March 01, 2020

Bikes are bad for economic growth

The article below is yet another instance of the wrong conclusions that non-economists routinely come to when they talk about economics.  Politicians routinely propose destructive policies (such as rent control and prohibitions on foreign ownership of land) that seem obviously right to them but are in fact counter-productive.

It's hubris.  What seems obvious can still be wrong and economically destructive.  What the galoot below has obviously never heard of is Jevons paradox.  Jevons formulated it in 1865 so there is no excuse for being unaware of it if you want to pontificate on economic questions.

The basic point of the paradox is that reductions in consumption of a particular thing will lead not to an overall reduction in consumption but to a switch to consumption of other things.  If somebody saves money on something, he might just put that money in the bank but he is much more likely to spend it on something else that he had always wanted.

So if we all saved money by switching from cars to bicycles we would spend the saved money on something else -- better accommodation, for instance.

The idea of a demand deficit was a product of the shallow thinking of John Maynard Keynes but he was another theoretician who knew little about the details of how the world works.  His ideas were politically convenient but usually resulted in inflation whenever resorted to


Simon Kuper

Like many other Europeans, I’ve begun commuting by bike in the past few months, too recently even to show up in official stats.

I bought an excellent new bike, two locks and a helmet for about €300 total. That’s about 1 per cent of the average price of a new car in Europe, and I’ll never need petrol.

Bicycle repairs rarely cost much, and if my bike isn’t stolen, nobody will earn another cent out of my urban transport for another decade or so. That’s wonderful — but the difficulty of making money out of cycling could hamper its growth.

Bikes are green, clean, healthy and take up less space than cars, but without a big industry behind them, they may be too cheap to thrive.

And if cycling does manage to grow, it will (certainly initially) decimate jobs and reduce gross domestic product. In short, the story of the bicycle is the myth of “green growth” in one device.

Europe’s dense cities were built for horses, so they proved perfectly adapted for bikes. In 1949, cycling accounted for more than 14bn vehicle miles travelled in the UK. But in the next 25 years, as driving spread, that figure shrank by about four-fifths.

Now, though, the automobile era is waning in Europe, and not only in cities. New ebikes — which can go up to 25kph — will make cycling practical for most suburbanites too.

Kevin Mayne of Cycling Industries Europe says: “Historically, we talked about cycling as a 5km solution. Now we’re talking about it as a 15km solution. That is transformational.”

For all the hype around electric cars, so far the more significant innovation is the ebike. About 3.3 million pedal-assisted ebikes were sold in the EU last year, or nearly six times the number of plug-in electric car sales, estimates the Confederation of the European Bicycle Industry (Conebi). And ebikes managed this without company-car subsidies and other tax breaks that prop up carmakers.

In many European cities, bikes are now popping up everywhere the way cars did a century ago, albeit from a similarly tiny base. Walk (or cycle) around London, Paris or Barcelona and you’ll see bike lanes in places where you’d never imagined them before.

Next month, there’ll be more. Lisbon just announced it is banning most cars from the city centre. In Seville, cycling has increased elevenfold in recent years, says Manuel Marsilio of Conebi. Biking keeps getting safer: Oslo (which aims to be carbon neutral by 2030) and Helsinki each recorded zero cyclist deaths last year.

Europe’s mighty car lobby isn’t trying to undermine urban cycling, say Mayne and Marsilio. It is too busy fighting bigger battles, notably surrounding the European Commission’s demand for more electric vehicles. The fiercest opponents of bikes in cities are motorists and small-business owners battling for their parking spaces.

But the car lobby will always outpunch the bike lobby, mostly because cars cost more. Germany’s cycling industry in 2018 had revenues of a bit more than €6bn; the country’s car industry was 70 times bigger. (The figures for both sectors include makers of components.) Even a decent ebike costs only about €1,500, just 5 per cent of the price of a car.

“The problem with a bike is that it’s just too good,” says Ross Douglas, founder of the Parisian urban mobility summit Autonomy. “The technology does not change much, and they last for ever. The car was amazing at creating jobs, as you use about two tonnes of mass and a motor of up to 350hp to move an 80kg occupant.”

Ominously for cycling and other green modes of transport, activities that can be monetised tend to get encouraged. There’s a cigarette industry and a gambling industry, but there isn’t a walking industry.

There’s also scarcely an escooter industry. Partly as a consequence, cities aren’t now building scooter lanes, leaving scooters to annoy pedestrians on pavements.

Carmakers employ millions of mostly blue-collar men, so governments care about them. In the UK, the fate of Nissan’s plant in Sunderland has become a central plot line of Brexit.

Conversely, the absence of serious Dutch and Danish car industries freed Amsterdam and Copenhagen to adopt mass cycling early, says Douglas.

The other danger of the rise of cycling: it may exacerbate the urban-rural divide that is already the bane of our politics.

While bikes proliferate in cities and inner suburbs, they’re fading from the countryside, even in Denmark, notes Mayne, as older people move to villages and bring their cars with them.

In other words, the town mouse and the country mouse are each acquiring their own mode of transport. That could leave carmakers with a rural, ageing and generally poorer customer base.

In the short term at least, we probably won’t see “green growth”. Instead, if we shift from cars to bikes, and buy less stuff, and carry around reusable shopping bags, going green will mean less growth.

SOURCE




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