Unexpectedly Intriguing!
27 March 2007

The blog, that is, not the book....

Steve Levitt recently commented upon a Texas state senator's plan to pay expecting women $500 to visit an abortion clinic, opt out of having an abortion, then place the baby up for adoption after giving birth. While Levitt earns his economics stripes in observing that the proposed payout would involve a lot of wasted activity (as it would be a lot more efficient to give the money directly to the prospective mother to place their baby up for adoption and skip the whole side trip to an abortion clinic), we'll observe that the increased wasteful activity might be the sole point of the exercise.

One effect of the proposal would be to increase the cost of operations of the abortion provider, as they would have to tie-up resources that might be used elsewhere to serve a client who has no intent of actually purchasing their core service. Kind of like the free-riders who enjoy a vacation at a timeshare resort who ultimately decline to purchase a time share, except here, the incentive is $500 in cash rather than a free weekend at a resort.

One wonders if abortion providers will adopt the same kinds of tactics used by the timeshare marketers and salespeople to discourage the practice if it comes to pass.

And as for the question "why only $500?" How much does a weekend trip to a resort go for these days?

Leaving the abortion clinic behind, let's go to Stephen Dubner's bus stop...

Here, Dubner has observed that he can greatly increase his chances of getting a seat on a particular New York City bus if he walks some 250 yards further to a bus stop than going to one much nearer his apartment. As it happens, the bus stop near his apartment is also very near a subway station, which provides a flow of bus riders.

He wonders why substantially more people waiting for the bus don't pursue the same strategy, coming up with the following potential reasons:

  1. Walking 250 yards doesn’t seem like a worthwhile investment to improve a short, if miserable, experience.

  2. Having just gotten off the subway, the Point A passengers are already broken in spirit and can’t muster the energy to improve their commuting lot.

  3. Perhaps some Point A passengers simply never think about the existence of a Point B, or at least the conditions thereof.

  4. There is a herd at Point A; people may not like being part of a herd, but psychologically they are somehow comforted by it; they succumb to "herd mentality" and unthinkingly tag along — because if everyone else is doing it, it must be the thing to do.

While we favor Dubner's second reason, having ridden on public transit systems in the past, what we really see here is the real estate mantra of "location, location, location" at work. Bus commuters, particularly those coming from the subway, often aren't aware of much beyond the shortest, most direct path to their real destination. They're committed to paying the price of their journey in both time and money (otherwise why ride a subway to a bus stop?!) and as a result, they become price "insensitive."

We see the same thing with gas stations. If you fill up at a station near a major highway, you'll find that the price of gas is higher than if you drive a little further to another station (whether it's worth the trip is another question!)

Since walking to another stop 250 yards away won't get them to their real destination any sooner, most will opt to stay put and they will discount the value of the benefits Dubner has discovered.

That assumes however that the two bus stops are equivalent in all things other than proximity to the subway exit. Perhaps they're not, and a good question for Dubner might be "what amenities are near the two bus stops?" It could well be that one offers bus riders something other than just a place to wait for the bus.


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