The Economic Case for Encouraging Bicycling as a Mode of Transport

An Examination of two bicycle-friendly policies in London

Pillars of Planning A BENVGPLA

Economics
Candidate Number STWD7

Introduction

The Mayor of London Boris Johnson wants to transform the British capital into a
“cyclised city” (TFL 2010 p 12). His objective: to make bicycling account for 5 per cent of
all journeys in London, requiring a 400 per cent increase from 2001 levels by 2026
(TFL 2010 p 6).

This essay seeks to analyse the economic impact and rationale of having more bicyclists
on London’s roads. Transport for London (TFL), the local government body chaired by
Johnson, has designated 2010 London’s year of cycling and is launching two major
initiatives which will be the focus of this essay.

Johnson, himself a keen cyclist, has staked huge personal capital on the highest profile
initiative, a cycle hire scheme in central London that has become known as Boris Bikes.
The idea, inherited from his predecessor Ken Livingston, had already enjoyed popular
success in Paris, Montreal, and elsewhere.

The second measure is a planned network of twelve cycle routes called Cycle
Superhighways designed to make bicycling safer and faster on key routes. Both
programs are sponsored by Barclays Bank, which is paying £25 million over five years
(GLA May 2010) towards the reported £140 million (Spillane July 2010) cost.

The essay will examine the rationale for such investments by considering the positive
externalities (health, lower pollution, lower congestion etc.) of increased bicycle use.
The essay also asks whether a conservative mayor seen to have profited from motorist
voters frustration with the perceived anti-car policies of his predecessor (Hill 2009),
would ally himself to a scheme that could clash with the interest group that helped him
into power.

Public provision

The services provided by TFL are commonly referred to as public transport, suggesting
they are a public good. In an economic sense, many services, such as seats on a bus,
would not be considered public goods, a term taken to mean “goods that are nonrival in
consumption” (Heikkila 2000, p 103). However roads or pathways do conform to the
economic definition of public good because the use of them would prelude others only
in cases of extreme congestion. There is little incentive for private individuals to
construct roads or cycle tracks in cities when it is difficult to prevent others from taking
free advantage of the infrastructure, not to mention the cost and complexity of sourcing
the appropriate land.

Externalities

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Johnson wants to encourage bicyclists not just because he is fond of them, but because
there are real economic benefits in doing so. Environmental concerns and congestion
have made policy makers re-examine transport policies that favour car use (CTC 1993)
and look at bicycling as a cheap way of alleviating some of the problems. Hudson (1982
p 2) sets out ten reasons to plan for cyclists (and encourage cycling), arguing that
bicycling is a cheap way of providing mobility; an efficient use of space; energy saving;
healthy; equitable; reliable; inclusive; benign and it can be quicker than other means of
transport as well as preventing death and injury.

These benefits are referred to by economists as positive externalities as illustrated by

Graph 1. Under normal market conditions, a quantity Q1 of bikes will be supplied at
equilibrium conditions (where demand equals supply). This is socially inefficient
because some of the social benefits of bicycling aren’t accounted for. If positive
externalities are factored in, consumption would occur at Q2.

Changing public attitudes

In developing the road network, transport planners paid little attention to cyclists after
the popularity of the bicycle waned dramatically in the post WWII years and the motor
car took over (Hudson 1982 p 1). Bicycling remains in the minds of many a poor man’s
mode of transport, fit only for those not rich enough to avoid the vagaries of weather

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and traffic. However, studies by the European Commission (Dekoster 1999 pp 23-31)
show that given the right image, even hilly terrain need not be a disincentive to
bicycling.

But how to fire up the public imagination and make bicycling fashionable again? Cyclists
in London are regarded by many as crazy – or even irresponsible. Friends of Eilidh
Cairns, a female cyclist who died last year after being knocked down by a lorry driver
with defective eyesight were outraged by his retribution: a £200 fine and three points
on his licence (Moore-Bridger 2010). “It seems to be the attitude that you are putting
yourself in the way of danger and therefore it is your own fault if it happens to you,
which is not the same as if it were a pedestrian killed," said Emma Chesterman, Cairns'
former flatmate.

Evidence suggests that the novelty of bicycle hire schemes elsewhere have proved to be
more effective than information campaigns in boosting the popularity of bicycling by
changing people’s attitudes. Bike shop owners in Paris said that the Velib reintroduced
the idea of cycling as a means of transport, boosting sales of regular and even electric
bikes (Vandore 2008). Such a move is explained in Graph 2.

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Graph 2

The market provision of bicycles before the introduction of Boris’ Bikes is at price P1
and quantity Q1. The cycle hire scheme increases the supply of bikes, making the supply
curve S1 shift out to S2 as the quantity of bikes available at a particular level of demand
increases. For the purposes of simplicity this graph deals with equilibrium conditions
(when supply equals demand), which should be attained following an initial period of
adjustment. The quantity of bikes available for use will thus increase from Q1 to Q2. But
as more people come to like bikes as the novelty to the new scheme prompts them to
overcome negative perceptions, the demand curve shifts from D1 to D2. After a period
of adjustment to new market conditions, even more bikes will be available (Q3) for a
price (P3) lower than before the scheme but higher than after its initial introduction.
Bike retailers are happy as the revenue gained increases from P1xQ1 (as shown by the
yellow square) to P3xQ3 (as shown by the green square). Policy makers have altered the
market.

