The Antiplanner will be presenting a new paper tomorrow at the Cato Institute titled “Fixing Transit: The Case for Privatization.” The paper was not yet posted on the Cato web site, but you can download an advance copy.
Most transit systems in America were private and profitable, if declining, as late as the 1960s. Since being taken over by the government, transit productivity has greatly declined. The number of passenger trips carried per transit employee has fallen by around 50 percent and the inflation-adjusted cost of carrying one rider or one passenger mile has grown by about 150 percent.
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These productivity declines, the paper argues, can be directly traced to government ownership, and only privatization will fix them. Privatization might mean less transit service for some and more for others. In many cases, it will mean a different kind of transit service: scheduled buses will often be replaced with demand-responsive transit like SuperShuttles. As high-cost rail lines wear out, many will be replaced with low-cost schedule buses. Those who worry about the poor might want to accompany privatization with transportation vouchers that low-income people can use for any form of public conveyance, from taxi cabs to airlines.
One thing is certain: privatization will save taxpayers more than $40 billion per year. While that won’t repay the national debt any time soon, it isn’t chicken feed either.
“In the era of private transit, cities gave transit companies exclusive franchises to operate on specific streets or routes. Since each route was a monopoly, city or state public utility commissions strictly regulated fares and service levels. Some people believe that such regulation hastened the decline of private transit by limiting the ability of transit companies to raise fares to keep up with inflation or cut service on non-performing routes. Considering that its chief competition is the automobile, transit can hardly be considered a monopoly today. In contrast to the regulatory model, cities could completely open streets to any transit provider. City or state commissions might ensure that vehicles and drivers are safe, but not regulate fares, routes, or schedules. This is essentially the system used in many developing countries.”
Oh, Antiplanner. So many mistakes in only a few paragraphs!
In the UK, we had exactly this privatisation system as a way of reducing subsidies. The idea was that companies would run minibuses, in perfect competition, just as you are suggesting. In fact, what happened was that a company would engage in predatory pricing to force the competitors out of the market, and then the prices were jacked right up, together with an increase in subsidies.
Most towns and cities have only one provider. Some cities have more, but this is a cold war situation where more than one company is capable of predatory pricing, and is waiting for the off. Periodically, the companies scrap for access to the bus stops, with buses physically trying to force their competitors out of the way.
To point out the obvious, quite apart from predatory pricing, there is another problem with your scheme. I want to catch the first bus that arrives (and hence not necessarily the cheapest) – hence there is no open market for you to invoke. And on the way back with a return ticket, I want to take the first bus back too, not have to wait for a specific company.
Demand responsive buses are pointless, being a lot more expensive than a regular bus. The UK has tried them, and then closed them down. There simply isn’t the money for it. Some passengers were having £000s spent on them in a year in subsidy. Like light rail, only worse.
The most successful bus operation by an ocean mile is run by Transport for London (TfL) in London, and it is a franchised system.
It would be good if the USA could actually learn from the UK experience. We have tried everything, but there is only one system that works – franchising.
The end of our empire is imminent. Gold hit $1400 today, silver was over $28 for awhile, and palladium hit $700. Before the crash, gold was under $800, silver was under $10, and palladium under $200. We’re debasing our currency as did the Roman Empire. The days of the white imperial city on the banks of the mighty Potomac engaging in expensive transportation projects (and other spending projects for that matter) are numbered. Rome debased its currency and hyperinflation ensued. Our founders looked to the Roman republic for guidance, but we, like the Romans, abandoned the ideals of the republic for imperialism. Someday the gleaming capitol with its Roman buildings will lay in ruins, a testament to yet another fallen empire that fashioned itself in Rome’s image.
It would be good if the USA could actually learn from the UK experience. We have tried everything, but there is only one system that works – franchising.
I don’t think you have tried everything, and I really wish someone would give this idea a try. It would probably have to be the UK that tests it, given the reluctance of US policy makers to experiment with any kind of meaningful reforms.
