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Knowing the Cost of Things

I recently took a business trip to the Santa Clara site and flew on the corporate shuttle.

Forget any images of glamour or exclusive perks, it's a bus with wings. But at least I didn't have to worry about being strip-searched by airport security personnel whose mission in life is to deprive the world of scissors. And there's enough room to comfortably use a laptop.

The trip was arranged at the last minute and for a while I wasn't sure if I'd be flying commercial or on the shuttle. That's not a trivial decision: In my case, flying commercial meant I could be there and back on the same day, so I wouldn't need a hotel. But it also would mean the hassle of airport security and a long drive out to PDX instead of the conveniently close HIO. In any case, there were many factors to weigh.

One piece of information that I regretted not having was the approximate dollar cost of a flight on the corporate shuttle. At some point the company decided that providing a shuttle would be a cost savings, and it could be argued that the shuttle would fly anyway whether or not I was on board so the marginal cost is very low and not worth considering. (It's the same sort of reasoning that can unfortunately make people believe that movie theaters are overcharging unless they're always full — but I don't want to talk about that right now.) But from a global optimization point of view, an awareness of the average cost of using the shuttle is important.

Maybe the shuttle is overused and it would be cheaper to reduce the number of flights and ask more employees to fly commercial. Maybe it would be cheaper to add shuttle flights and have fewer people fly commercial. It's impossible for me to tell because I have no information about the average cost of flying on the shuttle. I hope, but doubt, that someone in the company is carefully monitoring travel-related expense reports and making the correct guesses about same-day vs. overnight trip flexibility, and feeding that information into the planning for the number of shuttle flights. Given the nature of the problem, I think my skepticism is justified.

It's the need for this sort of analysis that makes socialism impossible. On a small scale such as this, and where clear money costs are known for at least some of the alternatives, it's reasonable to expect the cost/benefit calculations to be of fair quality. But even here it's difficult. Think of how much simpler it would be to weigh the alternatives if the corporate shuttle operated like an airline, charging for tickets in the normal way. The cost of the shuttle, including considerations such as the relatively low marginal cost of a seat, would be summarized in the ticket price. Travelers could compare the costs of using the shuttle vs. flying commercial at a glance. Each party would be incentivized (reduce expenses! maximize profits!) to always seek the lowest-cost outcome. This is the miracle of markets that enables resources to be used most efficiently.

In the other direction, imagine several alternatives in a socialist setting. They are very difficult to compare due to the lack of prices. The true costs are invisible to the travelers and they'll undoubtedly — and quite naturally — choose on the basis of the benefits (which can be seen) without much consideration of the costs (which cannot). Resources will not be used efficiently.

Tiny Island