One aspect of AV, which has not be sufficiently assessed is the issue of social equity. Mobility is a key factor in determining social mobility (excuse the word-play) and there is strong evidence for transportation investment/quality being strongly correlated with the spatial distribution of income groups. In terms of transit usage, higher income groups tend to take fixed rail transit over bus. This has resulted in the subway map of many cities displaying a strong resemblance with income maps (see for example this CityLab article). Transportation comprises about 30% of household expenses for the poorest of North Americans.
This brings us to the case of AV. Some believe this innovation will be unequivocally good for equity. They expect vehicle prices to fall and anticipate implementation as a shared mobility-as-a-service system. The thinking is that the sharing of the cost of a ride will decrease the marginal cost of a trip and lower the access cost for lower income households. The cost of ownership will be shared between users and the removal of the driving task will drastically lower operating costs relative to taxis. This line of thinking is in contrast with some fundamental principles of economics that I will discuss below.
First, we must consider that this proposed service will have substantial sunk cost research associated with it. Technology development is expensive and we are not looking at a government agency, which will utilize tax revenues to pursue research for public benefit. These are large publically held corporations, with the mandate of maximizing shareholder revenue. Absent of government intervention via subsidies, initial AV trips will be expensive and available to the wealthy. Rudimentary microeconomics states that this is the path of any non-inferior good: consumption will increase with increasing available capital.
I would like to provide an example to structure the argument. Consider a vehicle with capacity for 5 occupants. A firm can choose to 1) charge $1 for each passenger in order to provide a service available to all residents of the city or 2) charge $4 for each passenger, knowing that a large segment of the population will be excluded from the service. In order for case 1 to govern, the firm must be certain of at least 4 passengers for each trip. As a risk averse agent, the firm will invariably decided to charge $4 knowing they only need to capture a single rider for each trip to break even with respect to case 1. Additional passengers will rapidly increase the profits of the firm beyond what could be provided under case 1. This brings us back to the issue of equity and its spatial component. If we assume that there is spatial segregation by income group (a very reasonable assumption), we can say that $4 trips will be concentrated in set of sub-regions within the city. We can consider a situation of $4 “trip signals” for a high income sub-region and $1 “trip signals” from a low income sub-region. The shared mobility operator, seeking to optimize their vehicle routing, will deploy the majority of their vehicles in areas where they can maximize their profits - a function of the demand for trips at the prevailing rate of service.
AV and mobility-as-a-service raise questions about willingness-to-pay and willingness-to-share. Absent government input, these services will act solely based on market forces. Current patterns of auto ownership and usage suggest people would be willing to pay a substantial premium to avoid vehicle sharing. In a culture of 1.20 vehicle occupancies, can we consider shared mobility as a likely outcome? Profit seeking private vehicle operators will have no qualms about circulating vehicles through upper income communities where the highest premium can be gained for each trip. This will exclude lower income households from use of the service. Lower operating costs does not necessarily mean that prices will drop. The price of a trip will be a function of the willingness-to-pay for each person and the number of persons who are willing to pay a given price, that is aggregate demand. It may be the case that operators can maintain sufficient ridership at high prices and not require a lower price to draw in additional ridership. Each vehicle will still constitute a capital cost and firms will seek to maximize unit (vehicle) profit and technology costs will be high for each vehicle.
I do not argue that prices will not come down eventually, but the risk is that during the period of partial AV penetration barriers will form that exclude, or inhibit, the adoption of this new mobility tool by lower income households. Consideration of equity in transportation and land use model forecasts will be critical in informing government policy to mitigate these effects. I have seen the effects of transportation on social exclusion through my travels in South America and even here in Canada and the United States. These considerations will be particularly important in developing cities, where government incentive structures may differ from what we see in North American cities. Work conducted with the PECAS model framework in Caracas, Venezuala has proven the ability of these tools to quantify the equity challenges of transportation policy. We need only examine the locations where AV testing is currently taking place to see the potential inequity in its service provision. Major testing is occuring in Palo Alto and other technology hubs, among Richard Florida’s Creative Class - engineers, software developers, and the like. AV adoption has the potential to alleviate issues of accessibility and inequity of access, but we cannot negate the possibility of it exacerbating these problems in an environment of market-driven mobility.
Some final thoughts on the topic: How will luxury services affect access to AV? There is the potential for segregation of the market and higher quality services made available to those who can afford them. As infrastructure evolves to meet the needs of AV, I question whether this evolution will occur uniformly through the city or be focused in higher income communities where residents have the social capital to influence policy and the financial capital to become early adopters of the technology.