Is a subway system the way to go?
After more than two decades of work, Almaty’s subway system is to open in December, reported Business New Europe. Will it prove worth the wait?
Perhaps not. In the United States, subways cost so much to build and run that they almost always lose money – even in crammed San Francisco, where Marlon Boarnet found that rush-hour traffic was nearly twice the normal capacity of the highways. In 1985, President Ronald Reagan said Miami could have saved money on its transit system by scotching it and buying a limo for each user. Metrorail, in Washington, D.C., was so expensive that the city could have bought a BMW for each daily passenger and saved money, wrote Tony Snow.
Mass transit is expensive, because not enough people use it to drive down its per-rider cost by much. The problem is not the fare. Offering mass transit for free could draw only a third more riders (judging from the American experience), because the demand to ride does not respond strongly to changes in the fare, concluded economists Gerald Kraft and Thomas Domencich. The problem is that people don’t want to walk to the station and wait for the train. Per hour, they value their walking and waiting time at as much as one and half times their wage. Their time within the vehicle – be it a car, bus or train – is valued at only half their wage, reported an urban economist, Arthur O’Sullivan. Mass transit consumes more time than the automobile in the journey from home to the vehicle, and from the vehicle to work. Because people value this time highly, they prefer driving to riding.
San Francisco’s subway system, BART, illustrates how mass transit can go wrong. The train speeds 80 miles per hour between stations spaced 2.5 miles apart. The rider spends little time on the train but must take a while to reach the station and wait for the vehicle. Since the rider values this time highly, he prefers to drive, albeit at only 40 miles per hour. Studies suggested that buses were cheaper than BART at all levels of traffic; and that the auto was cheaper than BART for traffic levels of up to 22,000 passengers per hour, noted Melvin Webber in his case study of the subway system. For a fourth of BART’s construction cost, San Francisco could have bought enough buses to carry all subway riders.
Even so, mass transit may decongest highways and thus save money – lots of it. Bangkok may lose a third of its output to congestion, estimated Japan’s international cooperation agency in 1990. In the United States, congestion may have accounted for .7 of a percent of the value of domestic output in 1994, estimated economists Richard Arnott and Kenneth Small. In Europe, congestion may claim 2 percent of GDP, calculated the transport directorate for the European Union. In Los Angeles, commuting takes so much time that the average household there is willing to take a pay cut in order to take a job that avoids congestion, found urban economists Edward Glaeser and Janet Kohlhase.
Cash or crash?
Suppose that transit helps us avoid just 1 percent of traffic accidents. Then, judging from Urban Institute estimates, cities in the United States would have saved $3.3 billion in 1989, nearly half of the total operating subsidy for public transit that year, said Janet Rothenberg Pack. Mass transit also helps us shorten the auto trip – a value that we can measure as the increase in the worth of a house that is nearer the work site and that thus avoids a longer commute. In addition, mass transit decongests alternate routes and reduces noise and pollution downtown. Finally, the riders themselves get something out of it. Pack figured that the total benefits of transit in Philadelphia exceeded the costs for each of the three years that she studied – 1981, 1982 and 1989. The largest benefits were the welfare gains to riders of transit and commuter rail. Estimates of the net benefits over the three years varied from $70.3 million to $140.3 million.
To justify the subsidy, the city can argue that the price of driving an automobile is too low, since it does not reflect the congestion imposed on other drivers; so the city must lower the price of transit to make it relatively attractive. But the subsidy also lowers the cost of travel; with low prices for both the car and the bus, we may get too much travel.
In recent years, fares from mass transit have covered less than 40 percent of costs. One problem is that transit systems pitch their fares low to attract riders. Since fare cuts attract relatively few riders in the short run, they reduce fare revenues. Moreover, transit systems must pay escalating labor costs. Wages have risen while the productivity of a worker –- the number of transit rides per employee – has dropped.
To save money, the city could contract out transit services to the lowest private bidder. Phoenix, Arizona, hired a taxi firm for dial-a-ride service on Sundays, at one-sixth of the cost of running buses.
Other possibilities include small buses, called jitneys, running to the station or to work; and buses picking up riders more often and at more stops. In Ottawa, a fleet of 850 buses accounted for more than 70% of all rush-hour trips to the downtown, reported the Transportation Research Board in the United States.
