Soundings

Benjamin A. Plotinsky
The Bus Market Booms
Innovators are making travel affordable, with no foe in sight but the feds.
Autumn 2010

In 1969, Jane Jacobs published The Economy of Cities, in which she offered some striking examples of urban entrepreneurship. One was Ida Rosenthal, a New York dressmaker who became interested in underwear design as a way to improve how dresses fit; Rosenthal invented the brassiere and launched a company, Maidenform, to manufacture it. Another was the Minnesota Mining and Manufacturing Company, a small Minneapolis sand-digging outfit that, after experimenting with adhesives in order to manufacture sandpaper, soon grew more interested in the adhesives than in the sandpaper and became the colossus 3M. These companies generated income for their owners and jobs for their employees; they also created business opportunities for other firms whose products and services they needed.

This process of “adding new kinds of work to other kinds of older work,” as Jacobs put it, energizes and renews urban economies to this day. Take Pei Lin Liang, a Chinese immigrant who worked as a deliveryman for a New York noodle factory. In the 1990s, presumably because he had grown accustomed to driving, he began shuttling passengers around the city to make extra money. Then he noticed that “many Chinese families had children attending elite schools in Boston,” as Michael Luo later reported in the New York Times, so he started a daily van service from New York to Beantown in 1998. The business took off, Liang replaced his van with some buses, and soon his clientele was no longer exclusively Chinese.

Liang had illustrated one of Jacobs’s most compelling points: that “when new work is added to older work, the addition often cuts ruthlessly across categories of work.” That is, “it was not from the underwear industry that the brassiere emerged,” any more than 3M, the developer of Scotch tape, had set out to make office supplies. Similarly, it was not a bus company but a noodle deliveryman who discovered a big demand for cheap intercity buses that picked up passengers in prearranged locations on the street, rather than in bus terminals, which are often dingy or located in dangerous neighborhoods.

Supply quickly rose to meet demand. Rival companies in Chinatown began challenging Liang for passengers, resulting in a price war. Boston fares plummeted from the original $25, already a bargain, to just $10. Some firms added service to Washington, D.C. Two companies run by Hasidic Jews from Brooklyn entered the fray. It wasn’t long before the scrappy start-ups were joined by behemoths: BoltBus, owned by the existing bus companies Greyhound and Peter Pan; and Megabus, owned by a large Scottish firm.

Today, the intercity bus market thrives, with a host of companies battling furiously to lure customers from one another. Some sell the cheapest tickets; others drop off passengers in convenient midtown Manhattan instead of Chinatown, or in Washington’s wealthier suburbs instead of downtown; others offer service beyond the Northeast; others bill themselves as luxury companies, offering bottled water, electrical outlets, and wireless Internet access; others are experimenting with still greater luxury—and higher fares—by giving riders more legroom.

The curbside buses are a godsend for those who can’t afford to take trains or airplanes. They may even have made Greyhound’s fares more affordable. A quick survey of newspapers shows that over the last 60 years, a one-way Greyhound ticket from New York to Washington generally cost $40 to $70 (in 2010 dollars). Nowadays, you can buy the same ticket for $17 on Megabus, for $21 on Washington Deluxe—or for as little as $14 on Greyhound. Though Greyhound denies that the competition has affected its fares, it seems likely that the company has lowered them to compete with its smaller rivals.

Nowhere in The Economy of Cities does Jacobs explain how to squelch urban entrepreneurship, but the federal government has recently furnished us with a case study. Amtrak, the government-owned passenger-train company, currently charges anywhere from $106 to $225 for a daytime one-way ticket from New York to Washington. It has been poorly operated for years and routinely runs a huge loss, partly because of labor agreements far more generous than those found in the private sector. So it must receive a federal subsidy, one that amounted to $1.6 billion in 2010. The current federal government is surely to blame for allocating these funds, but no more than its predecessors, all of which kept extracting cash from taxpayers’ wallets and bestowing it on a service that caters to a tiny (and relatively well-to-do) fraction of American travelers.

Where Congress and President Obama do deserve special blame is the so-called stimulus package of 2009, which—apparently because that year’s Amtrak subsidy of $1.5 billion wasn’t enough—dumped another $1.3 billion into the Amtrak sinkhole. The stimulus also gave states $8 billion for high-speed rail projects—much of which will surely wind up in Amtrak’s hands—even though high-speed rail will probably fail to improve travel times appreciably on shorter routes, just as it will fail to compete profitably with airlines on longer ones. And in September 2010, Obama announced a massive infrastructure plan that would pour still more money into building “a national high-speed rail network.”

Among the taxpayers funding Amtrak’s incompetence, of course, are Gotham’s bus entrepreneurs. For them, the subsidies constitute a double insult: not only must they watch as their enormous competitor receives money that lets it continue attracting customers; they must also help foot the bill. And if their taxes rise to pay for this government’s historic munificence, the fares they charge will surely rise in tandem—just one more way that wasteful public spending fattens the richer with the dollars of the poorer.

Benjamin A. Plotinsky is the managing editor of City Journal.

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