On the proposal to roll back public transportation fares

The lawmaker who successfully petitioned the Land Transportation Franchising and Regulatory Board (LTFRB) to roll back fares for jeepneys has asked the agency for another rollback for taxis and buses.

Negros Oriental Representative Manuel Iway, who calls himself a “commuter,” filed two petitions with the LTFRB on Wednesday asking for a reduction in fares for buses and cabs due to lower fuel prices in the market.

In the first petition, he asked the agency to reduce the minimum flag-down rate for taxis from P40 to P30, and to slash by P1 the P3.50 charged for every waiting time of two minutes and for every succeeding 300 meters.

The Philippine Inquirer

This is exactly the kind of move that economists frown upon:  government messing around with the market. Well-meaning as Representative Iway’s intention is, his proposal has the opposite effect.  Free market, remember, in Econ 101?

Dictating an artificial price takes away market players’ freedom to compete and innovate.  Letting the market be on the other hand would lead to entrance of more players which leads to more intense competition and innovation that leads to more and better choices that leads to cheaper prices over time.  A particular market however can be freer relative to another.  The market for electronic and computer gadgets is a good example of a freer market as businesses are relatively left alone to compete according to how accurately they read needs and wants and the speed at which each innovates accordingly.

What government should get it’s hands on therefore is policies to improve doing business in the country although what this country needs more of is action on favorable policies already existing.

In the transport sector particularly public transportation government should ensure adherence to quality standards such as in fuel and vehicle specifications as an integral component of it’s policy favoring public transportation as outlined in the National Urban Development and Housing Framework (NUDHF). The jeepneys for example are in serious need of overhaul and their poor quality has prompted an influx of new competitors, the vans (which are also increasingly neglected by franchise holders thanks to lack of monitoring).  But when jeepneys are revamped (and their number limited via market based instruments), it’s expected that more passengers would avail of the ride because then they’re assured of a more comfortable hence pleasant commute.  Such is where government particularly local governments should dabble on, in fact, it’s their duty to do so.

Price, as can be gleaned from the above, also reflects opportunity costs.  “High prices” of public transport in the country mirror the high costs of insecurity and discomfort consumers put up with riding in dilapidated vehicles on dirty fuel.  Fine tune these vehicles and the service along with it, open up the field to competition and innovation, and the market will fix the price accordingly. Ceteris paribus.

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