As for the TfL experience and franchising, I suspect that it has more to do with the size and robustness of the market than the appropriateness of that form of industrial organization.
I am surprised The Autoplanner hasn’t read any of the work by Dr. Paul Mees of Australia. His work confirms the same sort of problems Francis King describes in England are “par for the course” where transit is privatized. Mees’ latest is at http://www.amazon.com/Transport-Suburbia-Beyond-Automobile-Age/dp/1844077403. Mees makes the case for vastly improved comprehensive transport planning, the exact opposite of The Antiplanner’s misguided recommendations.
Among other things, Mees explains why even the lowest density Swiss Canton (Grabunden) with less than 100 persons per square mile, carried 146 annual riders per capita in recent years. Hint: it has nothing to do with density, and only nominally to do with fuel prices–which are relatively higher in England, though British transit usage in similar rural areas is much lower, despite more favorable conditions such as denser urban development in the smaller towns.
Frank,
I knew I recognized you from somewhere.
http://radioexile.com/wordpress/wp-content/uploads/2010/02/EndIsNear3.jpg
MJ wrote:
“I don’t think you have tried everything, and I really wish someone would give this idea a try. It would probably have to be the UK that tests it, given the reluctance of US policy makers to experiment with any kind of meaningful reforms.”
What are you indicating here, please?
“As for the TfL experience and franchising, I suspect that it has more to do with the size and robustness of the market than the appropriateness of that form of industrial organization.”
No. The reason why it works is because it gives the customers what they want. TfL has no share-holders as they are an executive arm of the London government, so unlike private bus companies, they remember who they work for – us. As a government agency they enable me to travel anywhere in London – by bus, metro, light rail and heavy rail – on a standard electronic card, called Oyster. It just works so well. Unlike public bus companies, they don’t own any buses themselves, so that they are concentrating on the desired outcome.
The bus companies working for TfL don’t like it, because their profits under franchising are half what they are in private ownership and the consequential rip-off pricing.
In fact, what happened was that a company would engage in predatory pricing to force the competitors out of the market, and then the prices were jacked right up, together with an increase in subsidies.
This is how the world works. Ideological Fairy Dust, no matter how liberally sprinkled about, cannot overcome the way the world works.
As far as the ‘decline’ bit goes, I agree. We are watching it before our eyes, and recalculating the equation of the downward slope more frequently these days. Perfectly normal. And if you look at biology wrt population dynamics, completely to be expected. Perfectly normal, with the added complication of big brains throwing off the oscillations.
DS
The Autoplanner; One thing is certain: privatization will save taxpayers more than $40 billion per year. While that won’t repay the national debt any time soon, it isn’t chicken feed either.
THWM: $40 billion works out to be less than 40 cents a day per person.
So that really isn’t a lot of money for an important public service.
Though increasing passenger rail services will increase ridership and reduce costs overall.
Along with things like subcontracting various functions to the private sector.
Rail “reduces costs” like buying an X5 instead of an Accord “reduces costs”.
What are you indicating here, please?
The argument of this book is that previous efforts at transit privatization and deregulation, as in the UK, have struggled because they failed to establish property rights for the right to collect passengers at specified locations. The problems of front-running and route swamping are both symptoms of this. Establishment of curb rights would handle both problems.
Among other things, Mees explains why even the lowest density Swiss Canton (Grabunden) with less than 100 persons per square mile, carried 146 annual riders per capita in recent years.
Lowest density, huh? Do you know where Graubunden is? Have you ever seen it on a topographical map? I suggest doing a quick search on Google Maps. Use the “terrain” view. Hint: It looks nothing like rural England.
Yes, I know exactly where Graubunden is. Do you?
The fact the canton is mostly mountains is exactly the point, and it has about the lowest population density of anywhere in Western Europe sans Scandinavia and perhaps a few remote parts of Scotland.
Rural England is developed at much higher density. The quality of transit service provided by the Swiss is the primary reason for such high ridership, plus the general lack of dedicated school buses.