In my review of Tyler Cowen’s The Complacent Class, I wrote:
Disappointingly, in light of the problems caused by lack of tolls, Cowen cites that highway system as a big success. Less successful are other modes of transportation; he laments the fact that the number of bus routes has decreased, that “America has done little to build up its train network,” and that American cities “haven’t built many new subway systems in the last thirty-five years.” That last lament was shocking because subways, except in high-density cities such as New York, are notoriously costly and inefficient.
What led to my making this point? Tyler wrote (on p. 91):
The more general picture on transportation can be described with two words: less and slower. The number of bus routes has decreased, and America has done very little to build up its train network, even when additional or faster train lines would be profitable. Although American cities have growing population and wealth, they haven’t built many new subway systems in the last thirty-five years, with the exception of the partial system in Los Angeles.
In context, I took this to be a lamentation about the lack of new subway systems.
Tyler was reporting a true fact and his not pointing out how inefficient subway systems are what led me to my interpretation. Tyler has now clarified a little, but only a little, writing yesterday:
I know, I know — if only we would spend more money [on transit], do it better, and so on. An alternative and really quite simple hypothesis is that mass transit is largely a 20th century technology, it is being slowly abandoned, and in the United States at least its future is dim. The more you moralize about the troglodyte politicians and voters who won’t support enlightenment, the harder it will be to give that hypothesis an analytically fair shake.
Of course here also he doesn’t take a stand. He simply says this is an hypothesis, but doesn’t say it’s his hypothesis. So maybe he doesn’t have a view at all on whether tax-financed subways are good or bad.
One thing I just noticed for the first time in looking over my review of Tyler’s book is another aspect of his statement “Although American cities have growing population and wealth, they haven’t built many new subway systems in the last thirty-five years.” It’s based on something my UCLA urban transit professor George Hilton pointed out: At least back in the early 1970s there was strong evidence that mass transit is an inferior good. That is, the greater people’s income or wealth, the lower their demand for mass transit. Of course, that may have changed. But if the relationship between wealth and demand for mass transit has held up, Tyler’s word “Although” is out of place. It could well be because of this negative relationship between wealth and the demand for mass transit, that no new subway systems, with the exception of L.A.’s, have been built. That’s not a slam dunk. If mass transit is an inferior good, then we can understand the drop in demand for actual trips; that’s different from positing a drop in political demand for subsidies.
READER COMMENTS
Thaomas
Mar 27 2018 at 3:41pm
So long as vehicles on public streets and roads do not pay for congestion externalities, it is hard to judge if public transit is efficient or not. My guess is that buses are and that rail is not. If building codes did not discourage density this could change.
Jon Murphy
Mar 27 2018 at 3:48pm
At least back in the early 1970s there was strong evidence that mass transit is an inferior good.
That’s fascinating. I hadn’t heard that (although I don’t do much of anything in transportation economics). Do you recommend any particular paper(s) on this topic?
David R Henderson
Mar 27 2018 at 4:25pm
@Jon Murphy,
That’s fascinating. I hadn’t heard that (although I don’t do much of anything in transportation economics). Do you recommend any particular paper(s) on this topic?
I don’t. The information is 45 years old. I have this vague memory that Hilton was citing a book co-authored by some transportation economists that included a guy whose last name was Cain or Kain and that this guy was at Harvard. That’s the best I can do.
michael pettengill
Mar 27 2018 at 4:32pm
The past few decades are notable by the lack of investment in new roads and streets, leading to slower traffic and and higher costs once the government mandated operating cost reductions are factored in, eg CAFE, and mandated warranties for costly drive train components (emissions primarily, but other safety components).
Being stuck in traffic burning fuel gets offset by the lower fuel use when engine is running, moving and stopped. Even when the engine stops automatically with electric drive, the electricity required to power entertainment and condition air will require more fossil fuel or at least solar power due to lack of investment in streets and roads.
That subways have gotten slower, and buses get stuck just like trucks and SUVs, merely indicates private vehicle transit is getting worse slightly slower than public transit.
Substitution still operates when all options are getting worse for the consumer.
