Browsing Tag: price

    Switzerland Train Journey l Interlaken to Jungfraujoch
    Articles, Blog

    Switzerland Train Journey l Interlaken to Jungfraujoch

    November 6, 2019

    I have reached what is called the Heaven on Earth i.e. Switzerland. Today we will visit Junfraujoch mountain which is known as the ‘Top of Europe’ We will take a train and will enjoy the scenic beauty on our journey. Today I am going to show you the amazing train journey. Let’s go. We are boarding the train. We have set off for Jungfrau. The train has departed. First station would be Lauterbrunnen My pronunciation may not be accurate Never mind, you are going to find scenic beauty on both sides of this train. So, we will enjoy every bit of Switzerland through this train journey. Araina, Are you enjoying? I want to see snow We will find snow in Jungfraujoch Now our tickets will be checked I can see the gentleman there Here are our tickets to Jungfraujoch What a beautiful view! We are on our way to Lauterbrunnen. We will reach there in a shortwhile. One can sense the beauty right from the foothills I am sure its going to be more scenic at the top. We have reached Lauterbrunnen We will continue with our journey. And keep enjoying the scenic beauty. Our train has departed from Lauterbrunnen Now we will go to Kleine Scheidegg station The names here are difficult to pronounce, especially the German ones. I may not be accurate at times Swiss Alps are considered to be the most beautiful in the world We will enjoy the waterfalls and this beautiful nature I love these mountains Look at these. They are so beautiful. I can see a lot of snow We are about to reach Kleine Scheidegg From here we will go to Jungfrau. We really enjoyed the view. It’s crowded at Kleine Scheidegg station Everbody is waiting here to take a train to Jungfrau Trains depart at every 30 mins interval So one has to wait for a while. (Announcement) Now I am getting down at Eismeer station It is a five minute stop here. I have heard that we can get a beautiful view from here It’s only a five minute stop here at Eismeer The view from here is breathtaking. Let’s proceed now and enjoy..bye..bye Before we reach Jungfrau, we have to pass through a 9 km long train tunnel. We are in this tunnel right now. We have reached Jungfrau. Now I moving towards the top I hope I am going to get a breathtaking view. Let me climb up. Perhaps, all my life I have waited for this moment. I am on the top of Switzerland.i.e.Top of Europe I am on the top of Jungfrau mountain. Its snowing. I am enjoying every bit of it. I am feeling hungry now. Lets see if I can get some vegetarian food here. I can see some fruits here Its so interesting here. I can see menu display cards in Hindi. They are trying everything to attract customers. Masala Chai (Tea) costs 4.30 Swiss Francs which is approximately INR 300 Vegetable and Chicken sandwich costs 7 Swiss Francs which is about INR 500. You can find everthing here but you have to shell out bit more. We have got a vegetable sandwich, we have no other option so.. Counted? Yes. 20, 30, 5 and it’s 1 Swiss Franc. Won’t you get anything for me? Wait, You will also have something. It is yours as well. No I can see a lot of Indian tourists here. In fact both Indians and Chinese tourists. I can hear a lot of people speaking Hindi Come here Araina Why are you so unhappy? What do you want? You are at such a beautiful place. Why are so upset? I want Maggi. Lets go back through this lift after eating out and watching ice caves. Finally it’s time to leave Junfgrau. Now we will take a train again to Interlaken Let me tell you the cost of this trip now. The return fare from Interlaken to Jungfrau costs 235 Swiss Francs per person It is approximately Rs. 16000 (INR) per person For children below six years of age, it is free. We really enjoyed at Jungfrau, now its time to go back On our way back we have taken a different route. This way we have covered it from both sides. Let us end the the trip by enjoying some more scenic beauty. If you loved this video, please subscribe to our channel and like this video Please press bell notification to get information about our new video. Please share it and encourage us

