One of Russ’ academia friends, economist Michael Munger, speaks at length on the program about the public transportation system quality in Santiago, Chile before and after nationalization of their bus network.

Prior to 2007 Santiago’s surface transit was made up of a patchwork of thousands of independent, private bus operators. Operators specialized in niches ranging from neighborhood local busses which stopped at every block in a town to luxury express busses providing direct to city center service.

Since nationalization circa February 2007 the masses have expressed widespread complaints about the poor quality of the system. Wikipedia’s article on Transantiago sums up these complaints well:

The major complaints are the lack of buses and their inconsistent frequencies, missing or poor infrastructure (such as segregated corridors, prepaid areas and bus stops), the network’s coverage, and the number of transfers needed for longer trips.

I agreed in spirit that market based solutions can offer better outcomes than public, centralized planning in some situations. But, we shouldn’t get rid of public transit and city planning.

• I do agree that in controlled situations, a market solution is better. San Francisco’s publicly owned and operated transit system is largely a failure, spurring reactions identical to those of Santiago’s newly nationalized bus system. Here, Munger and Roberts are spot on in their complaints of the stupidity of nationalizing a once private resource. (Remember, SF had a patchwork of completely privately owned transit lines until around the 1910′s. Everything I’ve read says these competing systems provided excellent service, especially given available technologies.)
• But, I do not share Munger and Roberts’ idyllic view that free markets are the holy grail of public transport policy. Two reasons:
  • Just look at our suburban car-based communities. These communities are real life experiments in market based, unplanned transport and city zoning policies. These communities are a dismal failure.
  • While bus systems can arguably run with no government intervention, most other high-capacity transit systems need exclusive, government granted corridor rights-of-way, whether that be below ground subways, above ground rail corridors, or even fantastical elevated monorails. Like utilities, physical constraints necessitate government involvement to some degree.

Like many EconTalk podcasts, even if you don’t agree with everything, the discussion points a great alternative spotlight on conventional public policy views.

My favorite viewpoint: the entire concept of central transportation planning is communist at its core — an odd anomaly in a nation proud of its free-market ideology. Why should transportation “planners” dictate the best transportation routes? Our publicly owned and operated Muni is blind to the most powerful natural “planner” in the world: market feedback.

This viewpoint strikes me especially hard in the context of the impending Transit Effectiveness and the Geary BRT projects in the planning faces. With the TEP, the City is spending millions of dollars and years of research to accomplish what free market forces could do everyday, instantly, for free.

Link to podcast page (direct mp3 link)

San Francisco cab drivers face two recent cost pressures: a recent gate fee increase combined with the recent climb in gas prices.

Fortunately, these cost pressures come at a time when aggregate demand for taxis in the City is increasing. More tourists, outdoor City festivals, and frequent conventions bring in more and more cab passengers as the summer approaches.

However, I paint a bleak picture for this winter. As seasonal demand for taxis wanes in November, this winter could be the toughest yet for City cab drivers and companies. Qualified, skilled cab drivers will seek new income opportunities as average take-home pay dips to new lows this winter. Cab companies will likely have a more difficult time than ever filling shifts, putting pressure on hiring managers to accept drivers with less stringent requirements for clean driving records, English proficiency or general City knowledge.

Given this bleak outlook, I think my cab driving may come to an end (or break) at the end of October.

I point your temporary attention to a Flash website produced by UC Berkeley j-school grad students Eric Zassenhaus and Amy Jeffries.

The video clips thumbnailed along the bottom are accurate and colorful paintings of a typical taxi shift. Well worth a view.

But wait, there’s more. The site also features insightful interviews with Heidi Machen, the SF Taxi Commission Executive Director; Jim Gillespie, Yellow Cab President; and Thomas George-Williams, United Taxicab Workers member.

Since I drive a cab in the City and can’t shut up about local politics, I have some pointed reactions:

I don’t know who Heidi Machen is or how she got to be Executive Director of the SF Taxi Commission, but she doesn’t seem to have an accurate grasp of the industry over which she regulates. This is a bit scary.

When asked about the recent gate-fee increase, Ms. Machen responds with a bubbly response. “In many ways it’s very positive,” she starts, repeating again for emphasis, “in many ways it’s very positive, because, if indeed the taxi companies needed money to purchase the alternative fuel and hybrid vehicles San Francisco is looking at a clean taxi fleet in 3-4 years. Wow! That’s phenomenal!”

