidance, or that someone simply entered into the system in an unexpected way that bypassed the fare system, or if it’s simply that a fare was given out as courtesy, it’s all baked into the fares that everyone pays.
The only time chasing down the people intentionally skipping their fare, makes any sense is if that amount of loss because of fare skipping is significantly above the expected losses from fare skipping. Googling it, the NYC transit system has a gross revenue around 5.8 billion dollars. Which means the amount of revenue to be gained by chasing down ~$100k in losses is around 0.0017%
If, the process of chasing down the fares costs over 1000% more than the fares are worth to do it, then the simple answer is: don’t do it. That’s basic economics.
In addition, they garner so much negative publicity in that process that they damage their reputation needlessly, which may lead to additional spending to improve their public image.
Finally, if you don’t have more than 0.002% of your earnings set aside for losses like this, then you shouldn’t be running the business. In reality, that number should be much, much higher than 0.002%.
To conclude: the whole thing is stupid from the outset. Tracking the losses makes sense, so you know what the figures are. Once you know the figures, crunching the numbers to see if pursuing action against the perpetrators is trivial, and should show a very clear picture of whether to take action or not.
In this case, no action was appropriate. Instead, they spent $150 million to get their public image ruined chasing after a bit more than $100k, and they will likely spend $100M more to try to repair their public image.
They’re not bad at economics, they’re simply lying about what their goal was. That $150mil didn’t just blip out of existence like in a video game, it ended up in people’s pockets.
I would bet good money that many of those pockets belonged to friends and family members. Neoliberals have been using this tactic for decades as a way to turn public funds into private profits.
You also neglected to factor in the economic benefit of people taking a trip they don’t pay for vs not taking that trip at all because they can’t pay. Those people might be taking the train to work, which increases economic activity and value of the entire system, or to school, which is an investment into the future of the system, or to do shopping or eating at restaurants, both of which add value to the system. But I’m also one of those people that think public transit should be free since giving people the ability to freely move around an area can only have net positive outcomes.
Getting back into economics in a few weeks, sounds like a great starting point to review and get my head back into it. Disclaimer- I am half asleep.
You are discussing MR vs R, but wording is confusing. You are saying spend a dollar to get 0.10, not spend a dollar to make 1.10. Spend a dollar and profit $0.1 - good. Spend a dollar and get a dime - no.
A common mistake for those who learn econ - especially first year - is that it is taught in isolation. Set price for profit max, trade increases productivity and makes the average better - loss>profit shut something down. But it doesn’t teach the wider considerations - people who are affected, long term run v short term.etc.
In this example, and I don’t have the numbers:
what is the profit, and what are the fixed costs?
what long term revenue is being lost, what else will be lost when it isn’t prosecuted?
what message does doing nothing send to those paying. What other behaviors are these non payers displaying?
what is the cost of a lawful and ordered society?
does it need to be profitable, does police action only matter if it makes money, or is it a cost to service?
what equipment, training and experience did law get to do this, and can it be used elsewhere? What systems were put in place (security.etc) that supports other practices.
Make no mistake - seems well excessive. But there is a wider consideration.
I am by far, not an economics major. I took a few courses, that’s all. I know more about it than the average, but not nearly enough to make a career from it.
Regardless, I appreciate the comment. I’m not sure what else to say besides thank you.
Neither- business major and been tutoring 1st year economics for the last two years or so.
As I say, it’s a common mistake. We teach for the test, theory and how to apply it in a business context but it doesn’t take into account reality and wider issues… that’s later on.
Not a problem - always happy to talk with people who want to discuss rather than argue.
I’m always a fan of discussion. I’m also a fan of being corrected constructively.
To be fair, my understanding of economics, while it may be better than most, is all based on my college courses from more than 10 years ago. It stuck with me, and has helped to guide a lot of decision-making. I rarely buy the cheapest option when I need something, and spend time weighing the benefits of options to try to find something that I believe will provide a low TCO and high ROI.