    Royal Enfield Classic 350 : Pride vs Objectivity : PowerDrift
    Articles, Blog

    Royal Enfield Classic 350 : Pride vs Objectivity : PowerDrift

    October 10, 2019

    Ten years ago I was a teen, still trying to figure what my calling was, still trying to shape my identity and
    that’s when I was exposed to two wheels! It was a small scooter handed down to me
    from my mom and like many others for me too, it was a little embarrassing more so because I wanted something bigger, back then big meant Royal Enfield, because
    nothing marks your graduation into the adult league than the swag of riding one. This is me today, hooked onto
    motorcycles like never before and here’s the motorcycle that partially guilty for
    it. This is the Royal Enfield and it continues to be one of the most
    sought after motorcycles by young and old alike Especially those trying to carve
    out their biker identity B ut before we go any further let’s take a quick trip
    back in time to understand why this is special. In 1953,Madras Motors received
    an order from the Indian Army for eight hundred 350cc bullets These motorcycles arrived from a
    town called Redditch, they were sturdy and simple to maintain and for some even
    a soul mate to live with in the aftermath of these raging wars and wars
    at times create some able allies like the one we knew as Enfield India. In 1967,
    the original Redditch Hewell Road factory was shut. but the Indian arm continued
    to join hands with Eicher and safeguard this automotive interest. But all that is
    history today more than 65 years later Royal Enfield is paying a tribute for this
    legacy. Ladies and Gentlemen, Here’s the Royal Enfield Classic 350 and
    this particular beauty is the Redditch Edition. It is flanked by Redditch monograms an
    insignia that wears battle scars and heritage. With that in context, it’s time to thump it up Nothing brings back the old-school charm
    of riding a classic motorcycle like the Classic 350 even when people don’t
    understand motorcycles they will assume use of your biker at heart when you’re
    riding this. The cast-iron thump might be missing but this is still an experience. However is 2017, so let’s objectively assess this
    motorcycle with what the current generation motorcycles look like. Yes I
    know for me a decade ago, motorcycling meant ease and simplicity, my thrills of
    life was simple – to explore the length and breadth of this country. Three digits
    did not make a lot of sense as it meant theft of the surrounding scenery. I did
    not mind a few loose nuts and bolts. The wrench was teaching me more about my
    machines. All I needed along my side was my kit and I was happy.
    A Royal Enfield then was the go-to motorcycle. But time changes and so do the needs and
    wants. With the current speed of motorcycles that the Classic goes up
    against, well almost every other motorcycle is being upgraded to its next iteration.
    The new technology came to light, manufacturers like Bajaj Honda and even
    Mahindra chose to write the ride the tide. The community saw features like liquid
    cooling, ABS, alloy wheels and fully digital instrument clusters.
    Not only that they accept these changes but appreciated them too. The Classic
    however, well it still carries the vibrations, weight can still be felt and
    it misses out on a rear disc brake, leave aside ABS I mean, the batteries and electricals
    have evolved over the years and yet there is that it’s an amp meter for its form
    but no fuel indicator. These are needs today and not just wants and that is where, that is where the the needs is where the Classic 350 lacks today! Make no mistake
    the Classic 350 is the most selling Royal Enfield till date, in fact it’s the most
    selling motorcycle in the 200+ cc segment. IT averages at almost 20,000
    units per month despite an atrocious waiting period. Now one way to look at it is that the Classic is responsible in making a lot
    more people want to buy a motorcycle. I understand and appreciate that this is
    an iconic tribute and many want it but frankly we would want the brand and
    product to evolve into a lot more something that would make me stay in love with the simplicity of the experience. Now let me tell you this I still love the Classic
    350 but a little more power, more refinement, more reliability on this
    platform will not just help the brand but will also nurture and take care of
    new riders. Allow me to explain it this way I’m a kadak chai fan and I know this
    isn’t the world’s best chai but I still want it!

