mass transit (sic)

[Max Sawicky]

Because of the externalities there is no reason why a
transit system needs to be self-financing.  In fact, from
an efficiency standpoint it *should* run at a deficit and
scale up to the point where marginal benefits (private and
social) = marginal costs (ditto).
The more net external benefit, the larger the correct
"under pricing" at the margin and the larger the implied
operating deficit.  Basic micro, folks.

mbs


> >"If you starve public enterprises, whether mass transit or public
> >education, fewer people will be attracted to it except by necessity."
>
> -I can understand someone making that statement in the UK, whose public
> -transit system is a national disgrace.  Ditto for the US.  But
> not for the
> -continental Europe, whose rail based system is both technologically and
> -economically superior to anything that happened in the auto industry.
>
> Research I have read has explained these differences based on whether
> private companies or the municipal governments owned outlying land.  Where
> government owns the land, mass transit pays for itself as new areas around
> mass transit hubs jump in value, thereby paying for mass transit
> expansion.
> Where private developers own the land, government cannot capture the
> positive externalities of mass transit (as was often true in the US), so
> mass transit had a much harder time in the US.
>
> The railroad development of the 19th century understood this
> phenomena well,
> if in a privatized manner.  Railway companies were not just given
> the rights
> to run trains, but given large swathes of land around train development,
> since the growth in new towns  and associated rents around the
> railroad hubs
> helped pay for the track construction (and then some of course).
>
> -- Nathan Newman
>