Mexico City Fact of the Day
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The fare for Mexico City's subway system, the Metro, is two pesos, or roughly $0.20.
Of course the cost, as opposed to the fare, is far more than two pesos per rider. The government makes up the difference via large subsidies.
Compare this situation with the New York City subway system (fare $2.00), which is subsidized to a far lesser extent. Also compare the relative usefulness of the two systems.
By serving a substantial portion of the city, the New York City subway makes owning a car unnecessary to almost all New Yorkers, and few in fact own cars. The Mexico City Metro, by contrast, serves only a small part of the city's geography, hence cars are still necessary for most residents.
How does this relate to the air pollution problem of my previous post?
At first glance, it might seem that a heavily subsidized subway system would help Mexico City's air quality problem by keeping people off the roads. But consider: if the government reduced the subsidy and redeployed that funding to expanding the Metro, so more people could actually use it, then perhaps that would actually get more people into mass transit, despite a higher fare.
In entrepreneurial capitalism, demand creates it own supply. In central planning, demand creates its own government subsidies.
In Mexico City, you can literally choke on the difference.
Of course the cost, as opposed to the fare, is far more than two pesos per rider. The government makes up the difference via large subsidies.
Compare this situation with the New York City subway system (fare $2.00), which is subsidized to a far lesser extent. Also compare the relative usefulness of the two systems.
By serving a substantial portion of the city, the New York City subway makes owning a car unnecessary to almost all New Yorkers, and few in fact own cars. The Mexico City Metro, by contrast, serves only a small part of the city's geography, hence cars are still necessary for most residents.
How does this relate to the air pollution problem of my previous post?
At first glance, it might seem that a heavily subsidized subway system would help Mexico City's air quality problem by keeping people off the roads. But consider: if the government reduced the subsidy and redeployed that funding to expanding the Metro, so more people could actually use it, then perhaps that would actually get more people into mass transit, despite a higher fare.
In entrepreneurial capitalism, demand creates it own supply. In central planning, demand creates its own government subsidies.
In Mexico City, you can literally choke on the difference.
Related Posts (on one page):
- Another Econ. 101 Moment
- Mexico City Fact of the Day
- Mexico City Fact of the Day
- An Econ 101 Moment
Posted by KipEsquire on
6 September 2005
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