“If indeed?” If indeed? Ms. Machen, your job, for which you are paid a bulbous salary of some sort, is to be Executive Director of the Taxi Commission. There should be no “if” in your response. You should know whether or not taxi companies need money to purchase alternative fuel and hybrid vehicles BEFORE implementing fee increases.

Continuing, “On the other hand you look at the controller’s report and the controller said this would have an immediate detrimental effect on taxi drivers’ incomes. So, that can be a negative, obviously, because taxi drivers, a lot of them, may be hanging on marginally. On the other hand, maybe it encourages taxi drivers to become more efficient. Some would fear it would make taxi drivers more reckless.” Ponderously she summarizes, “I think there are some positives and some possible negatives that we’re looking at.”

My fear is she doesn’t seem to “get it.” A key sticking point: taxi companies need CPI gate increases but drivers also need correlated revenue increases. The discussion of green cabs is a sideshow distracting from this core issue.

On the other hand, Mr. Gillespie in his role as General Manager of Yellow Cab understands the situation perfectly. Unfortunately, his role is not an advocate for drivers but instead for revenue maximization for Yellow Cab. (This is not a judgment of his motivation, just a recognition thereof.) But, at least he “gets it.”

Thomas George-Williams, an active member of the local United Taxi Worker union “gets it” too. But, as most drivers are not members of the Union, its influence, regardless of Mr. George-Williams “getting it,” is unfortunately questionable.

Link

My unwavering allegiance to the American Public Media radio program Marketplace was made ever tighter by a clear and compelling opinion piece by Jerry Taylor of the Cato Institute.

The piece is written so concisely I can do no better than to quote Mr. Taylor’s introduction:

President Bush and many others are fond of saying that oil prices are high because we import too much oil. In reality, they’ve got it exactly backwards. We import energy for a reason: it’s cheaper than producing it here at home. A governmental war on energy imports will, by definition, raise energy prices.

Bingo.

Our search for the holy grail of ‘energy independence’ has distracted us from the real issue at hand: we have built our country, our cities, our communities around a transportation infrastructure that relies almost solely on fossil fuels. When the cost of these fuels increase faster than expected, the repercussions are multiplied: not only does it cost more for you to drive to a market to purchase goods, the goods cost more to produce and deliver since they rely on that same transportation infrastructure.

Oops!

Our national focus should be on changing the policies that have led us to rely so heavily on fossil fuels instead of debating from which source we should purchase these fossil fuels.

Links

• Direct MP3 Link
• Segment Page (including transcript)

The Chronicle has a touching and well-written article about the aftermath of the Mission District fire that completely destroyed a 30-unit apartment building Monday evening.

Central to the article is the story of Griselda Paleo. Ms. Paleo is 59 and lived alone in a studio apartment in the building. Her apartment was tied to an 18-year old rent controlled price of $698. Her income is $850 from a federal disability program. How can Ms. Paleo relocate in the City? Short answer: she can’t.

Studios in the City start at $1,000 per month, it’s hard to find a decent quality one at $1,200. Even sharing an apartment will likely use her entire income stream.

Since rent control regulations tie the stabilized apartment price to that particular apartment, if that apartment is destroyed, transferred to a live-in owner, etc, the tenant loses that price control. That is what happened with Ms. Paleo.

Ms. Paleo’s case shows that tying price controls to a particular property is a critical failure of rent control policies as implemented in San Francisco and some other big cities, notably New York City.

Rent control is a form of welfare paid to tenants regardless of income and paid solely by rental property owners. Welfare for low-income residents to live in our City is good. But, offering housing welfare to all residents regardless of income, supported only by property owners is silly.

Instead, the City should offer a rent SUBSIDY program, financed by all City residents that stabilizes rental unit prices for low-income tenants. Among other benefits, this would not tie a tenant to a particular property as in Ms. Paleo’s case.

A rent subsidy program in place of rent control offers a number of benefits:

• Ms. Paleo would be free to move to any apartment in the City, whether displaced by natural disaster as in this case, or by her own choosing if she wants to move to a new neighborhood.
• Tenants who do not need assistance will not be eligible. Ms. Paleo obviously needs rental assistance, but an investment banker with an income of >$100K should not be eligible for rent assistance. With the current system there is no way to differentiate the investment banker from Ms. Paleo. This is silly.
• The cost of the program would be borne by all City residents, not just rental property owners. This is important. Since rent control is a significant tax on property owners that choose to rent their property, this significantly limits the number of properties put on the rental market. By removing the rent control tax and instead spreading the cost of rent subsidies to the entire population, we allow the rental property market to operate much more smoothly.

