A Framework for Human Behavior

United We Stand

For united we stand. Divided we fall

And if our backs should ever be against the wall

We'll be together, Together, you and I

Man is a social animal. What does this mean for understanding our behavior?

Man is a social animal.  When Darwin wrote “On the Origin of Species” it gave rise to the “Survival of the Fittest” as a phase, but Darwin was applying it to species in the plural, even if it has been often applied to the behavior of individuals.  How humans approach winning is only one dimension of understanding behavior.  In many disciplines two dimensions are used to understand behavior: time and distance; exclusive and rival; likelihood and consequence, etc.  I would propose that two dimensions are useful in classifying human behavior.  The first dimension is how they define winning, optimization; and the second dimension is how they approach others, inclusion.

Games Theory proposes two basic approaches to winning: User Optimization and System Optimization.  I would propose that when applied to human behavior this is not a binary either/or choice but instead is a continuum, spectrum. 

Humans are wary of others.  That definition of others can also be inclusive or exclusive, but also as a continuum, not as an either/or choice.

The proposed framework of two dimension is:

Optimization can be a spectrum depending on the degree of shadow prices (e.g. customs, rules, regulations, laws) that are willing to be accepted.  Libertarians could be classified as favoring extreme user optimal solutions, while socialists would favor extreme system optimal solutions.  Shadow prices must be imposed and collected by society, i.e. government.  People who believe in small government, like Republicans tend to favor system optimal solutions, but limited government. Democrats also favor system optimal solutions favor, but they favor larger government.

While Socialists favor System Optimal solutions, there is a difference between Marxists and Nazis ( whose very name is a shortening of the German for National Socialism). That  dimension is the view of others included in those system solutions.  Marxists favor a very broad inclusive view, while Nazis and other nationalists favor a narrower definition of those included in the system being optimized. This inclusion can be on a continuum from individuals, families, ethnicity, language, religions, race, etc.

A distinction is made between “Do As I Say” versus “Do As I Do”.  Humans may adopt a public System Optimal solution in theory for others, but a private User Optimal solution for themselves.  E.g. Nazis in public as opposed to Nazi officials in practice.  However, nature has stood firmly on the side of System Optimal solutions, Species, rather than User Optimal solutions, individual organisms. 

While it is convenient to define human behavior in two dimensions, it is not extreme behavior in these dimensions  Humans are a balance of both social and xenophobic.  Moderation in these opposing tendencies may be the preferred behavior.

Risk and Business

Risky Business

I'm afraid we've gone and laid it on the line 
      It's a risky business

If the business of government is really business, then why can’t government be run more like a business?

The answer is in the perception of risk.  Risk has two components: likelihood and consequence.  If you get the risk wrong, and the likelihood was high, but it had minimal consequences, then that is no big deal.  If the consequence is dire, but the likelihood is low and it did not happen, then that also is no big deal.  If an event happens even though the likelihood was small, and the consequences are dire, and you did not properly consider the risk, then God help you.

That is why there are insurance actuaries. They set insurance rates by quantifying the likelihood of something bad happening and valuing the consequences of that event. And that is why insurance is purchased, not because you expect something bad to happen, but you want to mitigate the consequences if something bad happens.

Many businesses do not purchase insurance, instead they self insure.  They accept the consequence that they might go out of business if the if the worst happens.  The problem with going out of business, bankruptcy, is that it impacts the creditors and customers of that business as well. Society does not have the option of declaring bankruptcy, since the customers and the creditors are society.  Governments can declare bankruptcy only if the customers and creditors are another government, if those governments agree to take on the customers and costs of the old government.

If businesses or businessmen do value risk properly then, yes governments can be run as that business.  But a string of bankruptcies and business failures should be a warning sign that the business or businessman does not understand risk.  A child learns not to pick up a hot object by experience.  If it never learns because it assumes nothing it touches will burn, then they might be lucky, but have not learned this lesson.  You learn from mistakes. You do not  keep doing so many things in the hopes of finding something in which you will make no mistakes, incur no consequences.

International Trade

Trade Winds

And we're caught in the trade winds
The trade winds of our time

Can the growth in international trade affect the US economy?

