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Bendy Buses and Health Care

Sep 6, 2010 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic Thinkers, Government, Regulation, Thinking Economically • 170 Views    2 Comments

Have you heard of a bendy bus? The bendy bus was supposed to solve Santiago, Chile’s public transit problems. But the story relates to each of us.

It all began during 2007 when Santiago decided to replace its private bus system with public transit. Previously, with 3,000 different bus companies, the competition had been fierce and problematic. 1) Seeing a crowded bus stop, drivers would rev up their engines and race each other to get there first. Because of the accidents, injuries and conjestion, we could say competition was destructive. 2) Pollution was uncontrolled because buses were not licensed. 3) Although bus fares were quite low, the profitability ($60 million US dollars) made certain people question the ethics of making money by satisfying a basic municipal need.

To solve the three problems, the city took over the system. Here is where bendy buses enter the picture. Big and attractive, they safely navigated city streets.

Each of the problems was solved (but not really). 1) Drivers were told that on time service was crucial. Result? Buses were on time but empty as drivers skipped busy stops that might have delayed them. 2) Pollution was no longer a problem with the new buses. 3) Profits were no longer a concern because the system was losing lots of money ($600 million US dollars).

The Economic Lesson

In many ways, Santiago’s bus issues are our health issues.

1) Incentive: Which incentives will optimize service?

2) Pubic or private: How can we best provide the services we require?

3) Affordability: How can the cost of necessities be minimized?

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  • sherg11

    I disagree that the private bus companies should run the transportation service. I think that competition over busing, which is a necessity for the people, would corrupt the transportation service. The city should continue its hold on the system, but to solve the one remaining problem, they should cater their services toward the needs of the people, taking the time to pick up more people rather than racing to be on time; this would not only solve the “empty bus” problem, but it would also solve the problem of the loss of money that the company was going through.

    -Gabby S.

  • alhyatt2

    It seems to me that Santiago’s Transportation problems would best be solved through moderation in all aspects. The government must have a larger contribution as far as the transportation system goes, but they should not have a monopoly on said system (like they do now). Partial ownership in each company may help the government come up with/enforce bus company regulations, or they can stay out of the bus company’s affairs and create laws that will regulate them. The government could mandate that all bus drivers be licensed and that bus fair should be no lower than it was before government intervention, but no greater than it is now. This way, the licensed driers can ensure safety and less pollution, and the bus company’s can make the same, if not more, profit than before. However, the question again arises about the ethics of such profits. Well, the government could also mandate that aspect of this transportation system, increasing the taxes that these companies would have to pay. This way, the government can raise enough money to standardize all buses (as far as models go) and the prices for bus fair can drop again (because the majority of the costs for necessities will be subsidized by the government). The result would be a publicly private transportation service in Santiago – one in which each bus company is separate from the other, but they all abide by the government’s regulations and laws, thus creating a more efficient system for the community and its people.

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