A Stitch in Haste

The U.K. is considering imposing a surcharge on rail passengers during peak-traffic periods.

This story reminded me of a prediction I have been making for some time now: with the advent of the MetroCard, coupled with the ever-expanding ridership along certain lines (including the line that services my Upper East Side neighborhood), I think it is inevitable that the NYC subway will eventually adopt a peak/off-peak fare structure.

The New York City subway was not the first subway ever built, nor was it particularly innovative technologically when it first opened in 1904. It did however, incorporate two radical new concepts into mass transit: express trains and a flat fare (a nickel back in 1904).

The flat fare was a brilliant idea for two reasons. First, it was exceedingly simple to administer: no zones, no lengthy computations or questions at ticket booths, no need for conductors spot-checking tickets en route as most commuter trains and many local transit systems still do today. Just pluck down your nickel and go. Awesome.

The second advantage was to subsidize development in the outer boroughs of New York. If it didn't cost more money to live outside of Manhattan, and if it didn't cost more time either (again because of the new express trains), then people unsurprisingly decided to leave Manhattan, which was far more crowded during the early Twentieth Century than it is today.

On the other hand, flat-rate pricing for a fixed infrastructure, whether mass transit or a public utility such as electricity, has a major drawback: it does not account for capacity costs. In other words, subway costs are not entirely determined by total usage or by average usage, but by peak usage. You have to have enough trains to handle rush hour; many if not most of those trains sit idle the rest of the time.

This phenomenon has long been recognized in public utilities: part of the cost of providing electricity is not just having a generator, but having a big generator, one big enough to handle not average capacity but peak capacity. Why shouldn't those consumers who force the utility to build a bigger generator be expected to pay for the "extra bigness" by paying a peak use surcharge? Stated differently, by pricing some customers into the off-peak periods, the utility can build a smaller generator, thereby reducing costs for everyone.

And of course in our relatively new "cell-phone nation" we are all aware of the difference between peak and off-peak capacity and pricing (think "free nights and weekends"). The cell phone companies aren't being generous — their capacity expenses don't come from off-peak usage, so there's little need to charge for it; competition takes care of the rest.

Prior to the MetroCard it would have been essentially impossible to impose a peak/off-peak differential; the administrative efficiencies of flat fares swamped the operating efficiencies of capacity pricing. But now, with the MetroCard, that's no longer the case.

The New York City subways may not yet be as bad as Tokyo's, but we're getting there. A peak/off-peak fare differential might persuade people to go to work a little earlier or leave a little later, making the trip less torturous for all.

Since the disgracefully mismanaged Metropolitan Transportation Authority has made it clear that no new subway lines are forthcoming, some other way to alleviate the capacity strain must be implemented soon. A peak-travel surcharge may be the next best alternative.

In the days of my youth the penalty for the petty offense of carrying an open container of alcohol (perhaps a cup of beer on the way from one fraternity party to the next) was to be required to dump it and move along. Of course, depending on your mood and budget, that could be quite a harsh penalty ("Oh man, I just opened that can of Milwaukee's Best!").

I'm far too old now to engage in such sociopathy, so I don't know what the open-container laws are like today, in NYC or elsewhere. I'm pretty sure that's how New York City police officers still control alcohol consumption at parades, especially on St. Partick's Day.

In any case, I've often thought that a similar fate should befall those who break the rules on subway trains and other forms of mass transit. Simply make the transgressor who eats, drinks, plays a boom box or whatever exit the train and have to wait for the next one. It's almost like a 10-minute jail sentence, and it gets the point across (is there anything more boring than waiting for a subway train?).

Well, the New York City subway bureaucracy disagrees:

NYC Transit yesterday recommended that a host of routine subway activities be made fineable offenses — including putting one's feet on a seat, straddling a bicycle, wearing roller skates and moving from one car to another.

The MTA board will meet tomorrow to vote on proposals aimed at reducing crime and improving rider safety because "riding the subway is dangerous."

If approved, the new regulations would carry fines of $50 to $100 and go into effect Oct. 1.

October 1 — just in time for Election Day. Go figure.

But not all the news is bleak:

In another [vote], the committee proposed rolling back a rule against riders' putting packages on empty seats. That would become officially acceptable — provided they didn't interfere with other riders.

Asked why the MTA was in favor of relaxing that particular rule, [a spokesman] pointed to a case last year of a woman who, despite being the only person in the car, was cited after placing a package beside her.

Can there be any lower form of petty bureaucrat that the people who vote on whether putting bags on a seat should be a punishable offense or whether spitting out gum should carry a $50 or $100 fine?

Pathetic.

POST SCRIPT: Those who don't understand the Singapore reference can click here. And everyone remembers Stephanie Willet, right?

Just two days before a massive fire caused subway chaos in Manhattan (yet again), mass transit officials declared that, lo and behold, they have too much money and want to give some of it back:

In an unprecedented move, the Metropolitan Transportation Authority will cut the base fare in half to $1 on weekends between Thanksgiving and New Year's Day, agency sources said yesterday.

