We all have a few stories to tell… how we missed an important appointment because of bad traffic. We can read about it in the news: Ever more vehicles and trips, longer commute times, more traffic jams, longer delays, air pollution, noise and accidents. There are even dedicated news programs on TV and the Internet: Traffic shows, like weather reports… and in Los Angles, “the entertainment capital of the world,” of course, there is live reporting from helicopters, such as from stations like KTL5 and KCAL9 (see Figure 1). It seems somebody is actually making money from it all.
Figure 1: Live traffic reporting in Los Angeles (ABC7 2015)
So how bad is it? The picture has become grim: China is known for its severe air pollution and ever longer traffic jams (NASA Earth Observatory 2020, link; Jiaozheng 2017). In Europe, too, commute times seem to be getting longer every year (Eurostat 2019, link) and have lengthened approximately 10 percent over the past decade (Trades Union Congress 2019, link). In Germany, Berlin, is one of the most congested larger cities (only Hamburg is worse) with a 2019 congestion level of 32 percent, meaning that a 30-minute trip will take 32 percent more time than it would during Berlin’s baseline uncongested conditions (TomTom Traffic Index Ranking 2019, link). So, in Berlin, we would lose nearly one and a half years, if indeed we were to spend more than four years of our lives inside a car (Citroën 2016).
Figure 2: Key performance indicators of mobility in Germany, 2020
Other industries such as entertainment and telephony or communications have seen leaps and bounds in performance improvements. Take communications: Once upon a time it cost a fortune to call across continents – this author remembers paying several German marks per minute to call a girlfriend in the new world in the early 1990s – today it’s near zero (Deutscher Bundestag 2003). Or take entertainment: There was a time when only kings were able to enjoy music or a play. Ordinary people did not have the money to own an orchestra or a theater group. Today we enjoy music and film entertainment literally at our fingertips whenever and wherever we like. Just think of Spotify for music and Netflix for movies. It’s not free but very affordable for a mass market audience. With a shift from analog to digital technology, performance has exploded: Quality of goods and services has gone up and cost has come down to pennies.
Around one hundred years ago the motorized vehicle dramatically shrank the distance and enabled individual mobility … the cowboy metaphor comes to mind … the freedom to roam …. the pursuit of happiness. However, in recent memory travel speeds haven’t improved and instead deteriorated. Particularly, in urban spaces. Longer commutes, more traffic jams. Users of public transportation are often hit twice: First, the bus gets stuck in traffic, too. Second, service frequency or headway – the distance between vehicles – is stretched. You miss the bus, you have to wait even longer for the next one.
Figure 3: Traffic snapshot in Germany (INRIX 2020, Umweltbundesamt 2020)
Performance is down but price has gone up, way up … faster than inflation (see Germany: “The prices […] have been rising more than twice as fast as the average for years,” link; UK: link). Think of parking: Back then you needed change, quarters, to feed the meter; now, you need a credit card, because it takes dollars … many dollars. Any economics textbook will tell us that prices should have gone down. We even know it from our own experience. The same computer or flat screen TV we bought last year will be cheaper this year. With urban transportation, the bus is the same as last year, the seat on the train is the same as last year, heck 10 years ago, but fares are up. And to add insult to injury: Some cities like Los Angeles are introducing congestion pricing: First, taxpayers are paying for roads; then they must pay again and extra for using them (Bloomberg 2020). Congestion pricing is in itself an admission that there is a performance problem and it further obscures the magnitude of the cost increase. This is not what we learned at school. The economics textbook calls it market failure and offers a few causes, such as market control and imperfect information or lack of market and price transparency (for example, Tirole 2015, 1988).
Let’s look at the latter – market transparency – more closely. Without it, markets fail. Akerlof was awarded the Nobel Prize in Economics for deciphering this problem and developing solutions (some of which have been famously implemented as “lemon laws” for the used car market; Akerlof 1970). Often, markets struggle to make consumer choices transparent hampering quick decision making. For example, it is difficult to compare offers: The 150-gram package sells for 1.29, the 200-gram box for 1.69 … which one to pick? And then we may even get emotional: the 150-gram box looks so much better. Lately, the shift to a service and subscription world has further complicated choices: Instead of owning something and paying a big chunk of money upfront, we are getting used to paying small increments for its use. For example, instead of buying a song as an MP3 file or on a CD, we subscribe to Spotify to listen to it whenever we want. As consumers we are very well aware of the difference between owning something and just using it but it creates confusion. Like my coffee mug, the special one from a this famous overseas coffeeshop (Dean & Deluca in Manhattan). It’s mine, I own it, I care about it … so please, don’t drop it, the handle may break off. Other coffee mugs that I use … who cares, I don’t even notice, I’m only focused on the right splash of hot water to top off my double shot espresso … please don’t make it an Americano. I only care about the content, not the container. So, with ownership there seems to be some emotional attachment that may confuse our decision-making. There is theory to back this up: Thaler has been awarded the Nobel Prize in Economic Sciences for analyzing psychological traits that obscure our decision making and get us of track, behaving irrationally (link). It seems, owning a mug makes me care about the mug although honestly, I am ultimately only interested in the coffee.
