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This can't be right, or location theory upended
The flight from Oslo airport to Bergen airport costs less than the cab ride from Oslo airport to downtown Oslo. Blame the taxi cartel if you wish (is there one in Norway?), but relative to food and other prices that cab ride seemed like a bargain. Fifty minutes in the cab cost only three or so kung pao chickens with water. Imagine how location theory should look when it is cheapest to travel far and costliest to make small moves. I am reminded of Venice, where getting your shopping cart up through the steps to cross a canal or two is sometimes harder than taking a train or boat out of the place altogether.
Posted by Tyler Cowen on May 26, 2007 at 12:46 PM in Economics | Permalink
Comments
No cartel on Taxis in Oslo. There used to be a monopoly, but we just opened up to free competition a few years ago ... and what happend ... prizes went UP (as far as I can tell).
I guess one reason for the expensive fare between the airport and Oslo is that any sensible traveller takes the magnificent airport express train taking you downtown in less than 20 minutes. You'll save hassle, time, money AND the environment. Which leaves clueless (as in 'don't know about the train'), environmentaly unfriendly (as in 'I am to important to take public transport'), money wasters taking the overpriced taxies. Not sure which one of these fits here, but reading the previous posts about Norwegian prices, it seems it can't be the last one :)
Posted by: Morten at May 26, 2007 1:44:27 PM
Not about small moves versus far flights. You pay extra for flexible points of arrival and destination. Flights have fixed points.
Posted by: Sammy Z at May 26, 2007 1:49:21 PM
Per-passenger labor for an airline flight is far less than per-passenger labor for a taxi ride. Since the cost of labor seems to be the determining factor in cost of most services nowadays, it makes perfect sense to me that the taxi would be more expensive than the flight.
Posted by: Rex Rhino at May 26, 2007 3:30:38 PM
Also you have to take into account that Oslo airport is quite far away from Oslo itself, so if the fare is per-km (or a flat rate that takes into account the distance), it adds up. However, I agree with Morten - the airport express in Oslo is by far the better option (although still quite expensive compared to public transport from other airports - but hey, that's Norway).
Posted by: pinus at May 26, 2007 3:40:44 PM
I have a cousin who works in Norway often: she finds it expensive compared to LONDON!!
Posted by: dearieme at May 26, 2007 3:50:36 PM
This post reminds me of an old cartoon of a boy traveling around the world on a goose.
Posted by: Yan Li at May 26, 2007 3:51:40 PM
"Imagine how location theory should look when it is cheapest to travel far and costliest to make small moves."
But, as you note, the cab ride itself is more expensive than the flight. Presumably, you need to pay someone to get to the airport, so chances are, the full cost of traveling far (including getting to and from the airport) is still greater than the cost of traveling locally.
Posted by: Amol at May 26, 2007 7:12:28 PM
"Since the cost of labor seems to be the determining factor in cost of most
services nowadays"
Exactly. Norway has high labour costs, and a high tax wedge in addition.
This wedge between “goods” and services (including goods that are heavy in services, such as Thai food) is a general Scandinavian phenomenon. Whenever they pay taxes of course.
In Norway the problem is exacerbated like crazy through the upward oil-demand pressure on the non-tradable sector.
Airline trafic is more tradable and more capital intensive than taxi-fairs.
Posted by: Tino at May 26, 2007 9:20:18 PM
As the tone of some of the comments above suggests, public transport in Europe is one of their numerous (pagan) religions. Failure to make the required genuflection will attract about as much abuse as wearing a cross in an Arab marketplace.
The fact that most Europeans drive cars to all sorts of destinations on most days, as the mood takes them, just underlines the ritual nature of the requirement.
Posted by: ZDF at May 26, 2007 9:49:28 PM
Tyler, perhaps there is very little demand for that flight. The train ride from Bergen to Oslo is one of the most breathtaking I've ever been on, and surely doesn't take a significantly longer than air travel over such a short distance.
Posted by: Mark at May 27, 2007 2:38:34 AM
That train is spectacular, but it is a half century since I rode it.
Posted by: Barkley Rosser at May 27, 2007 4:15:57 AM
Automobile fuel is taxed; airplane fuel isn't.
Posted by: jim at May 27, 2007 6:27:04 AM
Let me join the others in saying that you've really missed out by not taking the train from Oslo to Bergen. This is especially so at this time of year since it would only barely get dark at night making for a spectacular ride even if you rode at night. Try it on the way back if you can. (Also, the train from the airport to the middle of the city in Oslo is fast, convenient, and comparatively cheap. Why take a taxi at all? Are you on an expense account?
