At 4:30 am, alarms on my cellphone and tablet start beeping, just enough out of sync to prompt me to get up and turn them off. By 5:00 am, I riding as a passenger along an unusually sedate New Jersey Turnpike, making friendly conversation with my driver and survey partner to make sure he stays awake. At 5:30am, as most of the city sleeps, we find a drab concrete picnic table outside the bus depot and chow down on our cold, prepared breakfasts. Around us, buses are revving up and their drivers are chatting and smoking cigarettes. At 5:50 am, we find our bus and introduce ourselves to our driver for the day. All of the Alliance drivers seem to be Hispanic. Our run begins. You wouldn’t expect it, but the first run is always the sweetest. The riders trickle on, making it easy to approach them, and unlike the typical 8:00 am rush hour rider they are usually friendly and receptive to my request. I approach them and mechanically incant “Good morning Sir/Ma’am. Would you like to take a survey on your commute today for NJ Transit? It will only take a few minutes of your time.” My partner sits in the front, tallying the boardings, exits, and survey refusals. We will spend the next eight hours zigzagging across the New York City metropolitan area, asking harried riders about their commute.

For the past month or so, this has been my part-time job: surveying bus riders about their origins, destinations, and travel preferences for NJ Transit. The job is just engaging enough that I rarely have time for sleeping or class readings, but has enough slow periods that my mind can wander on the question of bus planning. Although I am not authorized to read any of the surveys that I collect, it is clear that many of the people I am surveying have a tough commute. In many cases, they are disabled and/or evidently quite poor, wearing uniforms characteristic of low-wage service positions. Their circumstances leave them dependent on the bus for access to work. Often they mention how this bus ride, which may run more than an hour, is only one chain link in their broader commute. While the average bus rider is receptive once they find out you are not trying to sell them anything, it is more than clear that they are under a fair amount of stress. The general crumminess of their lot, and the incredible importance of making it better for their sake, often leaves me thinking about how we could improve bus service and transit broadly. For this reason, I decided to pick up and read a bus planning book that is a mainstay in market urbanism book recommendations, Curb Rights: A Foundation for Free Enterprise in Urban Transit. With the book turning 20 this year, it seemed worthwhile to draft up this short summary and review along the way.

Curb Rights, by Daniel B. Klein, Adrian T. Moore, and Binyam Reja, is an attempt to develop a market alternative to status quo bus planning. Published in 1997 by the Brookings Institution Press, the book arrived at a time of great enthusiasm for privatization and deregulation, and the authors’ prescriptions reflect this fact. In the following review, I will broadly sketch out their argument and conclude with a few of my broader critiques. This review is broken out into three broad sections: First, the challenge facing transit today as the authors see it (addressed in Section One of the book). Second, recent attempts to address this challenge through new regulation or deregulation (addressed in Section Two of the book). Finally, the solution proposed by the authors, namely a system of urban curb rights (addressed in Section Three of the book), as well their broader recommendations for transit policy (addressed in Section Four of the book). This review concludes with some critiques of their system and reflections on the continuing relevance of their ideas for 2017, 20 years after its publication.

The Trouble of Transit in an Automobile Dominated World

The key challenges facing transit, as Klein et al. see it, are the now unquestionable dominance of the automobile and the general mismanagement of public transit. Unusual for a book about transit planning, Curb Rights begins provocatively with a chapter titled “The Triumph of the Automobile.”^[i] Early on, the authors point out that in 1990 over 90% of Americans commuted by private automobile. While these numbers have declined somewhat in the intervening 20 years, there is still little question that Americans prefer private automobiles for commuting and personal trips.^[ii] Whatever your personal predilections about travel are—personally, I commute exclusively by bicycle and don’t own a car—it isn’t hard to see why: private automobiles are great for short trips, don’t involve any waiting or transfers, offer door-to-door service, guaranteed seating, and even storage space. Traffic congestion and car crashes notwithstanding, they are also generally reliable, safe, and comfortable.^[iii] As the authors see it, the main drawbacks of the private automobile—traffic congestion and air pollution—could easily be addressed using congestion pricing and pigouvian emission taxes, respectively.^[iv]

While some of this shift from transit to private automobile was likely inevitable, Klein et al. lay a fair share of the decline of transit at the feet of public mismanagement. Most urban transit systems were, after all, privately managed as heavily regulated monopolies up until the 1950s and 1960s. The deal was simple: municipalities would provide private companies with a portion of the right-of-way and a guaranteed monopoly over transit along a specified route, and in exchange private operators would own and operate the transit line subject to heavy public regulation of fares, stops, and frequencies, among other things. While private automobiles siphoned off some riders, the authors point to deferred capital investment due to rationing during World War II, the inability to cut unprofitable lines or frequencies, and the inability to freely adjust fare as important reasons for the wave of private transit bankruptcies in the post-war era.

While the Urban Mass Transit Act of 1964 provided local governments with funds to take over private transit companies, the situation only worsened in the decades to come.^[v] The share of commuters using transit fell from 12.6% in 1969 to 5.1% in 1990.^[vi] During this same period, operating costs per passenger trip have increased by a startling 175%, largely owing to increases in labor compensation.^[vii] Between 1960 and 1990, transit management transitioned from mild unprofitability to heavy dependence on subsidies, with over 70% of revenue coming from public coffers.^[viii]

Why has public management been so ineffective at turning around the fortunes of transit? Here Klein at al. offer two major critiques of public management: the Hayekian Critique and the Public Choice Critique. The heart of the Hayekian Critique is as follows: it is difficult, if not impossible, to efficiently centrally plan a multi-faceted and constantly changing system like urban transit.^[ix] As the economist F. A. Hayek observed in a different context, relevant knowledge related to consumer route, speed, and comfort preferences, and the price tradeoffs these consumers face, is widely distributed among riders and is not easily accessible to planners.^[x] While the survey project I am involved in is one such attempt to address this issue, a 25-question survey can only gather so much information, and only that information that planners already see as important. Every few surveys, a respondent will tell me something valuable that wasn’t asked about on the survey—often their perceptive ideas about how to improve the service. I nod and listen and promise to pass the information along, but in reality, this information is lost.

