Sunday, December 18, 2011

How much would a driverless taxi cost?

This is a post where I do a back of the envelope estimate of when we'll see driverless cars, what will they do to taxi costs and what will that do to unemployment.

There are several estimates to when driverless cars will arrive. The New York time estimates 2020.
Self-Driving Cars
By 2030, Sebastian Thrun predicts, more people will use self-driving cars in their daily commute than manually driven cars.
Submitted by Sebastian Thrun, developer of Google’s self-driving car.
Our readers predict this will occur around 2020, having moved this date 1381 times.

Many similar bets of Driverless cars being regular enough in 2020 and ubiquitous in 2030 exist for example here,
By 2020 - Driverless cars are commercially-available and street-legal somewhere in the United States.
By 2027 - New driverless cars outnumber new cars requiring at least some human control, in the US market.

and here
By 2019, it has begun spreading to public roads, with significant numbers of driverless trucks appearing.

and here
In my post last week, my commentors took me to task on my prediction that cars will drive us in ten years. Some thought Americans would wise up and learn to love mass transit. They don't know Americans.

Others thought the hardware cost would even in ten years remain out of reach. Google did not build an autonomous car by creating the hardware but by harnessing and training good machine learning algorithms. No amount of hardware would have given you a car able to navigate the streets of San Francisco five years ago.

What effect will these cars have? There are all sorts of ideas about how they will alter parking and car ownership. I'm going to try do a back of the envelope here on how much Taxi fares will cost if you don't have to pay the driver.

Taxis cost about 120 cent for a kilometer

For each additional 1/6th of a kilometre or time 28 seconds)

(a) Day time 8am to 10pm €0.15
(b) Night time 10pm to 8am €0.20
(c) Sundays, Public Holidays, Christmas Eve and New Year’s Eve €0.20

Ignoring the pick up costs of about 3.40.

The AA says it costs around 25 cent per kilometer to drive a car in Ireland. About 25 pence per mile in the UK. Taxis charge 1.20 so the majority of the cost looks like the driver. You would have extra costs on top of a normal car with a commercial vehicle. But given the pick up costs a driverless taxi could be about a quarter the cost of a taxi with a driver.
The price elasticity of demand should allow an estimate of how this will alter taxi usage. This paper "Estimation of Price Elasticity for Taxi Services in Hassel" gives a PED of -2.644. Though others such as Schaller at -.22 and here of -.6 shorter term. Taxis that cost a quarter the current price with a PED of -2.6 would mean about ten times the number of taxi journeys. The long term viability of public transport should take this possibility into account. If by 2030 people will be taking ten times the number of taxi journeys would enough people be using Metro North to make it cost effective?

Transport employs nearly one hundred thousand people in Ireland. Which is about 1 in 20 people who have a job here. Or about a third of the number of unemployed. I doubt everyone who works in transport will lose their jobs overnight. But taxis provide an example of how economic effects could provide a huge incentive to move to driverless cars. So far technological progress has always eventually resulted in new jobs to replace old lost ones. The money people save getting into town for a night now could end up being spent in town and require more employment in restaurants and bars for example.

But I think it is worth considering the possibility that fairly soon we could have nearly a hundred thousand people who earn a decent wage at the moment becoming unemployed in a short period of time. Construction lost 160 thousand people in three years. Transport jobs do not pay as well as construction did. But if the construction change caused most of our current economic issues it would be unwise to ignore a large sudden future change in transport employment.

To put some skin in the game, I am predicting that in 2025 in a period of three years we will see structural unemployment of about 5% of the workforce, half of those that work in transport.


Anonymous said...

A big cost in many areas is the taxi license. In Victoria Oz they are about half a million per taxi.

Tim said...

The job-loss arguments are tricky ones to make over developing technology. How does a society have technological change without someone losing his job, and how does a society know when a technology isn't worth the job loss?

Anonymous said...

Driver less taxis will arrive much much sooner than is being suggested here and the impact on employment in the taxi trade across the world will be massive with millions of taxi drivers as well as driving instructors among others that earn their living on the road joining the growing masses of unemployed globally.

People need to get wise to the fact that we will see the first driver less taxis in our major cities in the USA and the UK by 2015 , if not sooner.

The technology is 100% ready and good to go and we should embrace this new age of road transportation with open arms.

red dave said...

Good question Tim. So far pretty much every technology has been worth the job loss hasn't it? I would even include food in this. Maybe massed produced food has damaged quality or I think more likely it has provided cheap plentiful food and the extra money we can use to buy nice artisan food that would otherwise not be available to us.

Thanks Anonymous. I am interested to see someone come up with a sooner year than me. I am more used to seeing people dismiss the change as sci-fi. If you are right and the switch really starts in 2015 that brings the temporary structural unemployment into this recession which could mean it extends to ten years.