Of course my needs are fairly simple compared to the complexities of businesses and public facing services. The exercise allows me to stretch my economics skills a little and I enjoy it for the most part; needless to say, I’m a bit rusty on the specifics.
Subway fare dodgers steal $285 million per year, so spending $150 million to try to stop or prevent that in the future isn’t that unreasonable. It turns out to have not paid off because they only caught people who owe an equivalent to $100k.
I imagine that they assumed the increased surveillance would prevent some unknown amount of future fare dodging which can’t be quantified because the overall trend seems to be increasing.
The struggle here is that you’re talking about money earned after the fact and not including game theory. It would be a tough experiment to conduct, but say you spent $150 million to save $104. What if you didn’t spend that $150M? Would you have an extra $40k in the bank? Or would the $104M in losses actually end up more like $1.2B because, slowly, everyone realised there was no reason to pay a fare?
I don’t know what the case is here, but I imagine some economists have determined that $150M is enough to balance between actually getting people to ride the subway (increasing fare will eventually drive down revenue) and a substantial enough threat to prevent jumpers (no cops in the way means tons more jumpers).
This is so serendipitous, but the same day this post hit Lemmy, a Hidden Brain podcast episode titled “Broken Windows” started playing. The topic of this podcast hits home pretty hard with regards to how the NYPD managed transit fares in this story.
Broken Windows refers to a theory proposed in 1982 following the eponymously titled experiment. In this experiment, researchers placed 2 cars near the same area in Palo Alto, California and watched to see what happened. One of the cars was new, while the other was poorly maintained and old. Both were left unlocked.
The public started interacting with the old car, opening it, stealing from it, and eventually trashing it. The new car was left intact.
That was until the experiment’s author broke the window of the new car. People started noticing that this car wasn’t so new or maintained, and they started to steal from and vandalize it too.
This Broken Windows theory led to a lot of police reform in the ensuing 80s and 90s, to the point where Rudy Giuliani picked up the theory so his NYPD could follow it.
The idea is that where disorder lies in society, those bad actors who seed more disorder tend to go. Ironically this Hidden Brain episode also talks about rider fares like this article.
So, even though disadvantaged people may skip the fare for a public good out of dire need or poor life circumstances, the thinking is that intentionally chaotic people definitely skip the fare and seek it out. The idea is to catch bad actors who have other, larger crimes registered on their profile by focusing on the smaller ones.
I’m wondering if, in your calculus here, if you might include the offset damage done to society if more bad actors are caught in initiatives like this. Food for thought.
it’s a nicely written post and although I do believe the costs made to reduce the faire skippers is out of proportion I also believe you should mention another important fact.
That is that the more money that is being put in to prevent it the lower the damage will be. A good example is tax evasion. The bigger the chance of getting caught is, the less people who will attempt it. Thus if you reduce the preventive measures this will automatically go up. But yea again I do not believe 150m weighs up to 100k.
Actually I might’ve forgotten another factor. I believe and please do correct me if I’m wrong. Is that a lot of misbehaving people on the trains also skip the train fair. So it be 2 birds in one stone, safety and revenue.
Lal mate, it’s that’s rather funny. No I am definitely not American. So if you could kindly get of your high horse and instead of throwing insults politely tell me about countries where these free turn slides are as i have yet to spot them in Europe and Asia.
Your insults have no other objective than to make yourself feel better. Though I hope that in the future you will be kinder and focus on informing people of another way to go about this issue. I would’ve gladly heard that and probably agreed with your point.
I took economics in my college days and this is a very stark example of people who are bad at economics.
Everything costs money. You can relate everything to a dollar amount in business. From labor, to time spent, to equipment and it’s use, the cost of fuel for transportation etc. Knowing the full cost of selling an item including the time spent making it, the supplies used, the failure rate where you need to replace it at no cost to the customer, everything should be able to be factored in. From there you can set the cost of something, taking the overall price for all involved aspects of creating the thing, and adding some profit margin.
Spending a dollar to make a dime is adequate. If your economic costs are a dollar and you sell the thing for $1.10 then you make money. Sell enough and that’s business.