There is simply no way that a single agency could collect and integrate such knowledge about unique and changing local conditions. To collect and use this knowledge, as the economist Israel Kirzner explains, we require a process of competitive entrepreneurial discovery.^[xi] That is to say, we need a system in which easy entry and exit and the profit motive allow and incentivize entrepreneurs to collect local knowledge about what commuters need and test this knowledge in a competitive marketplace. While it is easy to observe the lack of incentives facing public transit agencies, these agencies are almost certainly doomed to provide less than optimal service given their inability to exploit the knowledge produced by the discovery process that is a byproduct of trial-and-error entrepreneurial activity.

Even if we assume that public transit agencies could collect perfect knowledge about the needs of consumers and opportunities for optimization, they may face conflicting incentives that lead them to produce suboptimal service. The authors refer to this as the Public Choice Critique.^[xii] Consider: what is the purpose of a public transit agency? To enhance intercity mobility? To renew and maintain certain neighborhoods? To connect suburbs? To minimize environmental impact? Vague comprehensive plans and idealistic transit advocates often muddle these purposes, leading to poor results toward any given end. Compare this situation to the singular incentive of private operators: to turn a profit by efficiently serving customer needs.

Even where policy makers provide their transit agencies with a clear goal, internal and external special interests may further meddle with the operation of the public transit agencies. As William Niskanen observed, the personal goals and poor incentives facing leaders within public agencies often lead to overprovision of the service in question, inflated costs, and reduced efficiency.^[xiii] Then, of course, there are the conflicting purposes of powerful external groups, including public sector unions, manufacturers, and developers, which often conflict with the actual needs of local residents. Together, the Hayek Critique and the Public Choice Critique paint a picture of public transit agencies that are in many cases unable and/or unwilling to efficiently provide riders with the best possible service.

Failed Attempts at Creating a Competitive Transit Market

Before setting out their proposal, Klein et al. turn to failed attempts to address the declining status of transit through expanding markets. The authors examine three alternatives to the status quo: jitneys, edge transit services, and bus privatization.^[xiv] Jitneys, essentially informal taxis, burst onto the scene in 1914, picking up waiting riders from streetcar stops in a process known as interloping.^[xv] During their heyday jitneys functioned as a competitive private transit market, operating along routes but without schedules. This dramatically reduced streetcar revenues, prompting municipal officials to prohibit them. At the time of publication in 1997, jitneys and informal taxis were still common, particularly among low-income migrant communities. The descendants of jitneys live on today as commuter shuttles and carpooling services, although these services are often heavily regulated and strictly limited.^[xvi] Today, ride-sharing services like Uber and Lyft almost certainly fill many of these functions. But any attempt to reintroduce traditional jitneys—following a route but without a schedule—would need to contend with the problem of interloping, which could bankrupt scheduled services, and the threat of jitney cartelization, which would eliminate the benefits of a competitive jitney market.

The authors also turn to the mixed results of bus privatization and deregulation in the United Kingdom. The 1985 Transport Act privatized and deregulated all bus lines in the UK outside of London, allowing bus lines to use any stop they choose so long as they post and adhere to official schedules.^[xvii] While this change lowered operating costs, dramatically scaled back tax expenditure on transit, and expanded service access, it also failed to reduce bus fares as intended. What kept fares from falling? Given that bus lines didn’t have exclusive access to riders at certain stops, new companies could schedule their stops minutes before competitors, stealing their riders in a process known as schedule jockeying. This prompted a tit-for-tat process of schedule changes that undermined the customer experience and led to administrative waste. In response to this threat, bus companies would often temporarily operate high, inefficient frequencies to keep out competitors, a process known as route swamping. This unhealthy competition over riders lead to greater consolidation and waste, which undermined fare reductions. In a prelude to their titular prescription, the authors point out that possessing rights to the riders at certain stops during certain times of day, or curb rights, could have avoided this issue.

Reviving Transit Markets Through Curb Rights

In the final third of the book, Klein et al. turn to the question of how learn from the mistake of the past to stimulate a private competitive bus market. In characterizing the challenges facing bus transit, Klein et al. draw a conclusion that is key to their proposed solution: attempts to create a competitive market of transit entrepreneurs through unsophisticated jitney legalization or bus deregulation can eliminate or seriously hinder the ability of private bus operators to offer scheduled, route-based service. The missing ingredient, as the authors see it, is a system of publicly and privately managed curb rights.

The key investment made by route-based, scheduled bus operators is in their bus stops. Beyond buses and staffing, a major cost for any bus operator is to make prospective riders aware that if they stand at a specified location at a specified time of day, they will receive comfortable and efficient transportation to a designated location. The goal is to create a level of service such that, when a bus comes through, there will be enough customers waiting to make the line profitable. However, in an under-regulated market, jitneys can easily come along and take those waiting riders and their fares, essentially expropriating the returns to the bus operator’s investment. In thick markets, where even with jitneys interloping there are still enough customers for bus lines to break even, this isn’t an issue. But in thin markets, where buses are drawing just enough passengers to break even, jitney interloping can kill scheduled bus routes. This in turns leads to fewer customers waiting at what were once bus stops, in turn killing the jitney market and reducing mobility overall. As in the case of UK bus deregulation, competing private bus lines can also have the same effect.

Once we realize that these the passengers standing at a stop are the results of investments made by bus operators, the need for curb rights becomes clear. Without them, rational bus operators won’t invest in high quality service, information dissemination regarding route schedules and fares, or high quality bus stops, knowing that jitneys or competing bus lines can come in and snag the returns to their investment. In short, the authors envision these curb rights as the exclusive right to pick up passengers at certain locations at certain times of day. These curb rights on public right-of-ways would be administered by public officials and would be auctioned off, encouraging bus operators to do the difficult work of finding the most efficient curbs for their routes and rearranging themselves as local conditions change. Separate “jitney commons” would offer curbs on which jitneys could freely pick up waiting passengers. This would keep competitive pressure on bus operators and provide greater choice for customers, without the standard problems related to interloping.

