When should public transportation systems be private?

A recent episode of Russ Roberts’ EconTalk podcast featured a wonderful intersection of interests: economics, public policy and public transit.

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)

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3 Responses to When should public transportation systems be private?

  1. fpteditors says:

    Whenever talking about public transportation and the “free” market, one should always acknowledge the elephant in the room. The auto and sprawl are heavily subsidized. Taxpayers pay for road building and maintenance, direct subsidies to oil companies, “free” parking, drainage problems, carbon dioxide emission damages, oil wars, medical costs from auto-caused injury, etc.

  2. Pablo says:

    Just a word from someone who speaks Spanish and understands what happened. In a nut-shell:

    In Santiago, private buses refused to service poor areas effectively and demanded subsidies for routes that did not meet a certain profit margins. This was crippling the entire metro-area. In the end, it was cheaper and more effective for the city to step in and take control.

    To understand why, you have to realize that intra-city public transit is a “Public Good”. That is to say, it works best if it strives to remain as non-rivalrous and non-excludable as possible.

    The city’s take over of public transit was a popular move. However, the system is still struggling with the switch-over.

  3. adam says:

    I’ve listened to this podcast and it has gotten me thinking about the public transport model of my city Los Angeles.

    According to the wikipedia article for the MTA here in LA, the $1.75 ride fare only covers about 10% of the operating expenses of the system. This means that the actual cost of the system is actually $17.50 per ride and this is what the residents of LA are actually paying.

    I’m convinced that a private system could do a lot better then $17.50 per ride. For instance, at perhaps a little over $17.50 I could call an airport shuttle and it would pick me up in front of my house at a time of my choosing, load my bags, drop me off exactly where I’m going and they take credit cards, and I wouldn’t have to pay exact change. I’ve shared a cab to the airport and it cost around $17.50.

    Also, I have done a lot of traveling in Japan, and I have to say their public transport system (privatized in the 80’s) it’s a great experience. The wikipedia article on JR east, the largest carrier shows that they are a profitable company, and a bus ride costs roughly 1-5 USD depending on how far you are traveling. oh, and no exact change needed.

    The japanese trains are unbelievable, and I’d guess that a majority of Tokyoites don’t own a car. Not to mention that you can get to almost every major city in japan on a train, usually a bullet train and it’s much more convenient and less expensive than air travel.

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