Friday, May 05, 2006

The Economic Repercussions of Riding a Bicycle: A Simple Model

I will create a short model to show what the repercussions of people riding bicycles in major metropolitan areas (Boston, Philadelphia, NYC) could look like. This is by no means an exhaustive statistical or econometric model, but it lays down the foundation for… well, no, not really, it’s just a neat idea to come up with things like this, really.


People who can ride their bicycles (from here on called bikes) live within a 5 mile radius from their workplace.

  1. Going to work doesn't involve hoping in highways or too complicated streets to ride a bike on, which probably deters most people from riding their bikes in the first place.
    1. We'll use an example such as my office, where approximately 15 people fit this criteria (about 20% of the total employees)
  2. Train or bus passes average $35 a month. All the people in my example use public transportation.
  3. One can buy a bike for $300 (including all the necessary gear like helmets, lights, etc).

So what?

The tables below are a summary of what I have realized. Table 1 shows the price of a monthly pass for public transportation, as well as the prorated price that was paid for the bike (aka $300 dollars spread evenly throughout 6 months. Why 6 months and not 12? Just for sake of simplicity)

Table 2 shows the yearly calculations under these assumptions. I originally did a 3 year version, but by the third year your bike might need some maintenance. Mine hasn’t had any in 2 years, so I figured this model was fair game. (Click to enlarge)

Table 3 and 4 are replicas of the above tables, except that they account for the 15 people that could be riding bikes in my office. (Click to enlarge)

What we come to realize, is that if people rode their bikes for two years to work instead of paying for public transportation, they could collectively save $8,100 dollars (or 14,000 in 3 years, and it grows exponentially for every year after that).

If we take the multiplier effect into consideration, which basically means that injecting those $8,000 dollars into the economy would transfer into more money in the end, merely because other people would be getting that money and would be able to ‘multiply’ it, the end effect is much larger than the initial amount.

Nonetheless, there are a few (more like a lot) of caveats to this model. What happens when it rains? What if your bike breaks? What if it gets stolen? But I’m not going to list most of the possibilities here. This is the argument, and I hope that if you can come up with a better idea you share it with me.

For now, I’ll stick to riding my bike, which is now going on more than 2 years… And keeps saving me money.

Tuesday, May 02, 2006

MyMoneyBlog - Personal Finance and Investments Weblog

One of my personal favorite blogs - lots of good interesting and every so often some very interesting articles. Check it out!

MyMoneyBlog - Personal Finance and Investments Weblog