Beyond this basic framework, the authors are forthright in their agnosticism about the details of how the system would work. How far would curb rights zones need to be from each other? How would public officials prevent bus monopolies? Would bus operators or traffic police enforce curb rights? The authors leave these questions to be resolved by a distributed process of municipal trial-and-error. Klein et al. conclude by suggesting eight further policy suggestions.^[xviii] They include general deregulation of transit services, privatization of public transit agencies, ending federal involvement in transit, keeping transit planning local, creating curb rights systems, instituting highway pricing, using individualized rider vouchers for equity goals, and reforming taxi regulation.

Concluding Thoughts

In some ways, the transportation landscape in 2017 is dramatically different than it was in 1997. The introduction and subsequent explosive growth of ride-sharing companies like Uber and Lyft has led to something of a jitney renaissance. This has in turn led to the relaxation or gradual elimination of twentieth century taxi regulation in many cities, making door-to-door transit easier than ever. Unlike the jitneys of yore, today ride-sharing does not depend on interloping and may in fact support transit by providing “last mile” service.^[xix] Further, unlike in 1997, many more people are living in cities, bicycling, and working from home in 2017.^[xx]

In other ways, the transportation landscape in 2017 still looks very much the same as it was in 1997. Road tolling and emissions taxes remain uncommon in the U.S., and congestion taxes are virtually non-existent, meaning that commuting via private automobile remains underpriced and thus disproportionately popular. While some states and cities are exploring mileage-based fees and congestion taxes, these proposals are still only in their early phases.^[xxi] Transit ridership has effectively remained flat during this entire period and in many cases may be falling.^[xxii] Finally, against the suggestions of Klein et al., many cities continue to heavily regulate and/or prohibit private transit options, including route-based jitneys, private buses, and commuter shuttles.^[xxiii]

I came out of the book feeling like the authors slightly overplay their hand. Yes, proper pricing of private automobiles, a competitive transit market, and vouchers for select groups could obviate the need for public transit services in low- and medium-density cities. But what about the needs of high-density cities? While open to being surprised, I remain skeptical that competitive bus markets alone can service the high job densities seen in many legacy cities. How would this competitive market interact with publicly managed rail? How could rail be integrated into a private transit market? What is the role of bus rapid transit? The authors leave these answers largely answered, beyond calling for the full privatization of all public transit.

On the other hand, I admire the authors’ creative attempt to develop a “property rights” approach to stimulating private transit markets. It is evident that we underprice private automobile use, especially in heavily congested areas. Getting this right could lead to an influx of commuters into transit, an influx that public transit agencies today simply aren’t equipped to handle.^[xxiv] Even without this influx, it is clear to my mind that the riders who I encounter while surveying deserve the greater choice, improved service, and lower fares that are only likely to come from the introduction of a competitive transit market. Toward this end, I appreciate the project of Curb Rights and hope to see more creative, economically literate thinking of this kind among transit planners and entrepreneurs.

—

^[i] Klein, Daniel B., Adrian T. Moore, and Binyam Reja. Curb Rights: a foundation for free enterprise in urban transit. Washington, D.C.: Brookings Institution Press, 1997. p. 7

^[ii] Passenger Travel Facts and Figures 2016. Report. Bureau of Transportation Statistics, U.S. Department of Transportation. 2016. 20.

^[iii]  Klein et al., Curb Rights, 9.

^[iv] Ibid., 8.

^[v] Ibid, 11.

^[vi] National Transportation Statistics. Report. Bureau of Transportation Statistics, U.S. Department of Transportation. 1995.

^[vii] Baumol, William J. “Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis.” American Economic Review. 57 (June). 415-426.

^[viii] Office of Management and Budget. “Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs.” Circular A-94. 1992.

^[ix]  Klein et al., Curb Rights, 17-21.

^[x] Hayek, F. A. “The Use of Knowledge in Society.” American Economic Review, XXXV, No. 4; September, 1945. 519–30.

^[xi] Kirzner, Israel M., Peter J. Boettke, and Fre?de?ric E. Sautet. Competition and Entrepreneurship. Indianapolis, IN: Liberty Fund, 2013.

^[xii] Klein et al., Curb Rights, 22-29.

^[xiii] Niskanen, William. Bureaucracy and Representative Government. Chicago; Aldine-Atherton. 1971.

^[xiv] Contracting out bus service is also very briefly discussed.

^[xv] Klein et al., Curb Rights, 33-46.

^[xvi] Klein et al., Curb Rights, 47-61.

^[xvii] Ibid., 62-72.

^[xviii] Ibid., 119-125.

^[xix] “Last Mile (Transportation).” Wikipedia. September 16, 2017. Accessed October 21, 2017. https://en.wikipedia.org/wiki/Last_mile_(transportation).

^[xx] US Census Bureau. “Biking to Work Increases 60 Percent Over Last Decade.” May 08, 2014. Accessed October 21, 2017. https://www.census.gov/newsroom/press-releases/2014/cb14-86.html.

^[xxi] Pevto, Mary, Bob Sallinger, and Adriana Voss-Andreae. “Portland Leaders Have a Choice: Increased Congestion or Courageous Leadership (Guest opinion).” OregonLive.com. September 15, 2017. Accessed October 21, 2017. http://www.oregonlive.com/opinion/index.ssf/2017/09/portland_leaders_have_a_choice.html.

^[xxii] Walker, Jarrett. “Researchers! Why is US Transit Ridership Falling? — Human Transit.” Human Transit. March 18, 2017. Accessed October 21, 2017. http://humantransit.org/2017/03/researchers-why-is-us-transit-ridership-falling.html.

^[xxiii] Berliner, Dana. “How Detroit Drives Out Motor City Entrepreneurs.” Institute for Justice. January 1997. Accessed October 21, 2017. http://ij.org/report/how-detroit-drives-out-motor-city-entrepreneurs/.

^[xxiv] Smith, Max. “Metro Ridership Drops 12 Percent; $125 million Revenue Shortfall Projected.” WTOP. February 21, 2017. Accessed October 21, 2017. https://wtop.com/tracking-metro-24-7/2017/02/metro-ridership-drops-12-percent-125-million-revenue-shortfall-projected/.

