As bicycle-sharing becomes more ubiquitous in Singapore, there are some commentators who have lamented its negative social consequences. And much like how government regulation was introduced for ride-sharing businesses such as Grab and Uber, it is common to hear of state intervention as a means to control the bicycle-sharing operators as well.
However, with any new policy, it is always important to understand what the costs and benefits are, and who they will ultimately accrue to. Therefore, today’s article will list out the perceived negative social consequences arising from bicycle-sharing, as well as analyzing whether state intervention is necessary to manage it. Fortunately, Andrew Delios, who is head of the Department of Strategy & Policy at the National University of Singapore Business School, has eloquently written for the Straits Times on this topic, and I will do my best in representing and addressing the issues he has raised.
The first major point that Delios raises is that of negative externalities. To put it simply, negative externalities are costs that are borne by a 3rd party that is not part of a transaction. For example, when I purchase cigarettes from a vendor and smoke them, the toxic chemicals are not just borne by me, but by passersby who inhale the secondhand smoke and suffer its health consequences. In the case of bicycle-sharing, Delios points out that users who haphazardly park their bicycles are creating negative externalities to pedestrians or the general public. Other than being an eyesore to the “carefully crafted landscapes of Singapore,” they present themselves as obstacles to those trying to walk past.
While I admit that Delios is correct in raising this negative externality, I disagree with the supposed severity of it. After all, the concept of negative externality can be applied to almost any transaction, from serious ones such as how toxic waste from chemical plants pollute drinking water in the local community, to relatively minor ones such as how consuming garlic results in bad breath that others endure. For the case of bicycle-sharing, it is difficult to see how the negative externalities raised by Delios could be considered a serious social threat. I mean sure, seeing multi-colored bicycles littering the streets of Singapore might be unsightly, but I doubt that it compares with secondhand smoke or industrial pollution. Likewise, it is difficult to see bicycles obstructing pathways as anything more than a minor inconvenience. Lest you believe that individuals should be regulated on the negative externality of bad breath that they produce, government intervention just seems excessive here.
Interestingly, it should be pointed out that some measures have already been set in place to curb the negative externalities that Delios raised. On October 5th, the Land Transport Authority (LTA) have signed a Memorandum of Understanding (MOU) with the 5 bicycle-sharing operators to “reduce disamenities arising from bicycle-sharing services and improve public safety.” Under the threat of increased regulation by the LTA, operators will be required to remove abandoned or indiscriminately parked bicycles within half a day as well as faulty bicycles within a day. Further, to reduce the rate of indiscriminate parking, operators will adopt geo-fencing technology which triggers an alert whenever a bicycle is parked outside a designated zone.
While the focus on abandoned and indiscriminately parked bicycles raised by the MOU is arguably narrower than the scope of Delios’ argument, the trade-off of this measure is clear to see. Firstly, in exchange for reducing the negative externalities from bicycle-sharing, the main value proposition of the service has now been limited as users can only retrieve and park bicycles from designated areas. If you were a daily user of the bicycle-sharing services as an intermediate gap between your home and your closest bus stop/mrt station, then this MOU is likely to be bad news to you, particularly if no designated parking spaces are close by. Also, in order to abide by the stipulations raised in the MOU to replace abandoned bicycles, it is likely that the bicycle-sharing operators will have to increase labor or operating expenses that will ultimately be passed down to users, which again reduces the value of the bicycle-sharing service. Lastly, let us not forget the societal benefits that bicycle-sharing services were supposed to bring. After all, Delios himself admits as much in the following paragraph:
“The idea of bike-sharing is a terrific one: creating convenience for people, and choices other than the use of more polluting private cars and taxis, while making public transportation more accessible and more desirable at a low cost.”
Aside from less car pollution and increased transportation access, we can also imagine the health benefits that can be accrued in the long run as more citizens utilize the service, something which should help ease our inflating healthcare expenditures. Are these not positive externalities to society? Each individual that utilizes a bicycle instead of a car, bus, or train is one less individual to cram on the PIE or squeeze in the morning commute. Each individual that becomes healthier as a result of the bicycle-sharing service may mean fewer costly hospital trips and procedures. When you try and regulate bicycle-sharing services, recognize that by doing so you are reducing accessibility and affordability to the services, as well as the positive externalities they had in the first place.
The next major issue that Delios addresses is that of free-riding. Simply, this refers to the scenario whereby an individual or company takes advantage of a common resource without paying for its use. A common example of this can be seen in the case of civil defense. For instance, tourists who travel to Singapore may call upon the police and utilize their services even though they do not pay the taxes which fund the police forces. In the case of bicycle-sharing, Delios contends that these services and their users free-ride on transportation infrastructure that they did not pay for, specifically roads and parking spaces.
Now on the surface Delios’ argument appears legitimate, since neither the bicycle-sharing companies nor its users can ever claim to have made a direct payment towards building the roads and parking spaces that they use. This however, is only partially true. As individuals and businesses must pay taxes that end up being used by the government for their expenditures, there is in some sense an indirect payment being made for the infrastructure. Each dollar that a citizen or business pays as tax is a dollar that the government could use to build roads and parking spaces. And even if it turns out that their tax dollar only made an infinitesimal contribution towards the infrastructure, it is still far from the case of being a true free rider problem.
Perhaps Delios could make a counter-argument and assert that the bicycle-sharing services and their users did not pay their fair share of the infrastructure used. This is a reasonable stance. After all, it seems likely that riders collectively utilize the roads or parking spaces more often, and chances are that their low rental fees won’t be enough to cover their share of infrastructure use. However, looking at the issue of free riding at a practical level, it is difficult to see how a fair-payment policy might even be implemented. I mean, should there be trackers that record and tax you for each kilometer you ride on the road? Should riders have to place a coupon whenever they park a bicycle? And while we’re at it, why not tax individuals each time they go out on the street, or pay for each inch of visibility they receive from the street lamps? Aren’t they free-riding on our public infrastructure as well?