According to the United Nations Center for Trade and Development, global trade (exports) have grown from $61 Billion US Dollars in 1960 to a value of almost $20 Trillion US Dollars in 2018.  The US Dollar serves as the international reserve currency and has served this role, exclusive of gold, since 1971.  The Gross Domestic Product of the United States is also $20 Trillion  in 2018,  about 12% of which is exports.  Even if the US trade dropped to zero, this international trade between the countries would still require US Dollars.

A question becomes what is the future of international trade?  Fitting a Compound Annual Growth Rate curve to the trade from 1960, would forecast that the Global Trade in 2030 could be $85 Trillion.  However, if the pattern of recent years is fit to a logit curve, this suggests that international exports could amount to $24 trillion in 2030.

This difference in forecasts has implications for the domestic monetary policy of the Federal Reserve Bank.  While the Federal Reserve can control the domestic economy, they have little ability to affect international trade. International trade, which includes US exports, is projected to be as large as the US domestic economy, if not larger.  This has major implications for domestic national monetary policy.  

This conflict between domestic monetary policy and the international trading when a domestic currency is used as the international reserve currency was anticipated in the 1960s by the Belgian-American economist Robert Triffin. He pointed out that the country whose currency is the global reserve currency, that foreign nations wish to hold, must be willing to supply the world with an extra supply of its currency to fulfill world demand for these foreign exchange reserves.

International trade might be equal to the US domestic GDP by 2030, or might be several times greater than this amount.  In any event,  the continued use of the US Dollar as a global exchange has become a serious problem,  It remains to be seemed if the change in trade winds is a problem that can blow down the US economy.

User Optimization

The Winner Takes It All

 The winner takes it all

The loser has to fall

 It's simple and it's plain
Why should I complain 

You should complain because the winner taking it all is only one way that a game can be played. 

Everyone loves a winner.  However, whether the winner is a society or an individual depends on one’s strategy and the rules of the game.  In Games Theory there are two major strategies: User Optimization and System Optimization.  The first strategy could be characterized as “I do what is best for me”.  The second strategy could be characterized as “All for one and one for all."  The first strategy involves finding the solution that is best for that individual.  The second looks at the sum of the solutions by all of the individuals in that system and picks the set of solutions that are best for that system. 

The System Optimal solution requires that some individuals  “take one for the team”, that is they must accept a solution that is not best for them, because that is the best solution for society.  A System Optimal solution has been shown to be different than a User Optimal solution but may not be intuitively obvious.  Individual User Optimal solutions will be chosen when there are no constraints on an individual.  If one user chooses a solution that is best for him, every other similar individual should make that same choice.  However, the aggregate of these solutions is not the System Optimal solution.  For example, when choosing a route, each user will choose the  route that maximizes their utility, minimizes their time and cost.  In my discipline of transportation planning, this is known as Wardrop’s Principle.  A misconception that the sum of these User Optimal solutions is the System Optimal solution has led to Braess' paradox, where eliminating a link which forces travelers to change their paths could result in a better system utility. If the User Optimal and System Optimal solutions are accepted to be different, then there is no paradox.

Humans are a social animal, but they are also individual animals.  Societies prefer team, group,  sports.  The Super Bowl generates more viewers and more interest than the individual championships in track and field.  The best player in a team sport may not play on the best team.  Giannis Antetokounmpo might have been the NBA’s Most Valuable Player in 2019, but in that year the Toronto Raptors, not Giannis’ Milwaukee Bucks, won the NBA Championship.   

There is a way to make the user optimal solution be closer to the system, societal, optimal solution. That is by charging an extra utility for using a certain item.  Economists call this adding a shadow price. It is one of the reasons why tolls are charged on public roads. Customs, Rules, Regulations, and Laws are among the ways that society imposes these additional costs for using an item.  When this shadow price is added to the actual price, then the individual user chooses a solution that considers this shadow price.  The shadow prices that are added can be chosen such that the User Optimal solution becomes closer to the System Optimal solution.  The problem is that the society that imposes the shadow prices is also the same society that collects and distributes these shadow prices.  Society must trust that the shadow prices are imposed for the good of society and not the good of the those in charge of society.  It becomes a matter of “Who Watches the Watchmen/Quis custodiet ipsos custodes?”

Is Inflation Real?

