mass transit (sic)

[Nathan Newman]

That's true in the abstract, but fails in the political reality, because the
governments doing the spending on mass transit in the US usually can't
afford to run the deficits required.   And it makes sense to develop
political processes that are self-reinforcing.  If there are ways for the
state to capture its externalities, it should where possible.

Nathan Newman
nathan at newman.org     http://www.nathannewman.org
http://www.nathannewman.org/log/  (News & Views WebLog)
----- Original Message -----
From: "Max Sawicky" <sawicky at epinet.org>
To: <lbo-talk at lists.panix.com>
Sent: Friday, June 07, 2002 2:22 PM
Subject: RE: mass transit (sic)

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
>