Posted by: Matt at May 27, 2007 9:30:50 AM
Excellent blog overall, I must confess.
Wrt to this particular item, dated 5/26/2007, I have to state that living in Chicago and a user of its CTA (transit agency), I am baffled that they continue to charge a fixed price for all distances. I noticed this when I moved to the US from Mumbai, fka Bombay, where the cost of travel was charged by distance traveled. As of last week, the CTA has threatened the user community with two drastic options - Shutdown because of operating deficits or a steep increase increase in fares combined with reduced services. I did not read the details carefully, but I believe that they are still planning to stick to the fixed fare regardless of distance traveled.
In this day and age of economic reason, I find it incredible that the CTA is still using short distance commuters to subsidize the long distance commuters. Well, I am sure that you have seen, noted, observed other similar situations but your post, and a particular line within, prompted me to write this short little response.
Posted by: CJ at May 27, 2007 12:32:19 PM
"Imagine how location theory should look when it is cheapest to travel far and costliest to make small moves."
On this vague topic: in the spirit of those maps that distort nations areas according to population, GDP etc, is there a map of the world that distorts distances according to travel time/cost?
In other words, if doing according to freight cost, New York and Tripoli would be very close (direct ocean shipping) while Tripoli and somewhere 500 km inland would be very far away (overland transport in Africa).
I just think it would do a lot to explain economic development.
Posted by: doctorpat at May 27, 2007 7:13:29 PM
Agreed on the train from Oslo to Bergen. Bergen is one of my favorite places on the planet.
Re: distance pricing, my experience with public transit is mostly in New York which, similar to Chicago, has flat rate pricing for the subway.
The thing is, with property values and rents going through the roof, the working class is being pushed further and further out of Manhattan. New York is already a playground for the rich, but at this pace it will reach a point where service industry employees won't be able to afford anywhere other than the outer reaches of Queens, Brooklyn, and the Bronx. Just seems unfair to hit them with more costs on top of very long commutes.
Posted by: fustercluck at May 27, 2007 7:22:20 PM
Didn't I warn you about this in your post about Norwegian Prices?!? ;)
Posted by: billb at May 27, 2007 7:23:36 PM
There are two many non-monetary costs of airport travel (need to get there early, security checks, cramped conditions, etc) for this comparison to properly work. Further, taxi rides aren't the only land transport available.
Posted by: Matt Canavan at May 28, 2007 4:05:49 AM
Jim is right. Also, taxes on the car are comparable to the danish ones we discussed earlier. I think that if the purpose of gas taxes is to reduce emissions, it's insanity to not tax air fuels similarly. But apparently that's not so easy.
Posted by: Harald Korneliussen at May 31, 2007 4:48:52 AM
Harald Koneliussen
Taxation of aviation fuels is banned by international treaty (the Warsaw Convention).
Like many such multi-partite treaties, changing it would require so much negotiation, that it just doesn't happen.
The only way it could happen is if the EU and US, say, agreed to change it, and threatened punitive taxes on flights from any country that didn't follow suit.
Which given the lobbying power of the US airline industry (and the European) is about as likely as snow in July in New York City.
Posted by: Valuethinker at May 31, 2007 8:57:21 AM
Harald
I should add the welfare gains of taxing aviation fuel would be very large.
Although international airline flights are 3-5% of global greenhouse emissions, some estimates of the aerosol effect (basically the contrails, *at night* reflect heat back onto the earth, but in the day, they do not) place the actual impact on global warming at 10-15% ie implying world aviation is as big a contributor as the cement industry to global warming.
In addition, airline flights have large environmental costs (you can measure that via the differences in housing prices between neighbourhoods overflown by landing aircraft, and those not).
And of course the presence of cheap aviation means its impossible for ground based forms of transport, like trains and buses, to compete over 300-500km ranges without significant subsidy. It's cheaper to fly to Glasgow or Edinburgh from London than to take the train.
The US airline industry lobbyed hard against increased security restrictions before 9-11. After 9-11, they got substantial state aid. Not the people in the industry who were laid off, but the companies themselves: ie a bailout of the debt owners, shareholders and senior management.
And of course every nation has to have its little flag carrier, loss making or no, so we can see our Maple Leafs, etc. ,fly around the world with us.
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