Impose a tax on every commercial shared bike

To the extent that commercial bike-sharing enables the substitution of vehicle ownership and use, it can potentially generate what economists call positive "externalities", in the form of reduced environmental pollution and congestion that benefit society at large.

However, amid the hype of bike-sharing, the extent of such substitution effect has tended to be grossly overestimated.

On the other hand, the negative externalities associated with commercial bike-sharing that are borne by society, such as indiscriminate parking and damage to greenery and the environment, are often overlooked (Bike-sharing: Time to crack down on free-riding?; Oct 18).

I venture to suggest that, based on present evidence, such negative externalities are likely to have outweighed the positive ones.

A tax may, therefore, have to be imposed on each and every commercially operated shared bike to take into account the net negative externalities and bring the costs of operating such bikes closer to their true costs.

Would the bike companies pass such tax to the hirers?

To some extent, maybe. But their ability to do so will be constrained by the competitive environment in which they operate.

In the end, an optimal equilibrium will be reached as to how the true costs of commercial bike-sharing will be shared between the bike owners and users.

Cheng Shoong Tat

A version of this article appeared in the print edition of The Straits Times on October 20, 2017, with the headline 'Impose a tax on every commercial shared bike'. Print Edition | Subscribe