August 17, 2005
Free The New York City Subways (Sell the stations)
The New York City subways are a good example of a high fixed cost, low marginal cost enterprise. The actual marginal cost of the extra passenger at non-peak time is much closer to $0 than it is to $2. Charges for non-peak riders pays almost entirely for the existence of the subway system and not for the actual cost of the rides themselves. Peak time riders, on the other hand, are almost all taxpayers, riding at peak times to and from their income and therefore tax revenue producing jobs. For them, subway fares are just a de facto tax. However this method of collection costs them more because now they have to deal with the hassle of buying/managing metrocards, waiting in line at turnstiles for that person ahead who keeps swiping unsuccessfully, etc. They also pay for the whole metrocard infrastructure and the losses they incur from expired metrocards, etc. It would be much more efficient if they paid once a year and could get on and off the subways as they pleased.
One could make an argument that paying for subways out of tax revenues is unfair to people who don't ride the subways very often. On the other hand, the city currently pays for street maintenance and that is just as unfair to people who rarely drive or take taxis. Freeing the subways actually just evens the score here.
More generally, non-subway riders bear the transaction cost of metrocards anyway in the form of lost tax revenues, dead weight loss from monopoly pricing, every interaction they have with anyone who does ride the subway, etc. (A sophisticated economic model version of this argument is available but beyond the scope of this blog post).
For now I'll observe the following:
- The rich should like this idea because they value their time highly and this decreases contention for cabs and overall street traffic (street traffic is currently subsidized by the lack of street tolls)
- The poor should like this idea because they pay relatively little taxes and regular subway fairs take a substantial bite out of their overall budget.
- The middle class should like this idea because net it saves them money and time.
- Business should like this idea because it just subsantially lubricates the flow of traffic in New York and because they end up paying the cost of the subway system either way (through taxable income or through buying metro cards on behalf of their employyes -- the status quo).
Lastly, a big noticable advantage of this plan is that New York City could sell off the subway stations. Private owners would expand the stations to offer more retail space, air conditioning in the stations, etc. Now, you have to pay $2 just to enter a subway station. If the subways were free, each subway station could become a small shopping center with all the conveniences and accourtements that that brings.
Update: Forgot a BIG point here. Selling the subway stations would convert them from cost generators to revenue generators as the city collected the money from sales and then the tax revenue from the commercial operation of the facilities. How much is Union Square Station worth? How much tax revenue would it generate?
Note: I suggested this idea to Andrew Rasiej last night at a fundraising dinner in his honor last night. He expressed interest and asked me for a short write up and I am providing it now. He hasn't endorsed this idea, but I have my hopes that he will. Either way, he will make a GREAT Public Advocate for New York City. But, to win, his campaign needs your help. Please donate.
Note: He is most definitely campaigning to lower the cost of wireless Internet in New York. That too is a reason to support him.
Update: Talked to a lawyer friend. She says that the city should lease rather than sell the stations. Either way, the same point applies. Net revenue from newly air conditioned stations.
Update: A very short summary of this whole post is: There are too few off peak riders, on-peak riders can simplify their lives by paying for the subways through tax revenue, and the stations would be nicer if they were run by private firms.
Update 9/19/2005: A described this idea to a libertarian friend of mine and she commented that New York should simply privatize the subways. I explained to her that the subways are a de-facto monopoly and a privatized subway would charge monopoly prices resulting in dead-weight loss (the economists name for the costs of monopolies). She accepted that one and then commented that the government isn't in the business of making money. If it is going to operate a service, it shouldn't be charging for it. She has a point.
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Comments
wow- Andrew Rasiej is a regular blogger on talking points memo. he was just recently describing the difference between liberalism and progressivism. these are interesting times.
that's a cool idea. Seems like refitting those stations for commercial space would be a massive civil engineering challenge- but I think the DC metro has experimented to some extent with selling off some aspects of the stations- I think they sell the names of the stops... i.e. 'starbuck's union metro', etc.
Posted by: ooghe at August 18, 2005 06:24 PM
very interesting idea.
has any other city tried this? i wonder what happened, if so...
not to be entirely facetious, but wouldn't you have a lot of "free riders" if you really made the subway totally free? the AC and heating are MUCH better on the subways than in my apartment!
Posted by: nicholas at August 19, 2005 12:44 AM
How do you attract shoppers underground when there is so much available street level and most people would prefer to avoid going underground for anything?
Posted by: scott at August 19, 2005 01:06 PM
Underground shopping beats the street for 8 months out of the year in New York. Also does anyone think that subway stations would be as disgusting as they are if they were run by private businesses?
Posted by: Dan at August 19, 2005 06:04 PM
The subway stations are unbearably hot during the summer, no one would voluntarily go down there.
Some of them are also unbearably hot during the winter.
Maybe there are volcanoes underneath Manhattan?
Posted by: Half Sigma at August 22, 2005 08:24 PM
the reason the subways are so hot is that the system was built to be self-ventilating, with the trains acting as pistons, pushing air through the system, forcing hot air up the street vents/grates and drawing colder air down them. That was before airconditioning in the subway cars. Now the cars are airconditioned, but the vent significant amounts of hot air out -- particularly when sitting at stations. In addition, overtime subway grates have been covered up more. Bottomline though is we have made train riding more comfortable and train waiting less so.
Posted by: mike at August 23, 2005 02:19 PM
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