With all that being said, the cost of transit fares should be set with the expectation that there will be unavoidable times where people will ride for free. Whether that’s because of gate jumping, or other fare avoidance, or that someone simply entered into the system in an unexpected way that bypassed the fare system, or if it’s simply that a fare was given out as courtesy, it’s all baked into the fares that everyone pays.
The only time chasing down the people intentionally skipping their fare, makes any sense is if that amount of loss because of fare skipping is significantly above the expected losses from fare skipping. Googling it, the NYC transit system has a gross revenue around 5.8 billion dollars. Which means the amount of revenue to be gained by chasing down ~$100k in losses is around 0.0017%
If, the process of chasing down the fares costs over 1000% more than the fares are worth to do it, then the simple answer is: don’t do it. That’s basic economics.
In addition, they garner so much negative publicity in that process that they damage their reputation needlessly, which may lead to additional spending to improve their public image.
Finally, if you don’t have more than 0.002% of your earnings set aside for losses like this, then you shouldn’t be running the business. In reality, that number should be much, much higher than 0.002%.
To conclude: the whole thing is stupid from the outset. Tracking the losses makes sense, so you know what the figures are. Once you know the figures, crunching the numbers to see if pursuing action against the perpetrators is trivial, and should show a very clear picture of whether to take action or not.
In this case, no action was appropriate. Instead, they spent $150 million to get their public image ruined chasing after a bit more than $100k, and they will likely spend $100M more to try to repair their public image.
The losers in this situation? The people.
They’re not bad at economics, they’re simply lying about what their goal was. That $150mil didn’t just blip out of existence like in a video game, it ended up in people’s pockets.
I would bet good money that many of those pockets belonged to friends and family members. Neoliberals have been using this tactic for decades as a way to turn public funds into private profits.
Or it just went into overtime for enforcers to sit around a train station watching a monitor.
“Sleeping Car: Abyss Presence”
deleted by creator
You also neglected to factor in the economic benefit of people taking a trip they don’t pay for vs not taking that trip at all because they can’t pay. Those people might be taking the train to work, which increases economic activity and value of the entire system, or to school, which is an investment into the future of the system, or to do shopping or eating at restaurants, both of which add value to the system. But I’m also one of those people that think public transit should be free since giving people the ability to freely move around an area can only have net positive outcomes.
Getting back into economics in a few weeks, sounds like a great starting point to review and get my head back into it. Disclaimer- I am half asleep.
You are discussing MR vs R, but wording is confusing. You are saying spend a dollar to get 0.10, not spend a dollar to make 1.10. Spend a dollar and profit $0.1 - good. Spend a dollar and get a dime - no.
A common mistake for those who learn econ - especially first year - is that it is taught in isolation. Set price for profit max, trade increases productivity and makes the average better - loss>profit shut something down. But it doesn’t teach the wider considerations - people who are affected, long term run v short term.etc.
In this example, and I don’t have the numbers:
what is the profit, and what are the fixed costs?
what long term revenue is being lost, what else will be lost when it isn’t prosecuted?
what message does doing nothing send to those paying. What other behaviors are these non payers displaying?
what is the cost of a lawful and ordered society?
does it need to be profitable, does police action only matter if it makes money, or is it a cost to service?
what equipment, training and experience did law get to do this, and can it be used elsewhere? What systems were put in place (security.etc) that supports other practices.
Make no mistake - seems well excessive. But there is a wider consideration.
this same question can be asked of the MTA itself.
I am by far, not an economics major. I took a few courses, that’s all. I know more about it than the average, but not nearly enough to make a career from it.
Regardless, I appreciate the comment. I’m not sure what else to say besides thank you.
Neither- business major and been tutoring 1st year economics for the last two years or so.
As I say, it’s a common mistake. We teach for the test, theory and how to apply it in a business context but it doesn’t take into account reality and wider issues… that’s later on.
Not a problem - always happy to talk with people who want to discuss rather than argue.
I’m always a fan of discussion. I’m also a fan of being corrected constructively.
