I'LL TELL YOU how old I am: I remember when Muni raised the fare from 50¢ to 60¢ – and lost money in the process.

It was back in 1982. A radical-right Republican named Ronald Reagan was in the White House. The economy was awful. And Muni officials insisted they needed to jack up fares 20 percent to balance the books and keep the buses running.

The mayor, Dianne Feinstein, loved the idea – it fit with her general social vision of making the little people pay the taxes (and letting the developers and big employers reap the benefits). The Public Utilities Commission, which oversaw Muni in those days, went along, and so did the supervisors.

And a few weeks after the new fares took effect, I was sitting in a PUC meeting when Dick Sklar, the top Muni manager, announced an unexpected revenue shortfall was leaving the system in a cash crunch. The daily papers duly reported this mysterious money problem, but nobody asked the obvious question: were riders simply refusing to pay the higher fare?

I checked the ridership tables, and yes, indeed: the number of people getting on the bus each day had dropped off by so much that the new revenue Sklar was counting on hadn't come in. People were walking, or driving, or cheating and not paying the fare at all (back then, it was pretty easy to color-xerox a Fast Pass). The fare hike was costing the city money.

This is what economists call the "price elasticity of demand": the amount that sales drop off when the cost of an item or a service increases. Prices are most elastic when there are easy substitutes: Raise the price of gas by 20 percent, and some people in San Francisco will stop driving and take the bus. Raise bus fares 20 percent, and some people will stop taking the bus and drive.

Which means that the latest proposal, to charge bus riders $1.50 (up from $1.25), is not only bad public policy (we want fewer people to drive, not more) and bad fiscal policy (it's a regressive tax on the poor). It's also bad economics (it may not bring in all that much new money, anyway). And as we report on page 11, there are plenty of other alternatives to bring in cash for Muni.

Tim Redmond