Thursday, October 22, 2009

When we need private transit

A little while ago, NPR's Planet Money team did a report for This American Life on health care finance. I've been following the health care debate and noticing some areas that could inform a good transportation financing plan. Towards the end, there's a good quote from Miami University economist Melissa Thomasson:
Melissa Thomasson says that what we have combines the worst of the market and the worst of government. Markets are usually really good at controlling costs. When they work best, products come into existence, like cell phones or stockings. They start expensive, and then they get cheaper and better. But markets don't guarantee that everyone can afford the things they need. Government can be good at that, ensuring universal access. But when you're paying for everybody, it's hard to control costs.

I'm not for "controlling costs" when it's a euphemism for giving workers a raw deal, but I am for it when it means reducing administrative bloat, sinecures and abuse of retirement benefits.

Of course, universal access is one of our goals, so any transit system will have to have a "public option" to ensure a minimum level of mobility to get to jobs, shopping, socializing and health care.

Beyond the cost issue, government-run transit systems tend to be bad at customer service and full of bureaucratic inertia. This is also true of corporations, but the worst offenders in that regard tend to be government contractors, public utilities, insurance companies and other entities that are insulated from competition by some kind of monopoly.

Privately run transit operations have the potential to radically remake our transportation system, for a fraction of the cost of publicly-run ones. We just have to provide minimum service, keep the labor issues under control, and work out the proper set of subsidies and incentives to guide the private operators in the right direction.


Unknown said...

Why does it seem possible to make money on intercity transit (e.g. Boltbus, Megabus) but not local transit? When you look at the prices a company like Boltbus charges--less than $10 per 100 miles--it seems they should be able to make money with shorter trips as well.

Cap'n Transit said...

Good question, David! You might want to read my posts on profits, particularly concerning the local buses that use the Lincoln Tunnel.

The answer seems to be that all other things being equal, buses have a time disadvantage over cars because they have to stop for other passengers. If you have a bottleneck that slows down the cars, and an exclusive bus lane that allows the buses to move freely, that advantage will provide enough ridership to generate a profit for the buses.

Helen Bushnell said...

Don't you mean that private transit systems "tend to be bad at customer service and full of bureaucratic inertia" ?

Cap'n Transit said...


jazumah said...

Bus operators have fixed costs. So, the more miles you travel, the easier it is to spread your fixed costs over those miles. It only cost $1.25-1.50 per mile to physically move a bus. But, your fixed costs could be between $300 and $500 a day before you turn a wheel.