Opportunity Cost: Economics of waiting

Earlier this week, I was venturing around the city of Boston and needed to take a train to reach my destination. I hopped on the train going to Alewife from South Station as quickly as possible as I noticed the train had arrived. I of course felt a sense of accomplishment for making it.

Five minutes passed, and I heard the familiar announcement indicating that a train rider was about to speak over the public address system. The rider announced that one of the trains ahead was disabled, and crews were working on it. They estimated it would take a few minutes.

A few more minutes ticked by, and the same announcement repeated... This continued for another twenty minutes. The message remained unchanged until around 3 pm (I had been on the train since 2:20 pm thereabout) when the train finally lurched forward. During those long moments of waiting, I couldn't help but wonder about the economic implications of this delay.

First, I'd like to introduce the concept of opportunity cost.

Opportunity Cost

Opportunity cost refers to the benefit we give up when we choose one alternative over another. We all experience opportunity costs every day. For every decision we take, there is likely to be an alternative we have to forego. For example, in my case, my decision to take the train that day led to me foregoing the alternative of walking to my destination. This highlights the concept of opportunity cost: every decision comes with a forgone alternative.

The concept of opportunity cost certainly gets more complicated (as is almost every concept in economics), however, I won't be going into those details. The key point is that every moment spent waiting represents an opportunity cost which translates into economic costs.

Now that the concept of opportunity cost has been established, we can dive into why it applies to the situation.

Implications of Waiting

While I was waiting on the train, there were other alternatives I could have considered, such as walking or calling an Uber or Lyft to get to my destination. Public transportation may not experience as severe consequences as businesses when users have to wait long periods, simply because users often have fewer readily available alternatives. However, long waits can still lead to frustration and reduced ridership in the long run. This is where businesses truly feel the impact of waiting times. As Kumar emphasizes in the Fox School of Business article "The Cost of Waiting in Line," "Cost to the company is how much less will [the consumer] buy from this company for every second of waiting." [1]

This doesn't necessarily mean there are no potential drawbacks to reduced use of public transportation systems. Several reasons exist for why public transit use is encouraged, often with subsidies to reflect its broader benefits. These benefits include environmental impact, and economic growth, which T. Lakshmanan et al. explore in their paper, "The Broader Economic Consequences of Transport Infrastructure Investments." [2] Reduced usage of transportation infrastructure could certainly have consequences on broader economic development. These negative implications include:

• Increased traffic congestion: If you have ever been in Lagos traffic, Boston’s traffic or any other traffic, you know how tiring it can get. With fewer people on public transport, more cars will be on the road, leading to traffic jams. This can cost businesses dearly – a study by INRIX found congestion cost the U.S. more than 70 billion USD in 2023 [3]. Another report by Boston.com showed that the average Boston driver lost 2,270 USD and 134 hours waiting in traffic in 2022. [4]

• Reduced accessibility and economic opportunity: People who rely on public transport for work, education, or even shopping may be left behind if it becomes less available or reliable.

• Higher infrastructure costs: Even with fewer riders, public transport systems may still require maintenance on existing infrastructure. This can strain budgets and make it difficult to invest in improvements.

There are many more implications of reduced ridership. For users, when the public transportation system makes them wait for too long, people can lose their jobs for being late, miss an important class or worse a test, miss a doctor’s appointment, and the list goes on and on. While unforeseen circumstances can sometimes prevent public transportation from running perfectly, prioritizing improvements and reducing wait times is crucial. This way, more people would be able to rely on these services and be encouraged to use public transportation.

Sources:

[1] https://www.fox.temple.edu/news/2022/01/cost-waiting-line

[2] https://doi.org/10.1016/J.JTRANGEO.2010.01.001.

[3] https://inrix.com/scorecard/

[4] https://www.boston.com/news/politics/2023/02/10/traffic-congestion-pricing-beacon-hill-could-pass/