    Why Trains are so Expensive
    Articles, Blog

    Why Trains are so Expensive

    August 27, 2019

    This is a Wendover Productions video made
    possible by Videoblocks. Get an exclusive 7 day free trial of Videoblocks
    with up to 140 free stock footage clips for your videos by using the link Before I start, I want to quickly mention
    that I started a podcast with Brian from Real Engineering called “Showmakers.” In the very first episode which is out now
    we chat with none other than Hank Green. I’d really appreciate if you give it a try
    and the link is down in the description. Trains are expensive. So expensive, in fact, that on three of the
    most travelled routes in three countries—New York to Washington in the US, Edinburgh to
    London in the UK, and Paris to Lyon in France—they’re pretty much the same price as the plane. These routes start at $49, £30, and €30
    respectively on the train and $52, £13, and €53 on the plane. On a longer route like New York to Chicago,
    the difference is even more pronounced: $59 for the plane, $108 for the train. And that’s keeping in mind that trains are
    subsidized or government run in almost every country while airlines are highly profitable
    commercial enterprises. The planes flying between DC and New York
    are $49 million dollar machines, while the trains traveling the route cost no more than
    $10 million total. The plane has to burn 1.7 gallons of fuel
    per mile flown (3.9 liters per km) while the train relies on cheap, clean electric power. All this therefore begs the question, why
    are trains so expensive? Now, I mentioned that fares between DC and
    New York start at $49, but that’s far from the average price—$73. Let’s look at the expenses that go into
    that fare. The single largest expense for Amtrak is staffing. Trains require a lot of people to operate. 85,000 passengers journey on Amtrak daily,
    but for that Amtrak employs 20,000 people meaning that, daily, Amtrak requires one employee
    for every four passengers. On top of that, the majority of those working
    for Amtrak are highly specialized, unionized workers who demand high salaries. Amtrak’s financial reports tell us that
    they spend $105,000 per employee, but that’s not to say that everyone at Amtrak is making
    six figures. Taxes and benefits typically cost an employer
    30-40% of a salary so the actual average salary for an Amtrak employee is around $75,000. These salary costs are so high that they account
    for over a third of the ticket price between DC and New York—$25.82 total. The cost of employees is so high for train
    operators largely because trains are so slow. For a flight from DC to New York, an airline
    would only have to pay employees for an hour of work while Amtrak has to pay their employees
    for three and a half hours of work. The difference is even more striking on long-haul
    routes—Chicago to Los Angeles for example. An airline would have to pay for four hours
    of work, while Amtrak pays for 44 hours of work. In addition, trains have physical infrastructure
    to maintain along the journey—the rails. Airlines also have infrastructure to pay for
    on each end—the airports—but between those they just use the sky, which is free. Amtrak only owns 730 miles of the 21,000 miles
    of track they use, but they still indirectly pay for the employees who maintain those 20,000
    miles of rented track through the fees charged by the track owners for their use. The next largest cost for train operators
    is that of the trains themselves. Trains aren’t that expensive compared to
    airplanes, but they still cost millions of dollars. The locomotive pulling the train from DC to
    New York costs $6.5 million dollars and then each one of the passenger cars costs an additional
    $400,000. With a seven car train, that works out to
