Department of huh?
From the desk of Jane Galt:
In the course of lecturing Arnold Schwarzenegger on economics, Michael O'Hare says something I just. don't. understand.
"Of course reducing GHG emissions from fuel is only useful if fuel use doesn't increase; indeed, if we don't (along with everything else) drive less and do it in less thirsty vehicles, we will not get on top of global warming. People have to have some other ways to get around than big thirsty individual cars, like bicycles, feet...and buses and trams. Accordingly it was a major wardrobe malfunction of those green garments when the governor's budget came out with a $1.3 billion cut in transit funding. This is a really inexcusable mistake, especially in California, indeed one could fairly say he's on stage with his environmental pants down.
I happened to return to Berkeley from San Francisco last night on the BART at 5:30, high rush hour, and there were some seats empty for much of the trip and lots of standing room for all of it: a New Yorker would think he had died and gone to heaven. This means BART is way overpriced, far above marginal cost, even at the busiest time, and one of the most important ways to attack global warming would be to get people into those empty spaces. Transit always has to be heavily subsidized, not because it's a communist plot but because it's a declining-marginal-cost service that can never pay for itself and be efficient at the same time."
Emphasis on both passages mine.
This makes absolutely no sense. The fact that a service is not fully utilised doesn't necessarily mean that it is priced above marginal cost; it might simply mean that there is inadequate demand. There are free trolleys in a number of small cities running empty through the streets. It is quite possible, even likely, that BART is priced above marginal cost, but empty seats are not proof of it. Moreover, in industries where demand is not high enough to cover current costs (i.e., money losing operations such as BART) and where price discrimination between customers is not feasible (again, as with BART), the rule that goods should be priced so that marginal revenue=marginal cost does not hold; if demand is very inelastic, one could well push revenue down near zero.
It might not even improve ridership; the non-monetary costs of taking public transit are considerable, and zoning laws, over which the transit authority has no control, often limit the potential usage quite sharply.
The latter bolded phrase makes even less sense to me. There are plenty of businesses with declining marginal cost structures that make money; indeed, it is thought to be a quite desireable situation, because declining marginal costs present high barriers to entry for competitors. I presume that what he means is businesses with low marginal costs. These are indeed often plagued with problems; but the problems centre around overcapacity and fierce price competition, which cannot fairly be said to characterise the public transit industry.
The reason public transit does not make money is that the non-monetary costs of it are very high. You have to walk at each end, crowd in with unpleasant people, and wait (often in the heat or cold) for your chariot. Like many New Yorkers, I get very impatient at even very small delays, and I recently figured out why; a delay of a minute or two can be transformed into a delay of fifteen minutes or more when you factor in a missed train. Plus, on a systemic level, public transit's speed is inversely proportional to its convenience. The more stops and interconnections a system has, the easier it is to move from any given point A to point B; but the longer it will take you to get there. All these things mitigate against public transit. Since moving to Washington, I--a lifelong New Yorker and mass transit afficionado with an ideological and financial opposition to owning an automobile--have begun seriously considering the acquiring a car.
As long driving is more convenient and comfortable than taking a train, most people will prefer it even at a relatively high price premium. It is notable that the one American city where public transit is the dominant form of transportation is New York, where driving during rush hour is generally much slower than walking or taking the train. But New York has the unique advantage of having grown to its physical limits before widespread automobile usage; and also, of centering around an island that is long and narrow. This made it easy to essentially run the core train system in closely parallel stripes up the entire island, making it very convenient to get almost anywhere in Manhattan quickly. Chicago managed a somewhat similar feat by planting a big lake down one side of the central business district, but even there, cars dominate. I just don't see how you'll pull that trick anywhere else, no matter how much you slash the fares.
janegalt.net |