Lining Shareholders’ Pockets with Public Money
It seems odd then, that with bicycles and free-riding problems existing well before bicycle-sharing companies came about that Delios would only cry out for regulation now. Of course, this is not mere coincidence, and he uses the issue of free-riding to set up a bigger problem: profiting off of public funds.
The way in which Delios does this is by comparing the scenario of bicycles in Singapore to that of the Netherlands, a country known for its bike friendly policies that accommodate a staggering 13 million riders. As Delios points out, bike usage has grown tremendously in the past 2 decades, leading the Dutch government to allocate a hefty sum to meet the growing infrastructure demand. Specifically, state spending on bicycles is “expected to cross well over $100 million by 2020, most of which is devoted to creating bike-parking spaces” while “Other public funds are used to pull up to 10,000 bikes from canals across the Netherlands each year.” This allocation of public funds towards meeting biker demands is thus the biggest bugbear for Delios. As he sees it, if Singapore were to follow this example (and the aforementioned MOU hints at this), bicycle-sharing companies and their users would be the biggest beneficiaries of it. From his own words, “providing benefits to a country’s populace is reasonable, but providing public benefits to private companies is equivalent to lining shareholders’ pockets with public money.”
Now, Delios is spot on in pointing out the large government spending on bicycles in the Netherlands. However, he is incorrect in suggesting that the public funds will accrue to only the bicycle sharing companies and their users. As I have mentioned earlier, there are positive externalities to be had from cycling such that the benefits extend to society at large. This perhaps could go some way in explaining the large state spending on bicycles in the Netherlands, where the approach taken is similar to that of other positive externalities such as education; to subsidize and increase the benefits to society at large. Athlyn Cathcart-Keays’ article in the Guardian supports this notion as well, where she finds that “One Danish study reveals that for every kilometer cycled, society enjoys a 23 cent (16p) profit, while driving the same distance produces a net loss of 16 cents (10p).” These 23 Danish cents are thus the rough accumulation of the positive externalities to be had from cycling: better fitness, lower stress, less pollution, and less congestion. Netting these gains against the minor negative externalities of unsightliness and blocking pavements will likely still lead to positive outcomes for society.
At this point, Delios could counter and assert that his point still stands, that despite the positive externalities bicycle-sharing companies are still profiting from public funds at no expense of their own. Unfortunately, this again not entirely true, as the Singapore government’s efforts to accommodate these bicycle-sharing operators is part of the deal agreed in the MOU mentioned above. So far, all the LTA have committed towards this front is painting more than 4,000 yellow boxes to park bicycles. While I am not suggesting that this is insignificant, it bears repeating that bicycle-sharing operators have to abide by LTA requirements such as removing indiscriminately parked bicycles or adopting geo-fending technology in return. At the moment therefore, it seems the case that the MOU deal will be more costly for the operators than the government, though in fairness future state infrastructure spending on bicycles might change the picture.
“Regulating industry will protect its growth”
To wrap up this article, I would like to explore Delios’ claim that “regulating industry will protect its growth”. Now to be fair, calling it a claim is being generous, since Delios only includes it in the sub-title and a line in the last paragraph without any explanation whatsoever. But rather than letting than it slide, perhaps we might be able to glean some insight from its inclusion. You see, business and regulation are natural enemies. One tries to grow and create profit and value through selling their goods and services, while the other mandates taxes and enforces regulations for the supposed benefit of society. Therefore, to state that regulating industry will protect its growth is somewhat of a contradiction in itself.
I mean what does the bicycle-sharing industry need protection from? Left to its own devices won’t it be the case that the bicycle-sharing industry will continue growing as more and more citizens find value in it? And especially so considering how the cracks are beginning to show in other alternative modes of transport such as cars and trains? The only obvious obstacle left to the growth of the bicycle industry is the government itself.
And perhaps Delios is aware of this. And he includes the line as a kind of fluff in order to mask the true intentions behind his cries. For surely he must know that added bureaucracy never bodes well for business, and that no private business owner can honestly claim that the threat of government serves their bottom line.
Or perhaps Delios is just underestimating the market system. I mean, if you’ve been living in Singapore for some time and witnessed how the “state-led” economic miracle powers on, you’d be forgiven for thinking that government intervention was necessary for success. You’d put little stock in the market’s ability to grow by itself or to correct its own faults, since of course every major industry in Singapore has some inkling of government involvement. But if you have ever upheld the analogy that the state is to its citizens what a parent is to their children, then I’m sure you can understand why we might want to be more optimistic of the market’s ability. After all, it’s the children who makes mistakes of their own accord that learn the most. And that the eagerness of an over-protective parent tends to have long term consequences later on.
So why not be a little bit more optimistic about the market? Since the way they conduct their business directly impacts their bottom line, I’m sure they’re aware of the negative externalities generated from their services. But rather than complain to the government and ask for regulation, why not let the service providers themselves know how their business might be improved? If it’s a case of indiscriminate parking, couldn’t the app indicate where one might appropriately park their bicycle? If it’s a case of abusing and wrecking the bicycles, couldn’t the operators do better to inform users of its internal reporting and credit scoring system? No business gets it right immediately, and no business stays successful without continuing to improve. Instead of constraining growth through regulation, tell them where they went wrong. Let them learn from their mistakes.
Image Credit: MoBike (cover), Shane Scmidt (Free-riding)