The post “Curb Rights” at 20: A Summary and Review appeared first on Market Urbanism.

Surprise!!  I’ve had the intent to wrap-up the Rothbard The Urbanist series for a long time, and it’s been sitting on my todo list for over 6 years.

I want to thank Jeffrey Tucker, then at mises.org, and now at FEE.org and liberty.me for enthusiastically granting permission to reprint excerpts from For A New Liberty.  Murray Rothbard’s 1973 classic can be downloaded free from Mises.org as pdf, and audio book read by Jeff Riggenbach.  This chapter is also discussed by Bryan Caplan as part of an econlog book club series on For A New Liberty.

It’s been a while, so you may want to catch up on the first six posts:

Rothbard the Urbanist Part 1: Public Education’s Role in Sprawl and Exclusion

Rothbard the Urbanist Part 2: Safe Streets

Rothbard the Urbanist Part 3: Prevention of Blockades

Rothbard the Urbanist Part 4: Policing

Rothbard the Urbanist Part 5: Diversity and Discrimination

Rothbard The Urbanist Part 6: Traffic Control

We pick up in the heart of chapter 11: “The Public Sector, II: Streets and Roads” to expand on a subject core to Market Urbanism: the pricing of highways, and the consequences of a system where politics, special interests, and top-down planning have incarnated a dysfunctional system severely disconnected with bottom-up pricing signals necessary to be sustainable.  Tragically, Rothbard’s insights on these subjects have been mostly neglected for over 30 years, while apologists for sprawl and automobile dominance have nearly monopolized the conversation among free-market advocates.

We begin the section with Professor Rothbard’s acknowledgement of what sprawl apologists turn a blind eye to, yet urbanists on the left are keenly aware.  Government intervention, fueled by special interests and old-fashioned progressive ideology, massively subsidized the highway system and crowded-out otherwise viable railroads.  As a result, we have an overbuilt highway system, urban neighborhoods were eviscerated, suburbs spread far-and-wide, privately built transit could not compete, and congestion clogs many socialized highways.

Pricing Streets and Roads

If, in contrast, we examine the performance of governmental streets and highways in America, it is difficult to see how private ownership could pile up a more inefficient or irrational record. It is now widely recognized, for example, that federal and state governments, spurred by the lobbying of automobile companies, oil companies, tire companies, and construction contractors and unions, have indulged in a vast overexpansion of highways. The highways grant gross subsidies to the users and have played the major role in killing railroads as a viable enterprise. Thus, trucks can operate on a right-of-way constructed and maintained by the taxpayer, while railroads had to build and maintain their own trackage. Furthermore, the subsidized highway and road programs led to an overexpansion of automobile-using suburbs, the coerced bulldozing of countless homes and businesses, and an artificial burdening of the central cities. The cost to the taxpayer and to the economy has been enormous. [p. 209]

Rothbard cites Columbia University economist, William Vickrey on the extent of subsidies to the automobile.  23 years later, Vickrey won the 1996 Nobel Prize in Economics days before passing away, and is known as the “father” of congestion pricing.

Particularly subsidized has been the urban auto-using commuter, and it is precisely in the cities where traffic congestion has burgeoned along with this subsidy to overaccumulation of their traffic. Professor William Vickrey of Columbia University has estimated that urban expressways have been built at a cost of from 6 cents to 27 cents per vehicle-mile, while users pay in gasoline and other auto taxes only about 1 cent per vehicle-mile. The general taxpayer rather than the motorist pays for maintenance of urban streets. Furthermore, the gasoline tax is paid per mile regardless of the particular street or highway being used, and regardless of the time of day of the ride. Hence, when highways are financed from the general gasoline tax fund, the users of the low-cost rural highways are being taxed in order to subsidize the users of the far higher-cost urban expressways. Rural highways typically cost only 2 cents per vehicle-mile to build and maintain.⁴

A transportation system without a rational pricing system causes dysfunction in many forms – most visibly, congestion. I first realized this while idling in traffic driving home from my first micro-economics class, which had just opened my eyes to queuing which results from supply shortages induced by mispricing.  If roads were tolled at a profit maximizing price, especially with today’s technologies that tremendously reduce transaction costs, congestion could be effectively eliminated and inform operators where to increase capacity or build new roads.  Instead, the government continuously attempts to solve congestion by buildings more roads without the benefit of price signals. Rothbard calls it, “like a dog chasing a mechanical rabbit,” and references a Washington Post article describing the unintended consequences of Washington’s Capital Beltway construction: more (not less) congestion, sprawl, and hollowing-out of jobs and residents from the central city.  I tried searching Washington Post archives for the 1971 article, “U.S. Highway System: Where to Now?,” by Hank Burchard, but was unsuccessful. Please let me know if you find it.

In addition, the gasoline tax is scarcely a rational pricing system for the use of the roads, and no private firms would ever price the use of roads in that way. Private business prices its goods and services to “clear the market,” so that supply equals demand, and there are neither shortages nor goods going unsold. The fact that gasoline taxes are paid per mile regardless of the road means that the more highly demanded urban streets and highways are facing a situation where the price charged is far below the free-market price. The result is enormous and aggravated traffic congestion on the heavily traveled streets and roads, especially in rush hours, and a virtually unused network of roads in rural areas. A rational pricing system would at the same time maximize profits for road owners and always provide clear streets free of congestion. In the current system, the government holds the price to users of congested roads extremely low and far below the free-market price; the result is a chronic shortage of road space reflected in traffic congestion. The government has invariably tried to meet this growing problem not by rational pricing but by building still more roads, socking the taxpayer for yet greater subsidies to drivers, and thereby making the shortage still worse. Frantically increasing the supply while holding the price of use far below the market simply leads to chronic and aggravated congestion.⁵ It is like a dog chasing a mechanical rabbit. Thus, the Washington Post has traced the impact of the federal highway program in the nation’s capital: [p. 210]

Washington’s Capital Beltway was one of the first major links in the system to be completed. When the last section was opened in the summer of 1964, it was hailed as one of the finest highways ever built.