The "bonus days" — which also include the last week of December — will be funded by a portion of the agency's $928 million surplus projected for the end of this year.
...
The discounts will cost the agency $50 million, but will encourage the use of mass transit during the holiday season and give riders a break in the face of escalating gas and home-heating costs, according to the memo.

Of course, what is described as "giving a break" to riders between Thanksgiving and Christmas is really a redistributionist tax from all the people who rode the subway up until now (who have been paying what now appear to be artificially high fares) to subsidize later riders (who will pay artificially low fares).

This is not what the MTA is chartered to do.

The MTA, a bureaucracy that is neither puny nor poor, exists to provide mass transit services at cost. Its raison d'etre is not to amass surpluses of nearly a billion dollars and then play Santa or Scrooge with arbitrary discounts.

It was wrong to accumulate such a surplus in the first place. Given that it now exists, it is wrong to use it for any purpose other than to shore up its own finances or to fund capital improvements.

If the MTA honestly can't think of anything better to do with its surplus than have a temporary, warm-fuzzy-feeling "sale" on fares, then let me make a modest proposal:

A subway endowment.

It would work like this: Whenever the MTA runs an unexpected surplus (which, remember, means the MTA was incompetent in its financial modeling and forecasting), the extra money would be put into a permanent fund, managed by independent trustees, the income from which would help offset the general operating expenses of the system, thereby helping to keep fares low in perpetuity.

This is hardly a Nobel Prize winning discovery. Permanent civic institutions often rely on endowments — colleges, museums, orchestras, scholarship funds, houses of worship, etc. — so why not mass transit? The benefits of an endowment are permanent and perpetual. They are also egalitarian, since all future riders benefit and not just those randomly fortunate enough to be paying their fare during some arbitrary interval.

The MTA should either figure out how to properly price train fares or at least put its surpluses to a use that would benefit all riders equally.

Either that, or at least spend the money on figuring out how to avoid burning the system down every few months.

More thoughts from Andrea Peyser.

UPDATE: Governor George Pataki, who controls the MTA board, has expressed his opposition to the "fare sale."

The good news is that subway fares might not rise as is currently planned:

"We don't want to do it," [MTA Executive Director Katherine] Lapp said of the expected hikes in 2007 and 2009 during testimony before a state legislative budget committee in Albany yesterday. "It's the last resource that we look to to close the budget."

The bad news:

Should revenue exceed what the MTA is projecting, particularly in the area of real-estate-transaction tax receipts, a fare hike may be avoidable, Lapp said.

Which invites the question of why "real-estate-transaction tax receipts" should be used to finance the MTA at all.

Here's a radical idea: the people who ride the subway should, um, pay for it. Not the people who buy and sell property.

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Speaking of the subway and money, here's one just for flavor:

A ride home on the F train doubled the cost of Samantha Hoover's groceries -- after a cop wrote her a $50 ticket for putting the plastic bag on the seat next to her.
...
"Next thing I know, a police officer walks up and wants to know if I've ever been arrested," said Hoover. "He asked for my identification and said, 'You can't put your bag there.' "

Hoover's life as an outlaw was made possible by new MTA subway rules -- prohibiting activities such as roller-skating or walking between cars, not to mention putting bags on seats.

Well, that's one way to keep fares down.

The bureaucracy that runs many of New York's bridges and tunnels is asking that very question:

According to a survey conducted by the Port Authority, most New Jersey drivers who take its three crossings over the Hudson River each morning earn more than $100,000, officials told The Post. Nearly one-third of drivers who use the Lincoln Tunnel earn more than $200,000.

The Port Authority conducted the survey of drivers' household incomes as it prepares to consider possible toll hikes for next year. ... Port Authority officials say incomes would be only one factor in deciding whether or not to raise tolls.

Of course, incomes should not be even "only one factor" in setting tolls. When the government, at whatever level and in whatever form, decides that a piece of infrastructure, such as a bridge or tunnel, is a natural monopoly that warrants public provision, there is an irrebuttable presumption that the government should base its fee structure on costs and costs alone. The toll should be exactly enough to fund the operations (broadly defined) of the infrastructure -- and not one penny more.

The notion that "people can pay more" is not a justification for charging them more for public infrastructure. The whole point of having the government run a monopoly business is so that it will not behave like a monopoly and extract monopoly rents.

Otherwise what is the government other than just another "greedy capitalist bastard"?

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Note that a public monopolist, or rate regulator, trying to estimate the demand curve for its monopoly product such that the system's capacity is neither strained nor squandered is an entirely different undertaking from "let's raise prices because we can." Neither is a "peak versus off peak" fare structure an affront to the notion of the "beneficent public monopoly," so long as the differential reflects only the cost of the addition peak capacity and not a rent-extracting abuse of public monopoly power.