    $9.4 million dollars which accounts for $9.67 on this particular ticket. The other part of infrastructure—rails—costs
    Amtrak an additional $3.66 on this ticket. Railroad tracks are extraordinarily expensive
    to build—typically more than $1 million per mile—but on routes like DC to New York,
    they’re just used so much that the per train or per ticket cost is negligible. Amtrak is a business, so it also needs to
    pay to run the business. $2.15 of this ticket goes to administrative
    costs, and then another $1.31 to advertising. Moving on, trains are extremely safe compared
    to cars, but you’re still more than 3 times as likely to be killed on or by a train than
    a plane. Trains do occasionally crash, and they also
    crash into people. When this happens, Amtrak often has to pay
    a settlement to the victims, and the fees associated with that account for $0.79 of
    the DC to New York ticket. That does mean that when traveling between
    DC and New York, in essence, you’re paying $0.79 in order for Amtrak to kill or injure
    people. Those were all the major costs to run a train,
    but there’s still another $5.91 on that ticket that just represents other minor costs. So the total expense for Amtrak to run that
    train is $50.14. The remaining $22.86 is pure profit. You see, the train from DC to New York, the
    Northeast Regional, is one of the few Amtrak routes to make a profit. The demand, speed, and frequency of the train
    helps it succeed financially where other routes failed. Per passenger per mile, Amtrak makes eight
    cents of profit on the northeast regional, the low speed train, and 29 cents per passenger
    mile on the Acela Express, the high-speed train. These profitable routes help pay for Amtrak’s
    unprofitable routes… and there are a lot of them. Some routes like the Sunset Limited between
    New Orleans and Los Angeles lose as many as 21.7 cents per passenger per mile, and when
    passengers can travel 2,000 miles on that route, that’s a lot of loss. As I mentioned, that $49 fare is not the average
    ticket price to travel between DC and New York. The $49 fare is the price at which Amtrak
    starts selling tickets, but as the date of travel nears, the price can increase to hundreds
    of dollars. That might seem like price gouging, but its
    actually a way to make sure everyone can afford a ticket. That’s not to say Amtrak and other train
    companies are these altruistic organizations trying to bring travel to the masses—it
    just makes more money. Especially with trains where it costs the
    operator roughly the same to transport 5 passengers as it does to transport 500, the operator
    always wants to have as many seats as possible filled, even if that means selling cheap tickets. In a perfect world for the operator, they
    could ask every potential passenger what the maximum amount they’d be willing to pay
    for a journey is. If they adapt the ticket price to every passengers
    maximum price then they can fill each seat with passengers paying the highest possible
    amount. However, in practice, nobody would ever answer
    the question truthfully so it would never work. Ticketing systems, however, try to ask this
    question subliminally. Going back to that route from Edinburgh to
    London, the operator, Virgin Trains East Coast, sells three types of tickets—advance, off-peak,
    and anytime. The advance tickets range anywhere from 30
    pounds to 140 pounds, the off-peak fares cost 137 pounds, and the anytime fares cost 148.50
    pounds. For the advance fares, there are a certain
    unknown number of tickets at different price levels on sale and once they’re gone, they’re
    gone. For example, there might be 15 tickets at
    30 pounds and once they’re sold, the price would increase to 35 pounds, then 40, 45,
