Bike inflation. I fully believe it’s real. Buying a functional and respectable bike in Portland is an investment. And I do want to place emphasis on respectable. Used bikes are often more expensive than new mass produced ones.
I don’t doubt that the Schwinn Midtown is a far inferior bike, from the point of view of a bike connoisseur, to whatever is being sold used in Portland. But you’ve got to love a city whose citizens put a set of moral/aesthetic principles — whether it’s riding a bike with proper disc brakes or refusing to support the Big Box stores — this far above their own financial well-being. And although every city has its bike aficionados, I think that in Portland, most people just buy rebuilt bikes locally because it feels right to do so, not because all these everyday bike riders can really tell the difference between Shimano TX-30 derailleurs and M-970 XTR’s.
The Freakonomics blog has an article on bicycle inflation. In cities where bikes are a serious form of transportation the value of bikes skyrockets while the value of cars falls off. According to the informal study done by the author, Robin Goldstein, Portland is matched with San Francisco for the most expensive bikes and least expensive cars. Seattle has even more expensive bikes and cheaper cars.
The author concludes that even though we have more bike shops in Portland than elsewhere, there still aren’t enough bikes to go around. But it’s not that simple. I think he was closer to the issue when he was talking about the types of bikes people were purchasing and their personal preferences for doing so. I don’t have any data or experience of the buying and selling of new bikes, but it seems to me that there are enough new bikes for everyone who wants one.
His study focused exclusively on (used) bikes on Craigslist. Despite the inflated price of used bikes, new (respectable) bikes in Portland are still slightly more expensive than used bikes, which gives the used bike market an advantage. Since the cost of living is otherwise comparatively cheap in Portland, and our citizens of limited income, consumers need to take cost benefit analysis very seriously (the costs being mostly monetary, but the benefits also involving personal and cultural touchy-feelies). Right now the new bike suppliers and the new bike consumers are keeping each other fairly satisfied while we are probably in a supply-and-demand swirling vortex of suckage* in the used bike market.
The two markets usually can run fairly independently of each other. People who prefer and can afford new bikes buy new bikes. Many new bikes will inevitably becomes used bikes. Some buyers will choose used bikes mostly based on price, but also on preference for the used objects. The demand for the two types of bikes doesn’t overlap until the price of used bikes becomes inexcusably high compared to the price of new bikes.
I haven’t written about economics since high school (sorry Mr. Roberts), so the next paragraphs are convoluted and not concise. I am also unpracticed at making flow charts.
Consumers, especially in a bad economy like Portland’s, will buy used bikes because they are cheaper. This could but doesn’t limit the demand and price of new bikes. As fuel prices increase, and the green theme is taking over, cars become less desirable, exercise becomes important. More people are buying more bikes in total and fewer are releasing their old bikes. The demand for new and used bikes has increased, so the price of new bikes has not decreased. Assuming that there is a preference is for used bikes (as opposed to the more expensive new bikes), the demand for used bikes has increased more than the demand for new bikes. Remember that while the supply of new bikes can increase at any time necessary, the supply of used bikes cannot increase without the supply of new bikes (plus that new supply of used bikes will be delayed until consumers release their old bikes to the market).** Since the demand for new bikes has not increased as much the demand for used bikes, the supply of new bikes will not increase as much as the used bike market needs. The price of used bikes will continue to rise as the supply of used bikes severely depletes.
A market spill-over could increase the demand for new bikes, but this may also increase the price of new bikes, making the inflated used bikes favorable again. The new bike supply and price will change in small bumps and dips (if there are really any dips at all) in order to satisfy its fairly independent market. In contrast, the used bike demand and price will continue to rise until it becomes ridiculous to choose a used bike over a new one and everybody buys new for a while. And yet, these assumptions barely factor in Portland’s DIY culture and affinity for reused and vintage items, which will always drive used bike demand.
It’s possible that cultural values will change to focus on cars once again. The looming development of the CRC Bridge, despite all protest, suggests that spendy, environmentally destructive interests still have a lot of sway in Portland. That is the worst way to fix bike inflation. I hope Goldstein is right about his prediction and a sudden injection of new (and possibly used) bikes into Portland will eventually fix the used bike problem.
So, it looks like even though there are tons of bikes and bike shops in Portland, there still aren’t enough sellers in town to satisfy the strong demand in this bikers’ paradise. Perhaps in the long run, when enough arbitrageurs start shuffling bikes around the country (and enough arbitrageurs start underpricing each other to drive down their margins), more cheap used bikes will become available in the bike-friendly cities.
I hope so. I greedily would like to double my number of bikes from one to two. And yes, I do have a personal preference for used bikes.
Just remember, no matter how comparatively cheap they are, do not buy a bike from The Bike Exchange.
*I stole this term from my friend Joy Meulenberg when she was describing population bottleneck.
** You cannot have used things without new things to become used things, unless the used things are brought in from elsewhere. A fact the Scavengers’ Manifesto is happy to flog like a dead horse. Maybe everyone outside of the city should charitably donate a used bike to Portland and fuck up my pretty diagram.
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Categories: business, transportation
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