It was expected to (a) relieve traffic congestion in downtown Washington by providing a bypass for north-south traffic and (b) knit together the suburban counties and cities ringing the capital.

What the Beltway actually became was (a) a commuter highway and local traffic circulator and (b) the cause of an enormous building boom that accelerated the flight of the white and the affluent from the central city.

Instead of relieving traffic congestion, the Beltway has increased it. Along with I-95, 70-S, and I-66, it has made it possible for commuters to move farther and farther from their downtown jobs.

It has also led to relocation of government agencies and retail and service firms from downtown to the suburbs, putting the jobs they create out of reach of many inner city dwellers.⁶

What would a rational pricing system, a system instituted by private road owners, look like? In the first place, highways would charge tolls, especially at such convenient entrances to cities as bridges and tunnels, but not as is charged now. For example, toll charges would be much higher at rush-hour and other peak-hour traffic (e.g., Sundays in the summer) than in off-hours. In a free market, the greater demand at peak hours would lead to higher toll charges, until congestion would be eliminated and the flow of traffic steady. But people have to go to work, the reader will ask? Surely, but they don’t have to go in their own cars. Some commuters will give up altogether and move back to the city; others will go in car pools; still others will ride in express [p. 211] busses or trains. In this way, use of the roads at peak hours would be restricted to those most willing to pay the market-clearing price for their use. Others, too, will endeavor to shift their times of work so as to come in and leave at staggered hours. Weekenders would also drive less or stagger their hours. Finally, the higher profits to be earned from, say, bridges and tunnels, will lead private firms to build more of them. Road building will be governed not by the clamor of pressure groups and users for subsidies, but by the efficient demand and cost calculations of the marketplace.

In 1973, it would have been easier to argue against Rothbard that widespread tolling was impractical due to the transaction costs involved with tolling.  43 years later, technologies that allow highway operators to charge passengers without slowing traffic are abundant.  The only obstacle to tolling highways, bridges, and tunnels is politics.  Unfortunately, drivers are voters, and they like their underpriced highways.  Can’t we just make Econ 101 a prerequisite for earning a driver’s license?

If highways were priced right, it may become feasible for governments to sell-off the assets.  But as we’ve seen in many pseudo-privatization deals, it’s hard to be optimistic it would be a true privatization where the government gets out of the highway business altogether

In the next instalment, we’ll be able to apply new technologies to Rothbard’s insights of pricing local streets, a less intuitive notion even today.  But as we’ll see, it’s actually not a new idea.

---

4. From an unpublished study by William Vickrey, “Transit Fare Increases a Costly Revenue.”

5. For similar results of irrational pricing of runway service by government-owned airports, see Ross D. Eckert, Airports And Congestion (Washington, D.C.: American Enterprise Institute for Public Policy Research, 1972).

6. Hank Burchard, “U.S. Highway System: Where to Now?,” Washington Post (November 29, 1971). Or, as John Dyckman puts it: “in motoring facilities . . . additional accommodation creates additional traffic. The opening of a freeway designed to meet existing demand may eventually increase that demand until congestion on the freeway increases the travel time to what it was before the freeway existed.” John W. Dyckman, “Transportation in Cities,” in A. Schreiber, P. Gatons, and R. Clemmer, eds., Economics of Urban Problems; Selected Readings (Boston: Houghton Mifflin, 1971), p. 143. For an excellent analysis of how increased supply cannot end congestion when pricing is set far below market price, see Charles O. Meiburg, “An Economic Analysis of Highway Services,”Quarterly Journal of Economics (November 1963), pp. 648-56.

The post Rothbard The Urbanist Part 7: Pricing Highways appeared first on Market Urbanism.

Moreover, the privatization of parking management prevents the agency from engaging in what is perhaps the most promising use of that resource: Redeveloping it into transit-oriented developments. In places like the San Francisco Bay Area, former transit parking lots have been successfully morphed into neighborhoods where people live in close proximity to public transportation and therefore use it frequently. Will the privatization deal make such projects impossible?

My only quibble with Yonah (and just about everybody) is that the market’s contribution to urbanism is maligned and neglected enough as it is – do we really have to associate yet another sprawl-inducing policy intervention with “privatization”? But beyond that, he’s got a point – rather than taking on entrenched suburban interests, we’re just adding another layer of government dependents, this time of the monied corporate variety (bidders include KKR, Morgan Stanley, Carlyle, and JP Morgan). The land on which transit parking lots sit is uniquely positioned to be converted into dense development, and the only thing worse than sitting on the land would be for the agencies to sign away their rights to change that within the foreseeable future.

The good news, however, is in the link he supplies: the number of transit agencies choosing to develop their parking lots appears to be higher than the number of those who are entrenching them with private contractors. The TODs that go up are considerably more managed and insider-dominated than I would like – few upzonings take place without a specific person in mind. But then again, even around the turn of the century, when private urban mass transit and development was at its pinnacle, corruption and favoritism dogged the deals.

The post Private parking contracting giving ‘privatization’ a bad name appeared first on Market Urbanism.

Transit activists have been bemoaning recent cuts in the MTA’s bus routes throughout New York City, but the cuts may have a silver lining, in particular for market urbanists: they may usher in the return of private buses to the streets of New York City. Private buses (and subways, and streetcars) were once the only transit options available to New Yorkers, but since the early 20th century, and especially after World War II, virtually all intracity routes have been subsumed by various levels of government, and the network has barely grown at all since nationalization (not withstanding the Second Avenue Subway, conceived eighty years ago by a private company).

Now that’s not to say that private operators haven’t tried to compete – the outer boroughs’ immigrant communities have had robust networks of informal private vans (known in NYC as “dollar vans”), which operate illegally but have been hard to prosecute, likely due to the fact that they are used mostly by linguistically-distinct immigrant communities. The recent cuts even propelled the bootleg bus phenomenon out of its immigrant ghetto, when a brave bus operator named Joel Azumah made headlines by operating a bootleg bus route along routes cut in Manhattan, Queens, and Brooklyn. This experiment was quickly quashed by an unrelenting bureaucracy, but at least it demonstrated the mutual desire on the part of riders and entrepreneurs for private service.