Rather than build subways or roads, the government could attack congestion directly, by taxing it. A study of California counties inferred that taxing congestion might prove more productive than building highways. Relieving congestion bore a strong, and positive, statistical relationship to output per worker across counties in the Seventies and Eighties. Constructing highways lacked this relationship. The author, Marlon Boarnet, concluded that taxing vehicles during rush hour would do more to increase output than would building roads. Relieving congestion helps workers get to their jobs quicker and thus produce more.
Building highways may fail to decongest roads by much, because it attracts new drivers, argued Small, an urban transportation economist. Taxing congestion, on the other hand, discourages all drivers. Moreover, it is a cheap measure for the government to undertake. One need only find a way to collect the toll – which may be fairly easy, with electronic monitoring. In New York, New Jersey and Pennsylvania, toll authorities equipped millions of cars with detection gadgets, so that drivers could pay their tolls monthly or with prepaid magnetic cards. The government can either return the money to taxpayers or use it to improve roads and transit. Small figured in 1993 that, in greater Los Angeles, a congestion fee of 15 cents per vehicle-mile during peak hours would raise nearly $3 billion a year.
In principle, the congestion tax should equal the cost that the motorist imposes on other drivers. It compels the motorist to weigh the true costs of his decision before deciding whether to drive. The tax is flexible. The government can experiment with the right tax to levy, raising it on the congested road until the road becomes slightly less congested than alternative routes, noted Small. It can charge a higher tax during peak hours, when the road is more jammed.
Governments are slowly adopting the congestion tax. Singapore has levied it since 1975; and, in 1992, France began taxing congestion on Sundays on its A1 highway into Paris, according to Small.
The case for a congestion tax is not unchallenged. Perhaps the time lost to congestion is not a true social cost, because the driver consents to bear it. Moreover, some congestion may be optimal, as a practical matter. In principle, one may maintain an even flow of traffic on the road; in practice, however, traffic ebbs and flows. If the road is not congested in its peak hour, then it may be underused at other times. In the Netherlands, highway use seemed optimal when 2 percent of each day’s traffic encountered congestion, reported The Economist. But even a little congestion can seem like too much of a good thing. -– Leon Taylor, tayloralmaty@gmail.com
Good reading
Alan Altshuler, editor. Current issues in transportation policy. Lexington, Mass.: LexingtonBooks. 1979.
Marlon G. Boarnet. Infrastructure services and the productivity of public capital: The case of streets and highways. National Tax Journal50 (1): 39-57. March 1997. Online. Reprinted in Wassmer (2000).
The Economist. Why motorists always outsmart planners, economists, and traffic engineers: The unbridgeable gap. May 9, 1998. Reprinted in Wassmer (2000). Reported the estimate of European congestion.
Matthew Edel and Jerome Rothenberg, editors. Readings in urban economics. New York: Macmillan. 1972.
Edward L. Glaeser and Janet E. Kohlhase. Cities, regions and the decline of transport costs. Harvard Institute of Economic Research Discussion Paper 2014. Online. 2003.
Gerald Kraft and Thomas A. Domencich. Free transit. In Edel and Rothenberg (1972).
Edwin Mills and Bruce Hamilton. Urban economics. Upper Saddle River, New Jersey: Prentice Hall. Fifth edition. 1997. Discusses urban transportation.
Arthur O’Sullivan. Urban economics. New York: McGraw-Hill. Seventh edition. 2009. Discusses mass transit.
Janet Rothenberg Pack. You ride, I’ll pay: Social benefits and transit subsidies. The Brookings Review 10(3). Summer 1992. Online. Reprinted in Wassmer (2000).
Kenneth A. Small. Urban traffic congestion: A new approach to the Gordian knot. Brookings Review 11: 6-11. Summer 1993. Online. Reprinted in Wassmer (2000).
Transportation Research Board, of the National Academy of Sciences. Case study of bus rapid transit in Ottawa. Online. Undated.
Robert W. Wassmer, editor. Readings in urban economics, Malden, Mass.: Blackwell. 2000.
Melvin E. Webber. The BART experience – what have we learned? In Altshuler (1979).
References
Clare Nuttall. Almaty metro nears end of line. Business New Europe. May 31, 2011. Online.
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