Monday, March 06, 2006

Should public transport be free?

An economist advocating free public transport, or even that we should be paying people to use it?

That’s what Professor Joshua Gans does in his blog. Professor Harry Clarke provides a response in his blog.

This debate was sparked by a front page article in Melbourne’s Age newspaper suggesting that Melbourne’s public transport could be made free at a cost of around $340 million a year, boosting usage by 30% and reducing pollution, greenhouse emissions, accidents and congestion in the city.

Interestingly enough, public transport advocates don’t necessarily support the idea, believing that the money could be better spent improving the service than making it free.

Update (Tues 7/3):

Joshua Gans has an op-ed piece on this in today's Age.


Rob Dawg said...

I'm not sure if this is a case of two peoples separated by a common language but I think the use of "public transport" is misleading. In the US the word is public transit. "Transport" implies that we should be providing commercial delivery services for the same reasons given. Thus the point. What is it about passenger transit that it is in any way the desireable component of the transport mix worthy of special treatment? Transit enjoys special treatment merely because it has political support from three directions.

David Jeffery said...

Reasonable point Robert. Similar arguments can be (and are) made about freight - to what extent (if any) should governments provide / subsidise freight rail infrastructure to get heavy vehicles off the roads? There are externality issues there too because many fatal road accidents involve heavy commercial vehicles.

Rob Dawg said...

At the risk of starting an ideological war I'd like to pose a serious but hypothetical policy question:

Subsidies are not bad. They've done some great things. Velcro, Teflon,
binary nerve agents. Okay, maybe not Velcro. Point being there's subsidies
and there's investments. Some investments are surely not going to pay off
and there are some that only collectively make sense, water and sewers as examples.
The problem is transit has fallen far below sewers in public import and
worse still it has entirely divorced itself from any prospect of ever having
a payback. $6 gasoline isn't going to send people back to living in 6 story
apartments and waiting for hand scheduled department store deliveries
just so transit makes sense again.

The question I pose: Does anyone claim transit is more
important than clean universally available water?
Why then do we subsidize the former and tax the later?

[the rest is just discussion about this question]

Transit can't seem to make up its' mind. Is it a public
utility? Is it a public service? Is it assisting a right of mobility? Is
it ...?

I know what a public utility looks like. How long would you keep the head
of the Department of Water and Power if he acted like your transit chief?

I know what a social safety net looks like. How long would you keep the
Director of Welfare Services if he operated like a transit agency?

I know what a public service looks like. How long would the fire chief keep
his job if he answered alarms the way the buses operate?

I vociferously support, nee advocate for
transit solutions. Mine is a difference of opinion as to what constitutes a

I have said that transit is unique among the
things that we as a society choose to subsidize in that it is not
means tested and is not a utility and is not a public service.
Transit is not like highway travel because there is no
massive subsidization. [There is probably a little but it isn't
policy as it is in transit.] Highways are indeed means tested. Try
to drive on the freeway without paying the appropriate fees and taxes.
If you cannot afford the registration and the gas tax, you cannot use
the highway system. You can ride a bike for free because of the kind
of piddling subsidy leakage I mentioned earlier as long as you have
the means to get a safe bicycle and agree to operate it safely. If
you lack the means to do this you are not allowed to use the roads
even on a bicycle.

Transit as a transportation choice is not
a public service of the same class as clean water, sanitary sewers
or safe home heating. If you don't pay your water and sewer bill,
the DWP will cut you off. They don't offer monthly passes and they
don't do any means testing. Does anyone claim transit is more
important than clean water and the public health issues of sewerage?
When was transit promoted to greater importance? Was this a
Proposition or Legislative law?

In the context of a public agency that loses money on every
passenger, attempts to build ridership and foster dependency looks a
lot like empire building by bureaucrats and social engineering by
transit planners.

Even welfare as a public service is based on
demonstrated need. Transit does not require demonstrate need.

When I use the term transit math I am referring to practices such as
calling maintenance a capital expense. The deliberate use of the
term boarding to make service figures appear larger. The depreciation
of capital assets that were acquired for free. Those kinds of things.

In as much as transit is an urban land use tool,
it should not be funded by transportation funds. Second I think people try to vote
with their feet (butts) and their dollars, I find it immoral to be an
advocate for a transportation mode without demonstrating a willingness
to "vote" with your seat, feet and your own money.

Meryn said...

No it should definitely not be free.
Public transport doesn't have a positive externality, so it shouldn't be subsidized at all.
Driving has a negative externality, so it should be taxed to reflect it's true cost. Current research suggests a 1USD/gal gas tax to be economically optimal.

If driving gets more expensive, people will look for alternatives. But the price of public transport needs to reflects it's true cost.

Actually, also buses cause a little congestion, so bus fairs (in theory) might have to be taxed as well, only far far less then driving. It might come down to nearly zero, I don't know. But it certainly shouldn't be subsidized. Not on economic grounds.

hc said...

Joshua jumped in too soon. It was just too quick. Were the claimed benefits right? What was the cost of a 30% expansion in the system? How much of the transfer would be new traffic given low cross price elasticities.

In the original post too he argued for comprehensive pricing. This is impractical. The proposal for free transport in Melbourne would service currently well-serviced areas even better but do nothing for underserviced periphery areas.

The public transport advocates are right. This proposed 'free' scheme is a dud. Better - pricing low at close to marginal costs, a cordon and pricing the major arterials.

Rob Dawg said...

Driving has a negative externality, so it should be taxed to reflect it's true cost. Current research suggests a 1USD/gal gas tax to be economically optimal.

Do you have a reference? In the US the national average is about $0.40/gal and we already spend less than what is collected on enumerable costs. What externalities did you have in mind to address with the additional money?

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