    and so on a so forth. That encourages those who can buy early to
    buy early. Normally that means tourists. Tourists tend to plan far in advance and are
    more budget conscious since they’re paying their own costs. They’re also more likely to travel down
    to London on the often cheaper plane since they’re less attracted by the convenience
    of the train. These advance fares are only valid for the
    exact route, day, and time bought which is fine for leisure travelers, but business travelers
    typically want more flexibility. Buying advance fares often doesn’t work
    for business travelers since their plans are only made a few weeks or days in advance and,
    since they don’t personally pay for their tickets, its no problem for them to pay for
    the convenience of taking the train on a flexible ticket. That’s why they often pay £148.50 for an
    anytime ticket. With these, you can just hop on a train whenever—it
    doesn’t matter if its in 10 minute or 10 days. You just step on the train and take a seat. The middle ground between those two is the
    off-peak single which lets you take any train that arrives in London after 11:17 am or is
    on the weekend. These fares are still geared towards business
    travelers, but by restricting against the early morning trains they give a discount
    to those who can avoid the busiest morning trains.. For each of these fares there are equivalents
    in first class—the advance first fares range between 40 and 200 pounds, the off-peak fares
    are 185.50 pounds, and the anytime fares are 236.50 pounds. On top of that, young, disabled, and elderly
    people get up to 1/3 off their fares with a rail-card. This all means that there are essentially
    12 different types of tickets for sale and that one person heading to London might be
    paying 20 pounds while the person sitting right next to them is paying 200 but what
    they’re really paying for is convenience. Now, back in the US, if Amtrak only operated
    profitable lines, their route map would look like this, but the routes that don’t make
    money are the ones that really matter. Amtrak serves over 500 destinations in 46
    states—many of which are small towns with no other means of public transportation. While trains are normally the more expensive
    means of transport, they are less expensive than planes to service small communities. The small airports in the rural parts of America
    are extraordinarily expensive to operate. Even if there are just two or three flights
    a day, they still need a runway, terminal, security, and air traffic control while a
    rural train station needs barely any infrastructure or maintenance. In fact, it’s cheaper to fly from Chicago
    to London ($741) than it is to fly from Havre, Montana to Chicago ($811 May 17-22) whereas
    Amtrak brings passengers from Havre to Chicago for only a few hundred dollars—much more
    in budget for the average resident of Havre who makes only $22,000 per year. Of course this is a political issue, but a
    part of why trains are so expensive is to allow train operators to fulfill obligations
    to serve small communities who need solid transport links. Research has shown that ease of access to
    transport has a stronger influence on whether someone will earn more than their parents
    did than the level of crime in their area or whether they grew up in a two-parent household
    and so keeping trains running through rural America is incredibly important. Next time you take the train from DC to New
    York, just keep in mind that that $22.86 of profit goes to making sure that someone from
    Havre can get to Chicago for less than you can fly to Europe. So you see this number? That’s how much these last few seconds would
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    How Airlines Price Flights
    Articles, Blog