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Alternative theories

Even if bicycles are a private good, providing a cycle hire service is shrewd. It
encourages people to cycle, freeing up space in buses, on the tube or on roads. From a
Marxist perspective, it could be seen as averting the crisis from the overconsumption of
transport and road systems. Infrastructure development in the past was “conceived and
built when attitudes toward energy use and design in the transport sector were
different” (Batterbury 2003, p 151). He notes that the response to rising vehicle
ownership has typically been to build more and bigger roads, thereby encouraging even
more car use. Encouraging bicycling could be seen as a response to the congestion and
pollution problems of London’s roads, and an overstretched public transport system.

Outer London

The cycle hire scheme for the moment is limited to central London, although there are
plans to start extending it to East London (TFL Nov 2010). TFL calculates that two-
thirds of the growth potential for cycling exists in outer London – or 2.4 million
journeys a day that could be made by bicycle but are currently being made by car (TFL
Jan 2010). An increased willingness to view bicycling as a means of transport combined
with facilities such as parking could increase housing demand in areas not on the tube
network as shown in Graph 3.

Graph 3

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Crouch End is a 15 minute bus ride away from Finsbury Park tube station. A cycle park
facility provided by TFL at the station allows users to leave their bicycles in secure and
weather proof conditions. Cycling to the station from Crouch End takes five minutes,
and the faster journey time could increase demand for property in the area from
cyclists. This would cause the demand curve to shift from D1 to D2. This would boost
the price of housing in the area from P1 to P2. Eventually, developers would be
attracted to the area to serve this increased demand, boosting supply of housing in the
area from Q1 to Q2, as prices settled at the equilibrium level (where supply equals
demand) P3 . This graph shows that bicycling could have an effect on potential housing
demand, although many other more significant factors are involved in house buying and
I expect the impact to be marginal.

The motorist lobby

With Superhighways, London planners are now designating road space for cyclists,
reducing the surface area available to motorists. This may be partly a response to
increasing numbers of cyclists: “the values of consumption rather than production guide
central city land use decisions” (Smith 1996 p 52). But McClintock (2002) says getting
sceptical Londoners onto bikes will require taking sticks to motorists, as well as
tempting potential cyclists with carrots and if Johnson is really committed he may have
to square up to the motorist lobby. Cycling groups CTC (CTC 2010) and London Cycling
Campaign (London Cyclist 2010) have given a lukewarm response to the first two
Superhighways. The CTC notes the blue lanes are often hidden under parked cars, and
at 1.5 metres wide they are no wider than regular cycle tracks. The next ten
Superhighways will test his resolve. In Germany, “the resurgence of bicycling as a
practical mode of daily urban travel is due almost entirely to public policies that have
greatly enhanced the safety, speed and convenience of bicycling whilst making auto use
more difficult and expensive.” (Pucher p 31).

Competitive City

Cycling, Johson says, is “arguably the single most important tool for making London the
best big city in the world.”(TFL 2010 p 3). One reason for taking on motorists might be
because London’s competitivity depends on making it a liveable city. Johnson may have
been inspired by Global trends magazine Monocle, which named bicycle-friendly
Copenhagen as the world’s second most liveable city in 2010 thanks to its green-living
ways, and the fact that “you can bike safely through the city.” (Monocle 2010).

The image of the cool metropolitan cyclist would certainly gel with the “creative”
classes, a term coined by Richard Florida (2002). He argues that as low skill jobs shift to
cheaper production areas, global cities should seek to attract architects, graphic
designers, engineers, artists and other high paid professionals. “Advanced economic
sectors are often engaged in global competition to attract good staff and these people
would sooner choose to work in a pleasant city than a polluted, ugly and crime-ridden
one.” (OECD 2006, p 137).

British Prime Minister David Cameron, Johnson’s boss as head of the Conservative
party, also likes to be photographed on a bicycle. The Economist (Nov 2010) reports

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that Cameron credited Florida “for devising a blueprint for government’s role in the
economy.” Although much criticised (Markusen 2006, Peck 2005), Florida has –
according to The Economist - become “the government’s philosopher” and the idea of
the cool metropolis may be gaining sway.

Conclusion

An argument for investing in bicycling can be made due to the positive externalities of
cycling, but also due to the negative externalities of motorcar transport. The latter, to a
mayor of London confronted with the ever more urgent problems of congestion, may be
compelling enough for him to confront the motorist lobby, or at least ask them to make
room for cyclists. The popularity of the Paris Velib bicycle rental scheme, which has
improved the image of the French capital as a liveable city, may also have influenced
Johnson. He knows that quality of life is a factor in the global competition for talent that
pits London against other big cities.

Word count: 1950

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