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STOCK INVESTORS TALK about taking advantage of market inefficiencies. That sounds nice, but I don’t have any confidence I can spot mispriced stocks, which is why I stick with mutual funds, especially index funds.
But there’s a market inefficiency where I’ve done pretty well—train tickets. In my late 60s, when I was in my final job, I commuted from central New Jersey to Philadelphia by train. This meant parking my car at the station, taking New Jersey Transit (NJT) two stops, and then switching to the Southeastern Pennsylvania Transit Authority (SEPTA) train into Philadelphia.
Door to door, this took two hours. For those readers who walk to work or drive 15 minutes, this might sound like a lot. But in the New York area, two-hour commutes are fairly common.
I had the option of either buying a monthly ticket or purchasing single-ride tickets. A monthly ticket is convenient. All you need is the one piece of paper for as many trips as you take within that month. As a senior—defined as age 65 or older—I was entitled to a fare discount. This discount applied to both monthly and single-ride tickets.
SEPTA is especially generous to seniors. You could travel anywhere within the SEPTA system for free—as long as you stay in Pennsylvania. But if you travel on SEPTA to Delaware or New Jersey, you have to pay. I only traveled one stop into New Jersey but, because of this, I needed to buy a ticket. I didn’t like this.
Meanwhile, I also discovered that NJT conductors weren’t that efficient. Sometimes, they decided—for reasons unknown to me—not to collect tickets. Had I bought a monthly ticket, this wouldn’t matter, since I’d have paid for the whole month, whether I took the train or not.
The upshot: I decided to buy individual tickets at the senior discount—and tried to take advantage of “train market” inefficiencies.
When I got on the train, I’d always have NJT and SEPTA tickets. If the conductor asked for my ticket, I’d hand it over. If the conductor didn’t, I’d keep the ticket for my next trip.
Riding the train every day, you tend to see the same conductors. Once they recognized me and they knew I didn’t have a monthly pass, they’d always ask for my ticket, which I would give them. There were no inefficiencies in this case. But when there was a new conductor working, I often got to keep my ticket.
This situation played out best on SEPTA coming out of Philadelphia at the end of the day. When new conductors worked the train, they didn’t know where I was going, nor would they ask. I’d show my SEPTA senior ID and get a free ride.
For those readers who feel I cheated these transit companies out of revenue, keep in mind that I always bought tickets and never got on the train without one. I simply used them as required. No, I didn’t go out of my way to give my ticket to the train conductor. But I would have done so—if the conductors were doing their job.
An added twist: To pay for both parking and train tickets, I would fund a pretax flexible spending account through my employer. But I needed to spend the full monthly amount or it would be lost. And sometimes there was indeed money left over.
What to do? The leftover money could only be used to buy train tickets, which meant buying yet more SEPTA or NJT tickets.
NJT senior tickets can be used by riders age 65 and over and by the disabled. My wife, son and I all fall into these categories, so I used the extra dollars to buy NJT tickets. We’d then use the tickets to travel into New York City or go to Newark airport. And there was no rush to use the tickets—because they don’t have an expiration date.
To add more fuel to this fire, besides “gaming” the two train systems, isn’t it also wrong to use a pretax flexible spending account from an employer, meant to subsidize commute costs, for personal tickets for one’s family?
The best part about this element of the scam is that if his family members don’t want or need the excess tickets, he could sell them on e-bay, thereby taking advantage of yet another “market inefficiency.”
One of the perpetual HD topics is gaming the IRMAA penalty (tax?) which ultimately results in less income for our barely solvent Medicare system. Is this so much more noble than gaming the transit companies?
“Ask not what your country can do for you, ask what you can do for your country”. JFK
Interesting there have been no follow-up comments from the author.
The site’s contributors receive no payment for their writing. I like it when they respond to comments, but some choose not to, and I respect that. After all, they’ve already been generous enough with their time.
Thanks for putting it out there, David! We had quite a family discussion along similar lines–about Costco memberships. Having lived in Taiwan with a Costco membership, I used it in the US when we returned. However, it turns out that Costco does not coordinate their databases and the cards do not list an expiration date. No doubt these choices save Costco money overall.
So the question was whether it was morally wrong for me to continue to use a Costco card from Taiwan in the US knowing that if I was in Taiwan they would tell me it was expired and I needed to renew it. I added sauce to the topic by pointing out that I felt Costco membership fees were discriminatory, a sneaky way to keep low income shoppers out of their business, which was clearly open to the public in every other way.