    How Airlines Price Flights

    August 27, 2019

    This video was made possible by Blue Apron. Get three free meals from Blue Apron by being
    one of the first 100 people to sign up at the link below. Airline ticket pricing probably seems like
    a crapshoot. The numbers change seemingly arbitrarily every
    week, day, or hour, but there’s some real science behind these prices. People spend their whole lives figuring out
    what to charge you to fly. Let’s take a look at one flight on one route
    by one airline to understand. American Flight 33 leaves New York’s JFK
    airport every day at 7 AM bound for Los Angeles arriving at 10:51 AM pacific time. This transcontinental route is one of the
    most competitive in the world with over 3.5 million yearly passengers and five major airlines
    connecting the country’s two largest cities. There’s nowhere where pricing strategies
    are more important for airlines than here. Looking at three months of fares for this
    flight, there are eight distinct prices for economy ranging from $129 to $472. These all get you on the exact same flight
    in the exact same seat but each and every price has a purpose and place. The lowest price, $129, is the most competitive
    price. This fare only shows up three times in our
    three month span—each time on Tuesdays. Now, Tuesdays are very often the cheapest
    days of the week to fly. Business travelers tend to make up much of
    the demand during the week and they most often want to fly out on Monday and return on Thursday
    or Friday so Mondays, Thursdays, and Fridays tend to be the most expensive travel days
    while Tuesdays and Wednesdays are often the cheapest. The average ticket price for this flight shows
    this—Tuesdays average $182 and Wednesdays $173. Even if the demand is lower American Airlines
    runs the flight anyways and they have to fill seats to break even so they sell the flight
    at rock-bottom prices. The next price, $144, actually demonstrates
    a very interesting phenomenon. Whenever American prices their flight at $144,
    they are not alone. Take March 6th for example. American, Delta, Virgin America, JetBlue,
    and United all have flights from New York to LA at around 7 in the morning selling for
    $144. They’re doing what is called price matching. Because this is one of the most competitive
    routes in the world and because the number one determinant for travelers on which airline
    they take is price, all five airlines flying this route match each others prices. This way, travelers make their decision based
    off the reputation of each airline rather than the price. The price stays at $144 because it’s in
    each airlines best interest to keep it there. In a normal market, if Delta, for example,
    dropped their price to $119 they would get more travelers since they were the cheapest,
    but in this price matched market all the other airlines would drop their prices as soon as
    Delta drops theirs so all of them would get the same amount of travelers as before while
    earning less money, but there are some cases where it can make business sense for airlines
    to drop prices to below even being profitable. Around the year 2000, WestJet and the now
    defunct CanJet airlines started flying from central Canada to Newfoundland. These routes were historically operated exclusively
    by Air Canada and they were expensive. A one-way flight from Montreal in 1999 cost
    over $600, but when the budget airlines WestJet and CanJet started flying the route, prices
    dropped dramatically and Air Canada was threatened, so they dropped their prices even lower. The $600 Air Canada fares then cost $89. Now, it wouldn’t make sense for anyone to
    fly a budget airline over Air Canada at the same price so WestJet and CanJet were almost
    driven out of business on these routes, until Canada’s Competition Bureau stepped in. They concluded that Air Canada was engaging
    in the uncompetitive action of predatory pricing since they were pricing flights below what
    it cost to operate them, so they were forced to stop. Airlines in the US, with some newly strong
    budget competitors, are engaging in similar actions nowadays. United airlines, for example, is matching
    Frontier’s $40 fares on many days from Denver to Chicago, among other routes, in order to
    maintain their market stronghold in Denver and Chicago even though their cost to operate
    the route is drastically higher than Frontier so they are almost certainly loosing money
    on those fares. But back to the New York to LA route. $159 is the lowest regular fare for this flight. The $129 and $144 price points were both basic
    economy fares—the most restrictive type with no seat selection, no carry on bags,
    and no changes or refunds. Every flight has a bunch of different booking
    classes each with a fare code. For example, the basic economy fare code for
    the $129 and $144 price is B, but the $159 price books into fare code N. These different
    booking classes are sometimes known are fare buckets. Essentially the airline decides it’s going
    to sell a certain number of tickets at the $159 price with fare code N, let’s say 10,
    then when those ten tickets are sold the airline then sells economy at fare code G for $204
    then when those are sold it sells economy at fare code V for $269 then fare code L for
    $318 and so on and so forth. There are also some cases where a ticket will
    default to a more expensive fare bucket because of reasons other than the lower fare selling
    out. Many fares, including each mentioned so far,
    have advance purchase requirements meaning that, even if a flight is not full at all,