To be fair, my understanding of economics, while it may be better than most, is all based on my college courses from more than 10 years ago. It stuck with me, and has helped to guide a lot of decision-making. I rarely buy the cheapest option when I need something, and spend time weighing the benefits of options to try to find something that I believe will provide a low TCO and high ROI.
Of course my needs are fairly simple compared to the complexities of businesses and public facing services. The exercise allows me to stretch my economics skills a little and I enjoy it for the most part; needless to say, I’m a bit rusty on the specifics.
Subway fare dodgers steal $285 million per year, so spending $150 million to try to stop or prevent that in the future isn’t that unreasonable. It turns out to have not paid off because they only caught people who owe an equivalent to $100k.
I imagine that they assumed the increased surveillance would prevent some unknown amount of future fare dodging which can’t be quantified because the overall trend seems to be increasing.
The struggle here is that you’re talking about money earned after the fact and not including game theory. It would be a tough experiment to conduct, but say you spent $150 million to save $104. What if you didn’t spend that $150M? Would you have an extra $40k in the bank? Or would the $104M in losses actually end up more like $1.2B because, slowly, everyone realised there was no reason to pay a fare?
I don’t know what the case is here, but I imagine some economists have determined that $150M is enough to balance between actually getting people to ride the subway (increasing fare will eventually drive down revenue) and a substantial enough threat to prevent jumpers (no cops in the way means tons more jumpers).
104k loss, not 104m. It would take 150 years of no change to be worth the tax money wasted.
Removed by mod
This is so serendipitous, but the same day this post hit Lemmy, a Hidden Brain podcast episode titled “Broken Windows” started playing. The topic of this podcast hits home pretty hard with regards to how the NYPD managed transit fares in this story.
Broken Windows refers to a theory proposed in 1982 following the eponymously titled experiment. In this experiment, researchers placed 2 cars near the same area in Palo Alto, California and watched to see what happened. One of the cars was new, while the other was poorly maintained and old. Both were left unlocked.
The public started interacting with the old car, opening it, stealing from it, and eventually trashing it. The new car was left intact.
That was until the experiment’s author broke the window of the new car. People started noticing that this car wasn’t so new or maintained, and they started to steal from and vandalize it too.
This Broken Windows theory led to a lot of police reform in the ensuing 80s and 90s, to the point where Rudy Giuliani picked up the theory so his NYPD could follow it.
The idea is that where disorder lies in society, those bad actors who seed more disorder tend to go. Ironically this Hidden Brain episode also talks about rider fares like this article.
So, even though disadvantaged people may skip the fare for a public good out of dire need or poor life circumstances, the thinking is that intentionally chaotic people definitely skip the fare and seek it out. The idea is to catch bad actors who have other, larger crimes registered on their profile by focusing on the smaller ones.
I’m wondering if, in your calculus here, if you might include the offset damage done to society if more bad actors are caught in initiatives like this. Food for thought.
That is that the more money that is being put in to prevent it the lower the damage will be. A good example is tax evasion. The bigger the chance of getting caught is, the less people who will attempt it. Thus if you reduce the preventive measures this will automatically go up. But yea again I do not believe 150m weighs up to 100k.
Actually I might’ve forgotten another factor. I believe and please do correct me if I’m wrong. Is that a lot of misbehaving people on the trains also skip the train fair. So it be 2 birds in one stone, safety and revenue.
Removed by mod
Lal mate, it’s that’s rather funny. No I am definitely not American. So if you could kindly get of your high horse and instead of throwing insults politely tell me about countries where these free turn slides are as i have yet to spot them in Europe and Asia.
Your insults have no other objective than to make yourself feel better. Though I hope that in the future you will be kinder and focus on informing people of another way to go about this issue. I would’ve gladly heard that and probably agreed with your point.
In society, those people are called capitalists.
Capitalists want to take whatever is available and make it so that it is theirs. More for them, less for everyone else.
They will take whatever the “market will bear” and hide behind caveat emptor when people cry foul.
Ooh I ain’t arguing that mate. Just discussing economics. Providing free public transport is another discussion point that is interesting of course.