Some people at UC Berkeley published an article this week giving “five arguments for making subways free.” Yet it is more realistic to think that fares should be raised, not reduced.
The five arguments in the Berkeley article are:
- Marginal costs are low because capital costs have already been spent;
- Externalities are low especially if the subways get cars off the road;
- No more waiting in lines to pay;
- Subways help poor people and stimulate the economy;
- There are increasing returns to having more riders.
Some of these depend on the system, yet the Berkeley article makes no distinction between such extremes as the New York City subway, which is the heaviest-used transit system in the country, and the Baltimore subway, which is a joke. Other arguments are simply wrong.
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- Marginal costs may be low compared with capital costs, but they aren’t really low. Just counting operating costs, the New York subway cost more than 50 cents per passenger mile in 2018 compared with average fares of 35 cents per passenger mile; the Baltimore subway cost $1.74 of which just 31 cents is recovered in fares. By comparison, American auto users spent just 25 cents per passenger mile buying, operating, and insuring their vehicles. (I understand the difference between marginal costs and average operating costs, but the point is that even after the subway is built it isn’t cost-free.)
- Externalities depend on the system. Externalities on the New York subway are low because New York gets much of its electrical energy from nuclear power, but Teslas and other electric cars probably do just as well. But the Baltimore subway uses almost five times as much energy and emits almost three times the greenhouse gases per passenger mile as driving a car and even the Washington DC subway–the second-most heavily used system in the country–uses more energy and emits more greenhouse gases per passenger mile than driving. Other than New York, the only ones that use less energy than driving are Atlanta, San Francisco, and San Juan.
- Is waiting in lines to pay even a problem? I’ve been on subways in Atlanta, Boston, Chicago, New York, Philadelphia, San Francisco, and Washington, and never noticed lines at the turnstiles particularly delay anyone.
- The average income of subway riders is well above the average income for Americans so the redistributive effects go the wrong way; moreover, placing a burden on taxpayers to pay for money-losing systems tends to depress, not stimulate, the economy.
- A few years ago, the biggest complaint about the New York and San Francisco subways was overcrowding, which means the returns to scale were decreasing if they had to expand capacity to deal with that overcrowding (which was the justification for building New York’s $2.1-billion-per-mile Second Avenue subway).
Here are my five reasons to increase subways fares:
- Just counting operating costs, even the most-used subway systems lose a lot of money. The New York City subway lost $1.5 billion in 2018. Nationwide, all heavy-rail lines lost $3.5 billion.
- We can’t count just operating costs because the subways have tens of billions of dollars of maintenance backlogs. New York City alone spent $3 billion rehabilitating its subways in 2018 and says it needs to spend $40 billion more. Nationwide, heavy-rail operators spent $5.6 billion on rehabilitation and probably need to spend $80 billion more.
- Subway riders neither need nor deserve our subsidies. The American Community Survey found that transit riders had higher median incomes in 2018 than any other commuters. Moreover, a recent paper from the National Center for Transit Research found that low-income transit riders tend to ride buses while rail transit riders tend to have the highest incomes. Why should everyone else pay for their rides?
- Transportation paid for by user fees will be more responsive to users than transportation paid for by taxes, which ends up being responsive to politicians who are willing to fund things that are highly visible, such as the Second Avenue Subway or the DC Silver Line, while they neglect anything that isn’t immediately obvious such as maintenance or new travel patterns.
- Transportation paid for out of user fees will be more resilient than transportation paid for out of taxes: if taxes decline, such as during a recession, transit agencies are forced to cut service even if ridership remains constant.
Bonus reason: Arguments in favor of subsidizing transit inevitably morph into arguments to expand transit. While the Berkeley article dismisses the cost of construction as “fixed costs,” we can’t ignore plans to expand subway and other heavy-rail systems in New York, Washington, San Francisco, Los Angeles, and elsewhere. Such expansions will not only have outrageously high dollar costs, it will require huge amounts of greenhouse-gas-emitting energy consumption. All these arguments suggest it is time to raise, not lower, transit fares.
Imaginary highway subsidies are often used as justification for real transit subsidies. “Highways are subsidized so trains and buses should be subsidized too, just for fairness”, the thinking goes.
So, if subways are free, shouldn’t buses be free? Shouldn’t highways be free? Shouldn’t cars and bikes be free? Why shouldn’t everything be free? Wouldn’t that be great?!