    the price will increase closer to departure. All the fares below $204 have an advance purchase
    requirement of two weeks meaning that you can only purchase them more than two weeks
    before departure while the $269 fare, for example, has an advance purchase requirement
    of only one week. Although, the cheapest fare without an advance
    purchase requirement at all, that is, the cheapest fare that you could buy day-of for
    this flight is fare class K at $472 which happens to be the most expensive economy class
    fare. And now for some caveats. Not every fare for this flight is going to
    be priced at one of these eight prices. Airlines have mechanisms to adjust fares from
    these buckets. In the short-term, they can adjust things
    like the fuel surcharge to raise the price if other factors, like oil prices, increase. In the long term they can adjust the actual
    prices of the different fare buckets. Airline often increase the base fares for
    busy seasons like summer. American Airlines does exactly that on this
    New York to LA route where their fare class M, for example, increases from $357 to $410
    in August. But so far we’ve looked at this at a micro
    level—how prices differ on one flight—but we also have to consider the macro level. Why if you leave on Tuesday February 6th and
    fly 2,469 miles to the west to LA do you pay $129 while if you fly 3,442 miles to the east
    to London—only a thousand miles further than LA—you pay $2,772. Well, the second figure is a bit deceptive
    because that’s the price of a one-way ticket. If you switch the LA flight to a round-trip
    ticket returning a week later it will cost $257—exactly double—while if you turn
    the London flight into a round-trip returning a week later the price will drop to $602—almost
    five times less. This is understandably confusing—a one-way
    ticket that costs more than a roundtrip—but the reason this is goes back to the fare codes. Embedded within each fare code are a bunch
    of little restrictions that dictate when you can use that fare. On the New York to LA trip those restrictions
    are just things like blackout dates for the fare and advance purchase requirements, but
    the New York to London ticket has loads more restrictions and the ones that make one-ways
    more expensive than round-trips are the minimum stay requirements. These requirements dictate how soon your return
    flight can be in order to get a particular fare. The idea is to price discriminate—business
    travelers should pay more because they can pay more. Meanwhile, airlines try to give the lowest
    prices to leisure travelers since they’re the ones paying for their own tickets and
    therefore they’re the ones that are the most price sensitive. Business travelers often want to be home for
    the weekend, so many of these minimum stay requirements, like with fares Q, N, and S,
    just require a Sunday at your destination. Others, trying to accomplish the same thing,
    require seven days, a full week, which would also require a traveller to stay the weekend
    at their destination. Now as the prices go up the requirements go
    down so once you get to paying around $2000 you can stay for as few as three days, but
    the cheapest roundtrip base airfare with no stay requirement at all is $5,544 in fare
    class Y—exactly double the one way price. So that explains this—the one way ticket
    is so expensive because, since the airline doesn’t know how long the traveller will
    stay at their destination the one-way fare has to be booked into the least restrictive
    fare class without the minimum stay requirement. You’ll see this idea of price discrimination
    all over ticketing structures. It’s a genius pricing concept that allows
    different people to buy products at the prices they can afford and therefore its allows businesses
    to sell the same product to more people. Tickets increase in price closer to departure
    because leisure travelers buy tickets far-out and business travelers buy their tickets close
    to departure and flexible tickets are more expensive because that’s what business travelers
    need, but there’s another pricing difference going on that’s less fair—between routes. It’s all about competition. Different routes of the same distance cost
    different amounts generally not because they cost different amounts to operate, but because
    of how much the competitors are charging. This is part of why flights into small airports
    are so expensive—because they lack competition. You can fly the 240 miles from Detroit to
    Pellston, Michigan on a CRJ 200 for $242 or you can fly the 170 miles from Detroit to
    South Bend, Indiana on a CRJ 200 for $76. The only difference is that South Bend Airport
    has flights from United, Delta, and Allegiant while Pellston only has flights from Delta. The same phenomenon happens over the Atlantic. There’s more competition on the six hour
    flight from New York to LA than on the six hour flight from New York to Dublin so you
    can fly to LA for $250 round trip while Dublin costs $500 round trip. Of course, travelers from New York to LA can
    drive, take the bus, take the train, or take a flight connecting halfway there while travelers
    to Dublin only have one choice—to fly. In all, the truth is that prices reflect what
    people will pay and so people will pay what flights are priced. If you’re a busy person like me, you know
    that eating healthy can be difficult. Sometimes it seems like you have two choices—quick
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    What If There Were No Prices? The Railroad Thought Experiment
    Articles, Blog