The topic raged. I found it entertaining. It’s so hard to discuss ethical issues these days. However, I capitulated and bought the US membership, on the basis that I wanted to be “above reproach” knowing as I did that they would in fact like to continue to collect the membership fee annually. I still remember the discussion fondly though. I’m not sure all my family members do.
Then there’s the question about walking on the unposted but private golf course in the evenings and when it is covered with snow in the winter….
C.S. Lewis said ” integrity is doing the right thing when nobody is watching “…food for thought David.
Been reading HD for a couple of years now, and this is my first ever comment. I must say this is the first article I dislike — wrong on every level. It’s not a one-off occurrence but rather is a systemic and intentional gaming of a system. I cringe that it made it to the publication here. Alright, I’ll be quiet and go back to my corner.
I must confess, I find myself amused by the moral outrage that Dave’s article has sparked. Obviously, HumbleDollar readers always behave in an exemplary manner, never imperiling others by speeding, never failing to feed the parking meter even when stopping for just a few minutes, never taking office supplies, always reporting all cash income on their tax returns, and never failing to make the full suggested donation when visiting a museum or an historic church.
If you’re among those who have never cheated or broken the rules in any manner, please reply to this comment with, “I attest that I have never cheated or broken the rules.” I readily confess that you won’t find me making such an attestation!
I confess that I have not “always behave[d] in an exemplary manner.” I guess that means I am forever disqualified from criticizing another person’s unethical behavior. Did I get that right?
I must confess I never had an ongoing strategy or figured out a plan to get a free ride so to speak.
I recently left a supermarket and when putting groceries in the car realized I never scanned an item so I went back to the store and paid for it. Do I get any credit?
👏 good job! I do the same.
“Virtue is its own reward”…Socrates
There is a difference between doing something you know is wrong, and boasting about it.
And I do report foreign pension income the IRS would not otherwise know about.
As Stewart reminded us on “the Big Bang Theory”, some things are “more wrong” than others (“calling a tomato a vegetable is wrong, calling a tomato a suspension bridge is even more wrong”). I think what several Humble Dollar readers are trying to communicate is, that “cheating on train fares” rises to a “wrong enough to be objectionable” level. I can’t really say with any conviction that I disagree with them.
I may be the only one who enjoyed the article. Thank you for publishing it, Jonathan.
“Let he who is without sin cast the first stone.”
I find this is one of the rare times I find myself disagreeing with you. Yes, I agree with Dan’s reply immediately below that we’re all sinners, which to me acknowledges that we all experience occasional lapses of integrity. But that’s a far cry from wanting to read an article touting how to systematically do so. Sorry, but from my perspective this story isn’t really about thrift, but rather it crosses the line into something less noble.
we are all sinners
David, First, I appreciate your candor. There is a perspective that savings derived from, or gained by, skirting a big company is “ethically better” than when done to an individual. Each of us must balance savings vs internal ethics.
I’m sure all of us at one time or another have tried to save a few pennies by skirting the rules. While not the best analogy, how many of us have accidentally taken a pen home from work, then conveniently forgot to bring it back the next day?
As I’ve grown older I have come to realize that savings in the manner you described leads to increase costs for everyone.
Well, I totally understand where you are coming from, and every one of us are sinners. As a former union rep I have seen your logic applied by a few of my members, but they still got canned.
I’m not sure your rational for not using a ticket stands up. If you bought a lottery ticket and the clerk handed you two by mistake, would you keep the second without paying?
With all due respect: since you intentionally deceived the train conductor-that is stealing. Having the ticket and not showing its doesn’t absolve your deception.
Not a big deal, just a small amount of money? Well your actions transfer costs to others and ultimately raises cost of train rides. Its wrong.
Seems like your conflating the Efficient Market Hypothesis with stealing. Sorry they are not the same. I’m surprised you were allowed to post this article.
I like to think I have high ethical standards. But if they didn’t take his ticket (which he already paid for), then they didn’t take his ticket. That’s the train company’s fault. Also, the author is probably their #1 customer given his lifetime ridership.
It’s on him if he uses it on another ride. If everyone operated on this principle things would be a right mess.
Ma’am, I regret to inform you, it already is.
Thank you. I was getting ready to say the same thing. Riding for free is cheating, whether or not you hold a ticket. Cheating on train rides robs your fellow passengers, whose fares have to make up the difference.