The city’s Taxi and Limousine Commission appears to have headed that call, and under the direction of chairman David Yassky is trying to replace at least some of the old bus routes with private buses. Unlike the city’s much-abused private van service, where operators are technically not allowed to pick up riders off the street who haven’t called ahead of time, the buses would operate with many of the privileges of regular city buses, with the added flexibility of being able to alter their routes to fit customers’ needs. Cap’n Transit has speculated that this discretion could be used as a back-door way to expand the private buses’ reach to areas not officially sanctioned by the program.

The pilot program has its detractors, the most prominent of whom are (not surprisingly) unionized MTA employees, who recently failed to get an injunction halting the program, which is scheduled to start in early September. Some transit activists also have mixed feelings about the program, which puts transit decisions in the hands of profit-seeking entrepreneurs. Benjamin Kabak at the NYC transit blog Second Avenue Sagas has argued that the private buses are a “necessary evil” and that “[i]nstead of offering services everywhere, privatized companies offer service only along profitable routes,” but considering that private operators are apparently making profits on the MTA’s least profitable routes, it’s unclear which current routes couldn’t also be served by the private sector. (In fact, only five MTA bus routes in the whole of New York City actually make operating profits.)

But even the transit union seems to view the program as to some extent inevitable, as they themselves have submitted an application to run one of the five routes up for grabs, which looks likely to be approved. (They plan on paying drivers their old union wages, though I’d be surprised if they can survive the competition.)

The program as it currently stands does not allow for unbridled competition, but as usual, the devil’s in the details. According to the TLC’s solicitation for bids, each “service area” has the potential to be served by up to three operators, which seems to allow for relatively free market entry and exit – even the wildly successful private subway and streetcar lines of the late 19th and early 20th century often negotiated exclusivity agreements with municipalities. The document also indicates that “preference” will be given to those who can offer $2 fares and accommodate wheelchairs, but if those two goals clash, it’s unclear which will take precedence. Fixed fares have also been a problem in the past – it has been argued the legally-mandated five cent fare doomed an earlier generation of private mass transit – and the fares charged by Joel Azumah’s nascent bootleg company were apparently as high as $6 for express service.

There are some ambiguities in exactly how the service will be regulated, but the mere fact fact that the program is being run by the relatively competition-friendly TLC and not the MTA is a promising sign. Despite the potential hang-ups, this program seems to be a serious step in the direction of privatization, and we at Market Urbanism will follow the story closely, as we’re eager to see private transport make a comeback in America’s commuting capital.

The post Private buses make a comeback in NYC appeared first on Market Urbanism.

If you haven’t kept up with our discussion, Murray Rothbard’s classic For A New Liberty can be downloaded free from Mises.org as pdf, web page, and audio book read by Jeff Riggenbach, and you can read the first five posts:

Rothbard the Urbanist Part 1: Public Education’s Role in Sprawl and Exclusion

Rothbard the Urbanist Part 2: Safe Streets

Rothbard the Urbanist Part 3: Prevention of Blockades

Rothbard the Urbanist Part 4: Policing

Rothbard the Urbanist Part 5: Diversity and Discrimination

Not long ago, I posted a video from a friend showing one traffic intersection in Cambodia that appears to function well without any signaling.  Here are some other resources on the emergent order of traffic without signals:

• Econtalk podcast with Mike Munger on Cultural Norms
• Cafe Hayek: The arc of emergent order and Traffic without Traffic Signals.
• Kids Prefer Cheese:  Movie from atop the Arc
• Tom Vanderbilt: News for Traffic Signal Manufacturers
• Infrastructurist on the Dutch City of Drachten

I caught some flak from a commenter who considered it “disingenuous” to present the video of the intersection as evidence “of a workable intersection.”  Of course I had to remind the commenter that I don’t consider these types of intersection something that I advocate as a “free market” solution:

Don’t mistake me as an advocate of a world without traffic signals. I am quite certain that some sort of traffic signaling would likely emerge from a free-market street system. But, my bigger point is that when information is dispersed widely among decision-makers without government monopoly, sustainable solutions emerge from the uncoerced behavior of individual agents over time.

This is a case where governance is needed, but not necessarily provided by government.  Some sort of cooperation would emerge among road operators, just like with technologies such as USB, DVD, or plain old electrical outlets and light bulbs.  A coercive government authority is not needed to dictate to manufacturers to use certain standards, manufacturers choose to produce industry-standardized equipment simply because it is what the customer desires.  If a lighting manufacturer decided to make a bulb that did not fit into standard sockets, who would buy it?  Probably nobody.

I see roads as no different.  Road customers will likely choose to avoid intersections as nerve-wracking as the one in the Cambodia video if they have a more stress-free option.  Thus road operators will work to optimize flow through their intersections while minimizing unpleasantly stressful situations.

Of course, Professor Rothbard communicates this more elegantly. I find the railroad example particularly interesting:

The principle that property is administered by its owners also provides the rebuttal to a standard argument for government intervention in the economy. The argument holds that “after all, the government sets down traffic rules — red and green lights, driving on the right-hand side, maximum speed limits, etc. Surely everyone must admit that traffic would degenerate into chaos if not for such rules. Therefore, why should government not intervene in the rest of the economy as well?” The fallacy here is not that traffic should be regulated; of course such rules are necessary. But the crucial point is that such rules will always be laid down by whoever owns and therefore administers the roads. Government has been laying down traffic rules because it is the government that has always owned and therefore run the streets and roads; in a libertarian society of private ownership the private owners would lay down the rules for the use of their roads.

