Brookings Institution • 1998 • 120 pages • $36.95 cloth; $15.95 paperback
Urban transportation in America suffers from gross inefficiencies. The source of these inefficiencies is political intervention that pushes transportation policy away from cost-effective solutions and toward the distribution of benefits to favored groups—predominately transit managers and suppliers of transit inputs (that is, labor unions, manufacturers of transit equipment, and builders of transit facilities).
The authors estimate that, as currently operated, the costs of public transit exceed the benefits by $6 billion per year. The net negative results are evidenced by mostly empty buses and trains. The authors report that on average only 14 percent of bus seats and 18 percent of train seats are filled.
In contrast to the net loss from transit, highways appear to be contributing large net benefits. The authors estimate that on an annual basis, the benefits from urban highways exceed costs by more than $200 billion.
The authors’ recommendations for improving urban transportation efficiency are directly at odds with current government policy. Both federal and local governments have been steadily increasing subsidies to public transit in order to increase bus frequencies and in many cases to build new rail lines. The authors point out that 30 years of increasing subsidies have failed to lure urban travelers out of their cars. There is little to indicate that maintaining or increasing these subsidies will be any more successful in the future.
Instead of continuing the failed current policy of massive subsidies, the authors advocate privatization. As it now stands, public transit policy is more oriented toward division of “loot” than the efficient production of transportation service. Since customers supply only a small fraction of the total revenue, attention to customer needs is not a high priority. Under privatization, the incentives for transit operators would be shifted toward a more customer-friendly focus because revenues would depend directly on pleasing customers.
Instead of running largely empty buses up and down major streets, a privatized transit system would be drawn toward using smaller vehicles catering to the relatively short typical transit trip (which averages less than five miles). A model for the privatized transit of the future exists today in the “Queens Van Plan.” This is a privately operated transit service in New York City that serves mostly low-income neighborhoods. Despite an unsubsidized fare of only $1, the service operates at a profit. The owner would like to expand beyond the borough of Queens, but is presently barred from doing so by the city council. You see, the public transit system needs to hold on to a “captive” transit clientele lest their case for large extractions from taxpayers be undermined.
The authors also make short shrift of the argument that privatization would harm the low-income transit users who depend on current transit service. They write that the average income of bus commuters is $40,000 and that of rail commuters is $50,000. Further, they claim that transit routes serving minorities are typically less well funded than those that serve more influential political constituencies. The authors favor vouchers for low-income people over the current system.
The authors also advocate privatization and congestion pricing for highways. The already substantial benefits of urban highways could be improved by moving roads out of the socialist, government-owned- and-operated mode and into the commercial mode. Commercially oriented road operators would adapt strategies similar to those used by the phone company to better manage existing capacity and reduce the dead-weight loss of traffic congestion. Peak period road users would pay more. Off-peak users would pay less. The aggregate value of time saved by reducing traffic congestion would result in net benefits for society.
The book is brutally honest in its analysis of current transit performance and daring in its prescriptions for reform. The fact that it is published by the Brookings Institution, an ultra-mainstream think tank, should catch the attention of those prone to dismiss criticism of public transit as right-wing propaganda. It merits the thoughtful consideration of anyone interested in improving urban transportation.
John Semmens is an economist with the Laissez-Faire Institute in Chandler, Arizona.