Making anything free causes it to be undervalued. Making subways free may encourage homeless people to just start staying on the system as a warm (or cool) dry place to live. In the SF bay area BART can be considered free as it is possible to just closely follow a paying rider through the turnstiles. Possibly as a result one BART rider told me she hated her commute after six months. By then she had seen “every bodily function performed on BART” and begging has become a problem. Making subways free might just result in them deteriorating into homeless shelters where people sleep, beg, smoke, and do not leave the system to relieve themselves.
I also agree completely that construction cost and depreciation need to be taken into account. When discussing a proposed light rail line to Santa Monica CA, a planner told me construction didn’t cost anything if you could get someone to give you the money! Another example of where giving away money causes the user not to value it correctly.
While DC Silver Line is a deeply problematic project, and Second Avenue Subway’s costs are a national scandal, I think that the best example of politicians building shiny things instead of useful transportation are things like Calatrava-designed World Trade Center station in New York, which costs close to the Phase 1 of the Second Avenue Subway ($4bn) and yet does not allow you to get anywhere any faster than you could before.
A similar boondoggle on the West Coast is San Francisco’s Transbay Terminal replacement. For $2.4 bn the city received a bus terminal and an empty underground cave for the California HSR (which will probably never happen), and Caltrain.
The fact is as, the antiplanner mentioned before; THE NYC subway is solely within the jurisdiction of the city, built by the city, owned by the city but run by a state agency; The MTA. That allows them to milk state taxpayers for a system western and mainland new yorkers will never use. If new york city doesn’t wanna pay to fix the subway they don’t need it.
My thoughts on the matter:
1) Marginal costs are only low in the short run. In the long run, which I assume such a policy is intended to be, the system’s capital assets need replacement. Davis should be thinking in terms of long-run marginal costs, including adjustments to systems’ capital stocks. Also, in most US urban areas, prices are already set below even short-run marginal cost.
2) The externalities of trains, at least in terms of emissions, depend upon the fuel source. Of course, if the argument is that cleaner fuels promote lower externalities, then why not go directly to promoting lower fuel consumption in automobiles? The Parry/Small paper that Davis cites does in fact recommend a fuel tax as a first-best response to emissions externalities.
Also, Davis’s working paper refers to three cities in Mexico. The vehicle fleets in these cities tend to be older and less fuel efficient to start with, not to mention lacking the same emissions controls commonly found in the US vehicle fleet. The marginal benefits, assuming they exist, for free transit in US cities are likely to be correspondingly much lower due to substitution for clean forms of transport.
3) Time spent waiting to pay does not necessarily translate into lower overall trip times. Travel times depend on service schedules, and unless each person is spending so much time having their fare collected that they could otherwise catch an earlier train, time spent waiting at turnstiles or fare machines is probably just replacing waiting time spent on the platform.
4) It is not at all clear that making fares free would lead to more progressive forms of redistribution. Randal already pointed out who is taking the subway, and that the poor are not a majority of riders. There are other, far more efficient methods of redistributing income that don’t suffer from the “leaky bucket” problem that applies here. Moreover, if the free fares have to be made up for with higher taxes, fares would in many locations likely be replaced with regressive sales taxes or taxes on labor income.
The “stimulus” argument makes no sense. The current recession is the result of a supply contraction due to the spread of COVID-19 and states’ harsh policy responses. Putting more people on trains at a time when it is more dangerous than ever to do so is irresponsible, not just in health terms but also in the likelihood of prolonging the recession by increasing the risk of another viral outbreak.
5) Increasing returns on heavy rail systems are exhausted at relatively low output levels. There are few systems in the US that would see substantial economies from large increases in riders, especially if those riders were concentrated during the peak period. Transit operators have been trying for years to lure more off-peak riders with offers of lower fares, to little avail. Given how close these fares are to zero already, there is little reason to think going to zero will substantially affect travel behavior.
Also, the “Mohring Effect” that Davis refers to was initially used by Herbert Mohring to describe the operation of bus services, and the fact that operating smaller vehicles more frequently and increasing the density of route networks would result in reductions in time costs for users that aren’t reflected in the costs facing transit operators.
Of course, this has all been made moot anyway by the decisions in many US cities to avoid pursuing these economies, and instead building radial rail networks that force transfers upon passengers and increase route spacing — just the opposite of what Mohring had in mind.
“Marginal costs may be low compared with capital costs, but they aren’t really low. Just counting operating costs, the New York subway cost more than 50 cents per passenger mile in 2018 compared with average fares of 35 cents per passenger mile; the Baltimore subway cost $1.74 of which just 31 cents is recovered in fares.”
By comparison to London Underground.
https://www.londontoolkit.com/briefing/underground.htm