    What If There Were No Prices? The Railroad Thought Experiment

    August 11, 2019

    To appreciate why market prices are essential to human well-being, consider what a fix we
    would be in without them. Suppose you were the commissar of
    railroads in the old Soviet Union. Markets and prices have been banished. You and your comrades. Passionate communists all. Now, directly plan how to
    use available resources. You want a railroad from city A to city B,
    but between the cities is a mountain range. Suppose somehow you know that
    the railroad once built. Will serve the nation equally well. Whether it goes through the mountains or
    around. If you build through the mountains,
    you’ll use much less steel for the tracks. Because that route is shorter. But you’ll use a great deal of
    engineering to design the trestles and tunnels needed to cross the rough terrain. That matters because engineering is also
    needed to design irrigation systems, mines, harbor installations and
    other structures. And you don’t want to tie up
    engineering on your railroad if it would be more valuable designing
    those other structures instead. You can save engineering for
    other projects. If you build around
    the mountains on level ground. But that way you’ll use much more steel
    rail to go the longer distance and steel is also needed for other purposes. For vehicles, girders, ships, pots and
    pans and thousands of other things. Which route should you choose for
    the good of the nation? To answer, you would need to
    determine which bundle of resources is less urgently needed for
    other purposes. The large amount of engineering and
    small amount of steel for the route through the mountains,
    where the small amount of engineering and large amount of steel for
    the roundabout route. But how could you find out the urgency
    of need for engineering and steel in other uses? Just one way engineering is used
    is to build irrigation systems. To assess the importance of a particular
    irrigation system, you would need to know what the farmers know about how irrigation
    would increase the yield of their fields. And to know the value of that increased
    yield, you’d need to know what grocers know about their customers eagerness for
    that produce. That in turn depends on what customers
    know about the better meals they could fix with that produce. How would you find all this out? Just one way to use steel
    is to build new trucks. To assess the importance of a particular
    new truck, you would need to know what the trucker knows about the capacity
    of his current truck, and how much more quickly he could make the deliveries his
    customers want with a new bigger truck. To know the importance of those
    deliveries, you would need to know what his customers know about the value
    of getting goods delivered. That in turn depends on what still others
    know about the uses of those goods at their destinations. To reason about where
    to route the railroad, you need this kind of information for all
    possible uses of engineering and steel. That’s a massive amount of knowledge, held
    by millions of people throughout society. How might you get it? You might try surveys, but think how
    many people you would need to survey. All those who prepare meals with produce,
    and all those who take delivery by truck for
    starters. The numbers would be staggering. And often people don’t even know what they
    prefer until they face an actual choice. So they might not be able to answer
    survey questions accurately. Even if they could,
    by the time the surveys were returned and processed, much of the information
    would be out of date. And even if you could get complete and
    timely information about what everyone knows, that’s relevant
    to every use of steel in engineering, you would still need to deduce from
    it where to build the railroad. How would you begin to make
    sense of that mountain of data? In the words of Ludwig von Mises,
    you would be groping in the dark. You would face what is known as
    the knowledge problem of central planning. The reason why comprehensive
    socialism inevitably fails. Central planners cannot get the knowledge
    they need in order to plan effectively. You, commissar, simply cannot know on what
    projects scarce resources should be used for the good of the nation. But now change the thought experiment. Imagine that somewhere in the market
    economy part of the world, you are the chief operating
    officer of a railroad company. You work not for the good of the nation,
    but to generate profits for your firm. You want to run a railroad
    line from city C to city D. Again, there’s a mountain
    range between them. Now, how do you decide on the route? You choose what’s cheapest. You would calculate the total
    cost of each route for each one, multiplying the amount of engineering
    required by the price of engineering, and adding that to the amount of steel
    required times the price of steel. Then, you would choose whichever
    cost your company less. You might give no thought at all to the
    good of the nation or society as a whole. But, and here’s the marvel,
    by choosing the route that is cheapest for your company you would thereby choose
    the route that’s best for society. You would use the bundle of resources
    that’s least urgently needed for other purposes. Why? Because those market prices you calculate
    with reflects the urgency of need for engineering and
    steel in all their alternative uses. For example, suppose customers wanting
    to taste your meals, would buy better, more expensive produce, if it were
    on the shelf of their local grocery. In effect,
    they’re offering grocers more for produce. So the grocers will offer farmers more for
    produce. So the farmers who feels would be
    sufficiently improved by irrigation will offer more for irrigation systems. And those who build irrigation systems
    will offer engineers more to design them. Now that designing irrigation
    systems pays engineers better, people who want to hire engineers for
    other projects, such as railroads, will have to offer them at least as
    much to make it worth their while. The higher price tells everyone who
    uses engineering that it’s become, for some reason, more valuable so
    maybe they should use less. In this way, the market prices of
    resources represent the particular knowledge and preferences of
    millions of people who directly or indirectly use those resources. And the prices communicate
    that knowledge and those preferences to everyone interested. Only with market prices to communicate
    this vast amount of human knowledge to us. Can we calculate the least costly
    ways of producing the things we want, coordinator activities with the activities
    of others, use resources where society values the most, and thereby satisfy
    as many human wants as possible?