However, might not the traffic rules be “chaotic” in a purely free society? Wouldn’t some owners designate red for “stop,” others green or blue, etc.? Wouldn’t some roads be used on the right-hand side and others on the left? Such questions are absurd. Obviously, it would be [p. 208] to the interest of all road owners to have uniform rules in these matters, so that road traffic could mesh smoothly and without difficulty. Any maverick road owner who insisted on a left-hand drive or green for “stop” instead of “go” would soon find himself with numerous accidents, and the disappearance of customers and users. The private railroads in nineteenth-century America faced similar problems and solved them harmoniously and without difficulty. Railroads allowed each other’s cars on their tracks; they inter-connected with each other for mutual benefit; the gauges of the different railroads were adjusted to be uniform; and uniform regional freight classifications were worked out for 6,000 items. Furthermore, it was the railroads and not government that took the initiative to consolidate the unruly and chaotic patchwork of time zones that had existed previously. In order to have accurate scheduling and timetables, the railroads had to consolidate; and in 1883 they agreed to consolidate the existing fifty-four time zones across the country into the four which we have today. The New York financial paper, the Commercial and Financial Chronicle, exclaimed that “the laws of trade and the instinct for self-preservation effect reforms and improvements that all the legislative bodies combined could not accomplish.”³

3. See Edward C. Kirkland, Industry Comes of Age: Business, Labor, and Public Policy, 1860-1897 (New York: Holt, Rinehart, and Winston, 1961), pp. 48-50.

The post Rothbard The Urbanist Part 6: Traffic Control appeared first on Market Urbanism.

Discussions I have had with people often lead to the topic of forestalling, in which a sinister land owner decides to completely surround a neighbor’s property, preventing him from using it. This valid concern can be eased through a principled analysis of such a situation:

At this point in the discussion, someone is bound to raise the question: If streets are owned by street companies, and granting that they generally would aim to please their customers with maximum efficiency, what if some kooky or tyrannical street owner should suddenly decide to block access to his street to an adjoining homeowner? How could the latter get in or out? Could he be blocked permanently, or be charged an enormous amount to be allowed entrance or exit? The answer to this question is the same as to a similar problem about land-ownership: Suppose that everyone owning homes surrounding someone’s property would suddenly not allow him to go in or out? The answer is that [p. 204] everyone, in purchasing homes or street service in a libertarian society, would make sure that the purchase or lease contract provides full access for whatever term of years is specified. With this sort of “easement” provided in advance by contract, no such sudden blockade would be allowed, since it would be an invasion of the property right of the landowner.

A likely solution to this issue of forestalling, would be the emergence of “access insurance”. This would be similar to title insurance, which is a system that emerged as a result of the United States system of document recording “in which no governmental official makes any determination of who owns the title or whether the instruments transferring it are valid.” The US system seems anarchic, but the Title Insurance system emerged through the marketplace.

Such a system of “access insurance” would likely emerge to become as universal as the title insurance system, and likely be required by lenders. A buyer of a property would purchase insurance to ensure that access to the property would not be denied by any parties. If some neighbor decides to invade the property rights of the insured by blockading him in, the “access insurance” company would have to compensate the policy holder for the full value of the property (or other amount insured). Thus, the heavily capitalized insurance company has every incentive to use its vast resources to prevent such an event from occurring to defend the property from blockades.

The post Rothbard the Urbanist Part 3: Prevention of Blockades appeared first on Market Urbanism.

It turns out the entire Chapter 11  called “The Public Sector, II: Streets and Roads” is actually a chapter on Market Urbanism. Bryan Caplan considers this chapter “the least convincing chapter in the book”, but as a Market Urbanist, I strongly disagree.  I do admit that his discussion of safety and policing of private local streets involves a great deal of speculation and reliance on faith in the action of individual agents, but the insights into road subsidization and land-use patterns was decades ahead of its time.  These insights may not seem so radical now, but imagine the resistance to these ideas in the days before urbanism gained much credibility.

I decided it would be valuable to share a thorough parsing of the chapter.  I checked with the Mises Institute, who informed me that I am welcome to quote large pieces of text directly from the book – so I will.  Over the next few weeks I’ll share parts of Chapter 11 for discussion.  Feel free to read ahead…

In response to the first Rothbard post, Bill Nelson commented:

That said, I think that Professor Rothbard unfortunately only sees what he wants to see through his “Austrian” lens, and is therefore missing other reasons why “poor” people are not welcome in the suburbs — or anywhere else. Specifically, most home owners are interested in keeping out not poor people — but instead people with sociopathic behavior — which is more common among people who are less well-off.

I responded that Rothbard has more to say on that topic.  In fact, as you’ll soon see, he has a lot to say on safety.  (Keep in mind that Rothbard wrote For A New Liberty back in the 1970s, prior to Times Square’s rejuvenation.  A lot has changed since then…)

Chapter 11: The Public Sector, II: Streets and Roads

Protecting the Streets

Abolition of the public sector means, of course, that all pieces of land, all land areas, including streets and roads, would be owned privately, by individuals, corporations, cooperatives, or any other voluntary groupings of individuals and capital. The fact that all streets and land areas would be private would by itself solve many of the seemingly insoluble problems of private operation. What we need to do is to reorient our thinking to consider a world in which all land areas are privately owned. Let us take, for example, police protection. How would police protection be furnished in a totally private economy? Part of the answer becomes evident if we consider a world of totally private land and street ownership. Consider the Times Square area of New York City, a notoriously crime-ridden area where there is little police protection furnished by the city authorities. Every New Yorker knows, in fact, that he lives and walks the streets, and not only Times Square, virtually in a state of “anarchy,” dependent solely on the normal peacefulness and good will of his fellow citizens. Police protection in New York is minimal, a fact dramatically revealed in a recent week-long police strike when, lo and behold!, crime in no way increased from its normal state when the police are supposedly alert and on the job. At any rate, suppose that the Times Square area, including the streets, was privately owned, [p. 202] say by the “Times Square Merchants Association.” The merchants would know full well, of course, that if crime was rampant in their area, if muggings and holdups abounded, then their customers would fade away and would patronize competing areas and neighborhoods. Hence, it would be to the economic interest of the merchants’ association to supply efficient and plentiful police protection, so that customers would be attracted to, rather than repelled from, their neighborhood. Private business, after all, is always trying to attract and keep its customers. But what good would be served by attractive store displays and packaging, pleasant lighting and courteous service, if the customers may be robbed or assaulted if they walk through the area?