Our Supervisors and Mayor wouldn’t touch the idea of changing the rent control structure with a ten foot pole.

City leaders, your inaction has forced Ms. Paleo to leave our City.

Links

• Original Chronicle article about fire with pictures
• Aftermath article

PS. Rent control is better than nothing. It’s a good start, but it’s just not the most effective solution we can come up with.

Hugo Gonzalez and Griselda Paleo walk through the patio at a Red Cross shelter set up at the recreation center on Harrison Street. Chronicle photo by Kurt Rogers.

The San Francisco Municipal Transportation Agency (SFMTA) is a bureaucratic whale, containing, in separate stomachs, the Department of Parking and Traffic (DPT) and the San Francisco Municipal Railway (Muni) public transit system.

Recently, the SFMTA crunched some numbers and said, “Uh oh, we won’t have enough money to cover our costs over the next two years.” Fair enough. Next step, “We need more money.”

Ideas? The Examiner and the Chronicle report the SFMTA has publicly discussed two classes of options: increasing transit fees and increasing parking fees.

Are these ideas justified? Most definitely yes — these fee increases are justified and necessary.

But, I believe the SFMTA needs to increase some fees significantly MORE than has been suggested. If we’re smart and look at the dirty details (below) we can find some fees that we can significantly increase. This has a multiple benefits — controlling traffic congestion, reducing total personal vehicle miles driven and rationing limited road real estate while ALSO generating significant revenue for the cash-strapped SFMTA. Win, win, win?

• Increasing transit fees: Monthly Fast Pass (unlimited bus pass) cards cost $45 per month and are priced below market. $1.50 each way to work plus 2 weekend trips per day makes a frequent Muni rider pay $90 per month if they pay per trip. The SFMTA’s analysis of neighboring communities’ monthly pass prices is wise and on par. An increase to $60 per month is more than reasonable given the value offered by the pass. At $60, the Fast Pass is still a bargain for regular transit users.
• Increasing parking fees:
  • Parking meters are priced at $.25/10 minutes = $1.25/hour = $12.50/day. This is below market value compared to garages. This could be increased.

    Idea: Why is Sunday meter collection or extended metered hours not discussed? Meters are not collected on Sundays. Meters are not collected after 6pm. Not only is this lost revenue but it causes inconvenience for City residents struggling to find spaces in highly trafficked commercial corridors at peak times. (This is the reason we have meters in the first place — to ration limited spaces. These spaces are still in high demand after 6pm and on Sundays in many metered commercial corridors. Just look at the Mission on Sunday afternoons; it’s a zoo.)

    Idea: Why aren’t meters priced based on demand? If meters had variable pricing, the City could collect significantly more revenue on Friday and Saturday nights, in addition to busy Saturday and Sunday shopping times on commercial corridors. This is a significant revenue opportunity lost that also serves City residents and visitors who are more than willing to pay market price for convenient parking.

  • Yearly residential permits are priced at $60/year = $5/month. Residential City parking permits are SEVERELY undervalued and could easily be doubled without approaching the true market cost of parking. Yearly residential permits should be priced $120/year immediately, with a yearly increase after that.

    At $120/year this is still an amazing bargain: I can park in my neighborhood ALL YEAR LONG for only $120? Remember, monthly private spaces cost as much as $250 per MONTH.

    People may complain, but even at $120/year this would result in no fewer permits purchased. Not until we pass $200/year will quantity demanded of yearly permits even begin to see a dent. Assuming about half of SF has a residential parking permit, just doubling this permit results in about $30 million incremental revenue per year.

• Congestion fees: Why is this not discussed as a revenue source? (Answer: The City can’t implement fast enough to be included as a revenue source for this 2-year projected shortfall.)

  Let’s change this. The City should implement congestion pricing within the next year.

  Variable City congestion pricing serves double duty as a significant revenue generator for the SFMTA AND as a traffic and transit speed increaser. It increases the speed of its public surface street-shared transit system and increases the convenience and utility of currently congested streets for frequent City street ‘power-users’ like delivery vehicles, taxis and persons with an absolute need for personal vehicle use.

So, SFMTA, go along with your plan, but let’s instead double yearly residential parking permits and let’s introduce congestion pricing immediately.

Marketplace painted a nice picture of Obama and Hillary’s voracious battle for the crown of ultimate NAFTA hater.