With mobility this defect in decision-making may make us care about the mode of transport, such as cars, instead of just getting us from A to B. Our emotional attachment with cars may be amplified by a lack of proper “reference points.” In his work on “mental accounting” Thaler provides numerous examples to illustrate how consumers pay more for less without proper reference points, such as a price per 100-gram (Thaler 1999, 1985). For example, pick any reputable organization or publication, such as the German automobile club ADAC. They provide an “ADAC Autokosten-Rechner”(car cost calculator, link). For gazillion vehicles of different brands and types it delivers a thorough cost breakdown with consolidated result of “Gesamt/Monat” (total/month) and “Cent/km” (all for “Kostenermittlung für Haltedauer 60 Monate und 15.000 km/Jahr Fahrleistung;” cost calculation for 60 months and 15,000 km/year). Or pick investment bank Goldman Sachs. They also calculate the cost of a car per mile to compare it with the cost per mile of other alternatives, such as ride hailing (Goldman Sachs 2019, p. 12). And almost always owning a car is cheaper and wins. Yet, wait a moment. How do we order coffee? First the mug, then the coffee? Do we order mobility by the mile? Do we think “gosh, what’s the distance in miles or kilometers between point A and point B?” Or do we think – “How long does it take us to get there, and how much is it?” I bet it’s the latter for most of us. And at the same time most of us probably don’t even know how much it would cost to use our own car per mile. Because why would you? You have already paid for the car itself (or are still paying off the car loan) and worry only about the additional variable cost such as gas and parking (maybe speeding tickets).
If we take a different perspective, if we change the denominator, then suddenly the decision situation seems to present itself very differently. On a per minute of use basis the car comes out as a very expensive choice (Schlueter Langdon 2020). For example, it is far more expensive than any public transportation alternative. The difference is staggering: It can be a 100 percent plus premium. Presented with this choice at point A many of us would probably take another look at public transportation – paying double is a lot. Yet, the decision to select the expensive option is made the moment the car is purchased. Post purchase it is all about sunk cost recovery. You may as well spend even more for this additional trip for gas and parking. It will increase the total cost further (throw good money after bad) but because you use it more, it will lower the cost per minute of use a bit. Yet it won’t make it a bargain, you’re still near 100 percent premium.
Lots of new mobility technology has emerged: the widespread adoption of smartphones and apps (mobile maps, turn-by-turn navigation, smartphone payments) have enabled ride-hailing, ride-pooling and car-sharing services (such as Uber, Free Now and Lyft). And lately better batteries have sparked innovation with two wheelers, such as e-bikes and e-scouters – Germany even had to change its laws (eKFV, Small Electric Vehicle Ordinance 2019, link).
This new technology is seen as an enabler for new forms of transport, such as intermodal mobility which Merriam-Webster defines as “being or involving transportation by more than one form of carrier during a single journey” (Merriam-Webster 2020-04-11, see also Jones 2000). E-scooters in particular have been welcomed because they “can perfectly complement buses and trains for the remaining kilometers to the destination. This makes public transport more attractive and can reduce car journeys” (Achim Berg, President of Bitkom, the country’s largest digital association, Bitkom 2019).
In densely populated urban areas with (a) a strong public mass transit systems (e.g., London Tube, Transport for London, link), Berlin U-Bahn (Berliner Verkehrsbetriebe/BVG, link), Beijing Subway (link), (b) new last mile options, such as bikesharing (Jump, Mobike; overview, link) and e-scooters (Lime, Tier, etc.), and (c) new shared van pools and ride-hailing services (ViaVan’s and BVG’s Berlkönig in Berlin, link; Volkswagen’s Moia in Hamburg, link) it would be possible to interlink these shared transport options to finally provide a true seamless A-to-B travel alternative to using a personal car. It could truly remove cars from traffic and with it their pollution, noise and danger to vulnerable road users. It would also free up space in highly desirable locations (see “Space Race,” link).
How to make inter-modal work? Or, firstly, is there even value in it? Is it truly better for consumers? Let’s find out about it in our next sequel … Mobility Analytics #4: link.
Akerlof, G.A. 1970. The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism. Quarterly Journal of Economics 84(3): 488–500
ABC7. 2015. Traffic gripes: Does rush hour in Los Angeles ever end? Eyewitness News (May 13), link
Bitkom. 2019. E-Scooter sollen beim Klimaschutz helfen. Press release (May 6), Berlin, link
Bloomberg. 2020. It’s Time to Try Congestion Pricing in L.A. City Lab (July 2nd), link
Citroën. 2016. CITROËN – Our Lives Inside Our Cars. European Survey (August), CSA Research, link
Deutscher Bundestag. 2003. Tätigkeitsbericht 2002/2003 der Regulierungsbehörde für Telekommunikation und Post – Bericht nach § 81 Abs. 1 Telekommunikationsgesetz und § 47 Abs. 1 Postgesetz und Sondergutachten der Monopolkommission gemäß § 81 Abs. 3 Telekommunikationsgesetz und § 44 Postgesetz. Drucksache 15/2220, Berlin, link
Goldman Sachs. 2019. The future of mobility. Equity Research. (June 4th), link
Jiaozheng Research and Development. 2017. Opinions of the Ministry of Transport on Comprehensively Promoting the Development of Green Transportation. Issue 186 (November 17th), link
Jones, W.B., C.R. Cassady, R.O. Bowden. 2000. Developing a Standard Definition of Intermodal Transportation. Transportation Law Journal 27 (3): 345-352
Schlueter Langdon, C. 2020. Quantifying intermodal mobility: A parsimonious model and simulation. Working Paper (WP_DCL-Drucker-CGU_2020-06), Drucker Customer Lab, Drucker School of Management, Claremont Graduate University, Claremont, CA, link
Thaler, R.H. 1999. Mental Accounting Matters. Journal of Behavioral Decision Making 12: 183-206
Thaler, R.H. 1985. Mental Accounting and Consumer Choice. Marketing Science 4: 199-214
Tirole, J. 2015. Market Failures and Public Policy. American Economic Review 105(6): 1665–1682
Tirole, J. 1988. The Theory of Industrial Organization. MIT Press: Cambridge, Massachusetts