JW
Mar 27 2018 at 4:48pm
When i was an civil engineering undergraduate in the early 90s, the debate between busing and light rail in transportation was a fairly hot topic. I remember reading a lot of different studies which pretty well demonstrated that busing was far more cost effective than light rail unless you were in a highly dense urban area like NYC or Tokyo.
There were several issues with making buses an efficient means of mass transit but one that was somewhat unexpected was social stigma. Most people saw riding the bus as beneath them, while riding a subway wasn’t. Not sure why but my guess is had to do with perception that only lower class people rode the bus or that in riding the bus you might have to sit next to someone who wasn’t bathed, etc.
Taeyoung
Mar 27 2018 at 5:17pm
While train lines could theoretically be profitable in the US, I just find it hard to believe that they could actually be profitable in the US. We’re just not very good at building them or maintaining them anymore. On a per capita basis, sure, we spend less than most other countries on transit, but that’s because so much more of our population lives in places too spread out for transit to make even theoretical sense. When you look at specific transit systems, like WMATA, our spending isn’t out of line with what other cities spend. We just get so much less for the money we put in. And it’s not like that money going into invisible intangibles like safety either. Our safety record is nothing to brag about. With WMATA, half the department we were paying to perform safety inspections apparently had a general practice of falsifying safety inspection reports!
Maybe it’s ultimately the fault of political pressures or nonsense regulations or greedy unions or whatever, but the people who run our transit systems just don’t do a good job. Not every problem can be solved by throwing money at it.
Khodge
Mar 27 2018 at 7:33pm
Let us take, as an example, ACELA. I’m not an expert on it but supposedly it is profitable. We are subsidizing wealthy East coast riders when private industry could – and should – do it cheaper and faster. Is this why we have the federal government?
In my little piece of flyover country, local government promised to build light rail – again with lots of federal money – if we increased taxes. Years later the same local governments are trying to downgrade to buses because the trains are nowhere near economically viable.
There are always problems when you let the government do the math.
Shane L
Mar 28 2018 at 5:43am
I saw and was somewhat surprised by Tyler’s post at Marginal Revolution on this. Here in Ireland, the number of passengers using public transport is rising again, following a dip during the economic crisis when private car driving also dipped. There seems to be no general perception that public transport is on the way out; the government recently announced Dublin’s first section of underground rail. Of course all of this could just be political – I’m not sure how expensive it all is – but before announcing the death of public transport it seems sensible to see comparisons abroad.
(The fact that many Old World cities have strange, sprawling old medieval layouts might be significant here? Dublin was a Viking city at first. Perhaps well-designed modern cities based on grids are better for things like private car transport and don’t need underground systems.)
RPLong
Mar 28 2018 at 12:31pm
My economics professors in the early 00’s also taught that bus rides were inferior goods. I don’t know anything about the research in this area, but I can confirm that it was still something that was taught to economics students in the 21st century!
Thanks for reminding me of this fact. I remember thinking a lot about this because, in my college town, bus rides were “free,” paid for by the local sales tax. Hardly anyone rode them, even among us poor college students. I can’t imagine it was a profit-generating enterprise for anyone other than the bus drivers.
John
Mar 28 2018 at 1:36pm
It seems worthwhile to consider what the market equilibrium would be.
The major distortions at play are the highly regulated and subsidized infrastructure sectors and the extreme land use controls placed on urban land. Japan seems to suffer less from these, and so Tokyo might be a good model, at least for being closer to equilibrium. We see that Tokyo is quite dense and privately operated public transit ends up being the market choice.
Also, building subways in the US is outrageously expensive, even compared to highly regulated and unionized European projects [source]. It seems like the costs are mostly captured by contractors, with some credit also due to burdensome regulatory requirements. To Tyler’s credit, the rent capture there is worth bemoaning.
I don’t think it’s a good idea to respond to excessive subsidies of cars and single family homes with counter-subsidies for transit and multifamily; it seems much wiser to remove the subsidies and regulations that exist. But Tyler might be right that more transit would result in a less subsidized and regulated environment.
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