This is frustrating. Yes, they’re in Ohio. Yes, they have to cater to the lowest common denominator.

Instead, they should rise up above the normal crap and say, “Look America, NAFTA is here. I (didn’t support it/didn’t agree with my husband), but it’s not going anywhere soon. But, I *DO* support free, government supported retraining programs to help displaced persons find jobs. This is a *REAL* way that, if elected, my administration would work toward a solution for Ohio and American citizens that were hardest hit by NAFTA.”

Please remember: NAFTA is not bad. Free trade is not bad. But, free trade often displaces labor that is most easily displaced — which is most often low/unskilled labor.

Our government must recognize that the effects of free trade often hits hardest our lowest income members of society. As such, our government has a strong social duty to provide free retraining and placement programs for those displaced by trade.

Link

Let’s rewrite a few headlines to illustrate the point.

Case 1

The original headline reads, “Supervisor looks to limit liquor licenses.” Supervisor Gerardo Sandoval seeks to add a ballot measure banning any future City liquor licenses.

This headline should read, “San Francisco Supervisor seeks to inconvenience (but not prohibit) citizens’ access to a specific range of legal products (alcohol), while also restricting trade from further competition (further liquor licenses), entitling existing holders of permits to become unjustly enriched by these misguided attempts at reducing violence. Oops!”

This legislation will not reduce violence. It will increase the value of liquor licenses for private individuals or corporations that own existing licenses. It will also inconvenience taxpaying citizens that desire liquor products, especially those in growing areas such as Mission Bay that have yet to develop retail outlets. Why are these people to be inconvenienced with no liquor stores in their new community just because we have a stupid Supervisor?

Correlation does not indicate causation. At best, a high prevalence of liquor stores may be correlated with lower income or high violence, but in no way does the presence or lack of liquor stores serve as a cause or solution to violence.

Case 2

The original headline reads, “Bill aims to maintain rent-controlled units.” State Senator Carole Migden (D-San Francisco) introduced a bill Wednesday that would allow local governments to order property owners to replace every demolished rent-control unit with an equivalent rent-control unit somewhere else in the City.

The headline should read, “State Senator Carole Migden wishes to doom San Francisco to rental market failure hell ad infinitum in the mistaken belief that price ceilings are an effective tool to reduce rental unit prices instead of promoting incentives for builders and owners to increase supply. Oops!”

Rent control is a price ceiling. Price ceilings don’t work.

Politicians, if this is the best you can do, please just stop making any new legislation. Go back to scolding sports celebrities.

By the way, this is a prime example of hippie conservatism.

When I drive an 11 hour shift and make only fifty or sixty bucks I feel pretty sour. This doesn’t happen often. But, it does happen a few times a month during this time of year when demand for cabs in the City is seasonally low.

My angry mind jumps first to the cab company. How can this evil cab company charge me so much for my taxi, gas and dispatch services when I’m just barely making money to pay rent? What sort of evil people must they be to squeeze pennies out of the pockets of immigrants and hard working laborers?

(I don’t usually feel these thoughts. In fact, I have a great deal of respect for the cab company I work for.) But, many cab drivers feel these thoughts often. Some of them have posted on this blog or others to express their frustration at high gate fees and poor treatment.

Many American workers have these same thoughts about their employers. Whole websites are dedicated to venting these thoughts about individual companies.

STOP! Take these angry thoughts elsewhere: Aim them at your government.

Robert Reich is former Secretary of Labor under Bill Clinton and a regular commentator on my favorite radio program, Marketplace. He has an hour full of extremely wise words on a past edition of the Commonwealth Club of California radio program. (Unfortunately, these wise words are only available in Real Audio format.)

Among many other thoughts he shares in this program, one I latched on to with the whole of my heart is that American citizens can never look toward corporations for true social change. A corporation is a machine. It is a machine with one relentless goal: to create value for its shareholders. Let’s not judge this as bad, good, or whatever. It just is.

Accepting the fact that corporations are value creating machines let’s revisit our anger from above. Let’s not blame Wal-Mart for bad wages. Let’s not blame the taxi company for a high gate fee. Let’s not blame health insurance companies for refusing to accept high risk subscribers. These corporate entities are nothing more than the result of an evolution of best practices to create value for shareholders.

The only true accountable way of making significant societal changes such as a minimum wage or universally available health insurance is ONLY through government regulation, not through the magic of an oxymoronic corporate conscience.

Links

• Commonwealth Club Broadcast
• KQED Forum Interview with Robert Reich