The merchants’ association, furthermore, would be induced, by their drive for profits and for avoiding losses, to supply not only sufficient police protection but also courteous and pleasant protection. Governmental police have not only no incentive to be efficient or worry about their “customers'” needs; they also live with the ever-present temptation to wield their power of force in a brutal and coercive manner. “Police brutality” is a well-known feature of the police system, and it is held in check only by remote complaints of the harassed citizenry. But if the private merchants’ police should yield to the temptation of brutalizing the merchants’ customers, those customers will quickly disappear and go elsewhere. Hence, the merchants’ association will see to it that its police are courteous as well as plentiful.

Rothbard then goes on to describe two hypothetical ways private ownership would lead to safer streets – through joint ownership or management of city blocks, or ownership of the streets themselves by private operators:

Such efficient and high-quality police protection would prevail throughout the land, throughout all the private streets and land areas. Factories would guard their street areas, merchants their streets, and road companies would provide safe and efficient police protection for their toll roads and other privately owned roads. The same would be true for residential neighborhoods. We can envision two possible types of private street ownership in such neighborhoods. In one type, all the landowners in a certain block might become the joint owners of that block, let us say as the “85th St. Block Company.” This company would then provide police protection, the costs being paid either by the home-owners directly or out of tenants’ rent if the street includes rental apartments. Again, homeowners will of course have a direct interest in seeing that their block is safe, while landlords will try to attract tenants by supplying safe streets in addition to the more usual services such as heat, water, and janitorial service. To ask why landlords should provide safe streets in the libertarian, fully private society is just as silly as asking now why they should provide their tenants with heat or hot [p. 203] water. The force of competition and of consumer demand would make them supply such services. Furthermore, whether we are considering homeowners or rental housing, in either case the capital value of the land and the house will be a function of the safety of the street as well as of the other well-known characteristics of the house and the neighborhood. Safe and well-patrolled streets will raise the value of the landowners’ land and houses in the same way as well-tended houses do; crime-ridden streets will lower the value of the land and houses as surely as dilapidated housing itself does. Since landowners always prefer higher to lower market values for their property, there is a built-in incentive to provide efficient, well -paved, and safe streets.

Another type of private street-ownership in residential areas might be private street companies, which would own only the streets, not the houses or buildings on them. The street companies would then charge landowners for the service of maintaining, improving, and policing their streets. Once again, safe, well-lit, and well-paved streets will induce landowners and tenants to flock to those streets; unsafe, badly lit and badly maintained streets will drive those owners and users away. A happy and flourishing use of the streets by landlords and automobiles will raise the profits and stock values of the street companies; an unhappy and decaying regard for streets by their owners will drive the users away and lower the profits and the stock values of the private street companies. Hence, the street-owning companies will do their best to provide efficient street service, including police protection, to secure happy users; they will be driven to do this by their desire to make profits and to increase the value of their capital, and by their equally active desire not to suffer losses and erosion of their capital. It is infinitely better to rely on the pursuit of economic interest by landowners or street companies than to depend on the dubious “altruism” of bureaucrats and government officials.

I think it is easy to mistake Rothbard’s vision as some sort of privately-run pseudo-police state, clashing with Jane Jacobs’ vibrant public spaces.  Keep in mind that this was written in the 1970’s – when crime was at its peak in New York and many other cities.  But, as Jane Jacobs taught us, diverse, vibrant street life provides “eyes on the street” – a no-cost security measure.  As a commercial benefit, streets with high foot traffic also enable higher-rent ground-floor retail.  So, I think it’s important to add to Rothbard’s discussion of safety that a well-run block or street would be wise to encourage pedestrian-activated streets as both a cost reducing and revenue increasing measure.  Publicly-run streets lack this natural incentive.

Note: Rothbard does mention Jane Jacobs on page 247 in an unrelated chapter.

Stay tuned for more of this series. Feel free to read ahead or listen to the audio version of the chapter…

The post Rothbard the Urbanist Part 2: Safe Streets appeared first on Market Urbanism.

In Robert Poole’s article, he discusses the merits of the increasingly popular use of Public-Private Partnerships (PPP) to fund and operate roadways:

Four potential benefits are particularly important:

1. Fewer Boondoggles: Elected officials often champion projects that yield political benefits but have costs greater than their benefits. But with PPP toll projects, nobody will invest unless the benefits exceed the costs to the extent that they can project a positive return on their investment. That’s a powerful safeguard against boondoggles.
2. Avoiding “Big Dig” Disasters: Large-scale “mega-projects” like Boston’s notorious Big Dig are prone to large cost over-runs and schedule delays. In a well-structured PPP project, those risks can be transferred to the private sector, shielding taxpayers from those costs.
3. Cost Minimization: Traditional highway projects are built by the lowest-bidder, which often means they are built cheaply and need lots of expensive maintenance over their lifetimes. But a PPP toll highway must be maintained for decades at the private company’s expense. Hence, it has every incentive to build it right to begin with, to minimize total life-cycle cost.
4. Sustainable Congestion Relief: If you add ordinary freeway lanes, they tend to fill up and become congested. But today’s urban toll lanes use variable pricing (as on the 91 Express Lanes) to keep traffic flowing smoothly on a long-term basis.

In contrast, Walter Block takes a more principled stand for complete privatization:

Public – private partnerships (PPP) are thus part and parcel of both fascism and socialism; they constitute a partial state ownership of the means of production. As well, they are emblematic of fascism, and government is the senior partner, and its regulations still determine the actions of these public – private partnerships.

Block has dedicated a chapter in his new book, The Privatization of Roads and Highways: Human and Economic Factors to a critique of Public-Private Partnerships.  I haven’t read it yet, but hope to share some of the insights when I do.

This is a concept I have been debating in my head for a while.  Are public-private efforts towards privatization really a step in the right direction towards liberalizing the transportation system, or are they just a form of corporatism that enable governments to bail themselves out of their fiscal crises?  Should we hold out for Block’s ideal, yet unlikely, complete private overhaul, or hope for gradual, yet inevitably incomplete liberalization with PPPs as the first necessary step?

What are your thoughts?  Have any readers read Block’s critique of Public-Private Partnerships?  (a pdf version of the book is offered free from the Mises Institute)

The post Block vs Poole: The Public-Private Partnership Debate appeared first on Market Urbanism.