Urban Transit Policy (road-based, not rail)

Daniel Klein Lecture for Econ 825, 17 Oct 06

Putting rail aside

 Rail transit is pertinent, but will be left aside here. For a comprehensive review of economists’ judgments on rail transit, see Balaker and Kim 2006 . Generally, economists frown on rail.

Urban transit defined

 Travel modes: – Driving yourself there (private automobility) – Biking or walking – “Transit”: going as a passenger in someone else’s vehicle (your destination is not the driver’s)  Tele-commuting is communication, a substitute for travel

Road-based transit

 Conveyance by motor vehicle: – Buses – mini-buses – Vans – Cars – motorcycles, mopeds (major in congested LDC cities)

Cars

    Private automobility: the driver transports her own party to their destination.

Pure private automobility is not included in “transit.” However, “public” conveyance in private cars should be included: Taxis, carpools, etc.

“transit”: Getting around in some way other than driving yourself there.

Status Quo Controls

      Govt planning of bus systems.

No free entry.

Bans on vans, shuttles, etc. except originating or terminating at airports.

Heavy control on entry into the taxi market.

Usually heavy regs on taxis: fares, share-ride bans, etc.

Restrictions on on-the-spot carpools and on private terminal capacity.

1.

2.

3.

Three elements of a transportation system Vehicles Rights-of-way Terminal capacity (staging areas) Apply to air travel Apply to ocean shipping Apply to private automobility Apply to urban transit . . .

Government ownership

 The government owns the rights-of-way (the roads) and most of the terminal capacity (sidewalks, curb areas, bus stops, bus stations)  When government owns major components of the system, it must be an active player in the system.

Privatize everything?

    I’m for that. The “first-best” arrangement, I think, is to convert all the resources, even city streets, into private property ( Klein 1998 ). Does the liberty maxim then become unambiguous?

Well, there would remain the tough issues of crossing/prescriptive rights or easements.

Also, hold-out problems and eminent domain (but see Benson 2005 ).

Should we discuss the crossing issue?

   Rothbardian libertarians like Walter Block would probably say that prescriptive crossing rights violate property, and should not exist.

I am inclined to agree that they violate property (Epstein disagrees), but I am not so sure they should not exist. Would spontaneous forces in a Blockian world would work out OK? Maybe. If so, an essential, even heroic, role is played by esteem/moral mechanisms.

Ranking institutional arrangements   My ranking: 1.Govt owns nothing and laissez-faire (perhaps qualified for crossing prescriptions) 2.Government owns the roads and customary govt terminal capacity, but otherwise tries to take a neutral laissez-faire attitude toward vehicles, routes, services, and private terminal capacity, subject to general rules for use of the government resources.

3.Status quo: Heavy regulations and govt planning.

This presentation is about 2>3.

The basic proposal

    Privatize vehicles and services Deregulate private transit services: buses, shuttles, taxis, carpool systems Better manage terminal capacity – In particular, privatize or semi-privatize terminal capacity (“curb rights”) Allow free emergence of private terminal capacity  Side proposal: Remove subsidies.

Aside about the roads

 Improvements to be made there: – Tolling, particularly of highways. No-brainer ( Lindsey 2006 ).

– Privatizing existing roads ( Roth 2006 ).

– Building more roads (public or private). A big issue here is environmental clearance.

– Parking: This to can be “propertized” ( here is my review of Donald Shoup’s great book).

   Market imperfections against these proposals?

Public goods, positive externalities?

– There are arguments about network/density externalities and consequent need for centralized coordination – Then, there is the people’s romance . . .

Negative externalities?

– There are arguments about congestion externalities, but this is addressed below Natural monopoly?

– Except in the sense of density externalities above, economies of scale in services is not borne out, and even if it was, it wouldn’t form a strong arg against

Market imperfections against these proposals?

 Equity?

– Really no argument for the restrictions on vehicles and services, or for not privatizing. Could perhaps address with user-side subsidies.

 Poor information?

– Not really applicable. Could be allayed with light registration requirements/decals.

 Myth of rationality? Not relevant.

Triumph of the Automobile

 Flexibility: all points known to man and pavement, when it suits you, door to door, with or without your pals, no transfers        Speed Comfort Reliability Security Freight, storage Privacy Shelter

Advantages of transit

 Costs of owning a car  Not having to drive  Not having to park

Public transit trends

 Declining usage  Rising costs  Source: Wendell Cox The Public Purpose www.publicpurpose.com

Pathologies of public transit

 Federal subsidies, with strings that drive up costs  Transit-worker interests (unions)  Bogus cost and ridership projections  Yet voter support  Capture theory: Restrictions on competition, protecting transit worker jobs, taxi interests, shuttle industry

Making transit work

 The taxi is like the best of both  Transit needs to emulate the taxi  Two types of service: – Fixed-route – “Edge” transit: taxis, shuttles, carpools, not plying a route

A Theory of Fixed-route transit

 First, some illuminating experiences: – US jitney episode of 1914 to 1916 – Jitneys and route associations in LDCs – Illegal jitney vans in NYC – Bus deregulation in Britain  It seems the problems continue  Lessons: Importance of coordination and curb rights

Advantages of the interloping jitney  Available “now”  Faster travel  Safer, more pleasant (typically)  Courtesy deviations from route  Assume that most riders prefer the interloping jitney

Thick market

copied from Klein, Moore, Reja 1997

Thin market

Typology: fixed-route urban transit

Curb Rights: A Foundation for Free Enterprise in Urban Transit

( Klein, Moore, Reja, Brookings Institution 1997 )

Four sets of players

 Local officials  Curb-zone leaseholders  Transit operators (bus companies, jitneys, and so forth)  Passengers

Also, private staging areas

 McTransit  “In our scheme, local officials are not primarily regulators; they are creators and enforcers of property rights. Provided that jitney operators and staging entrepreneurs do not tread on the property rights of others, they should be allowed to operated unencumbered” (p. 49)

“Holding companies”?

 Preventatitves: – Commons zones – Private staging area competition – Require a degree of openness to jitneys on the leased zones?

– Requirements against concentration of holdings?

New typology

“Edge” transit

   Taxi markets are typically highly regulated: entry, fares, restrictions on share-ride. Economists generally agree that deregulation is good ( Moore and Balaker 2006 ) Shuttles, charter buses, etc: Entry is highly regulated. PUCs generally outlaw any “stage” services except originating or terminating at airports.

Carpool systems: Not recognized and organized by government.

Huge taxi market potential

 A lot of people with cars who want to get out of the house. Social contact, activity, contribution.

Shuttle van potential

 Express point-to-point commuter vans – Sometimes a commuter driver  Kiddie ride vans

Huge carpool potential

Typology of commuter services

Passenger participates by the trip Passenger participates by the month (subscription or weekly or monthly pass Commuter driver On-the-spot carpools Carpool Vanpool Buspool Commercial driver Taxis Commuter van Commuter bus Subscription van

Role of economics

 From: Nick Dranias Sent: Oct 6, 2006 2:34 PM To: [email protected], [email protected] Subject: MN Taxi Victory Release     Gentlemen: Taxi reform won the council vote! Barring a mayoral veto, the PCN standard will be gone by next Saturday and the cap will be gone by 2010. Thank you for your valuable assistance during the PCN hearing! It was a crucial contribution to the cause.

Your prior research was the seed that finally grew. You both deserve to share in the credit for the ultimate success of the taxi reform effort.

Very truly yours, Nick Dranias Staff Attorney Institute for Justice MN Chapter