Just My Imagination

I tell you I can visualize it all
This couldn't be a dream for too real it all seems
But it was just my imagination
 Once again runnin' way with me.

Inflation seems real, but it may be just our imagination.

Price inflation seems real.  Every year things get more expensive.  But it hasn’t always been this way.  See my earlier posting. https://dbeagan.blogspot.com/2018/08/the-happening-riding-high-on-top-of.html.  There was a time when prices seemed stable.  Prices rise because demand is increasing at a faster rate than supply.  Demand is growing because the economy is growing.  Everyone knows this, including the suppliers.  They should increase supply at the rate of demand in order to increase their profits. They know how much demand is growing, or is there some other reason why there is still inflation?

The US dollar serves as the medium of exchange in the United States, but also serves as the de facto international currency.  It did not have to serve as the international reserve currency.  John Maynard Keynes proposed at the 1946 Bretton Woods Conference that the international currency exchange should be the bancor, French for bank gold.  This was rejected in favor of a system a system of pegged exchange rates ultimately tied to physical gold in a system managed by the World Bank and International Monetary Fund, IMF. In practice, that system implicitly established the United States dollar, USD, as a reserve currency convertible to gold at a fixed price on demand by other governments. The dollar was implicitly established as the reserve by the large trade surplus and gold reserves held by the US at the time of the conference.

But these conditions would not endure for ever.  By the early 1970s, the US trade surplus was no more, and, in 1971, Nixon decoupled the US dollar from gold. This made the US dollar the explicit, not just the implicit, international currency.  A period of monetary inflation ensued, but this is only inflation based on the previous year. In fact, the Consumer Price Index, a measure of inflation, has consistently risen since that time, even while annual inflation has been declining.  Since 1971, the CPI appears to have been growing at a linear rate.  While Year Over Year, YOY, inflation from 2018 to 2019 was 1.8%, inflation from 1971 to 2019 was 531%.  Inflation reached a maximum annual inflation of 13.5% in 1980.  By contrast a linear regression of the CPI, assumes that much of the inflation happened immediately in 1971 when it was forecast to be a maximum of 21%, but by 2019, its forecast annual inflation drops to 1.8%, and has increased from 1971 by 549%.

Why is there any inflation at all? As stated in the  earlier posting, this is because of the Triffin dilemma. Since the USD is the international reserve currency, trade between, for example, China and Nigeria, even though it does not involve the United States, may require USD.  The growth in international trade according to World Trade Organization is forecast to be 1.6% in 2019.

The United States Federal Reserve Bank has been adjusting US monetary policy to reach its goal of 2% annual inflation but has admitted failure.  I am proposing that if the USD is the international trading exchange, then “inflation” is a consequence. If the USD was NOT the international exchange, then inflation might be just my imagination, and 0% would be the real inflation, which is certainly better than the Federal Reserve’s 2% goal.

Classification Systems

Horse in Striped Pajamas

No, that’s not what it is at all 
That's an animal people call a zebra
  I see, but it still looks like a horse in striped pajamas to me

There is no single best classification system, it just must be useful to you.

And I thought truck classification systems were screwed up!  It is nothing compared to product classification systems.  Humpty Dumpty was only partially wrong when he was talking to Alice in "Through the Looking Glass".  The word used to describe a thing may mean what I choose it to mean, but the word, or classification system, that I use depends on my purpose.  A shipment of household cleaner can go by many classifications.  A retailer might describe it by the UPC Code on the items in the shipment.  A customs official might use the Harmonized Series code to see what tariffs should be collected on that item.  The railroads might use the Standard Transportation Commodity Code to determine what price to charge for transporting that shipment by rail.  The US Department of Transportation might use the Standard Classification of Transported Goods to report on multimodal shipments.  The US Army Corps of Engineers might use the Public Monitoring System code if that shipment was transported by water.  An emergency first  responder might refer to that shipment by its United Nation’s Hazardous Material code.  An economist might refer to the industries that Make or Use that product.  Etc.

Each one of these classification systems is appropriate for the purpose that is intended, but each one is different.  An economist might have a classified a product but used a system that a hazardous material responder would like to use.  It is too much to expect that a single code could be developed, but in order to transfer information from one discipline to another, it is desirable that correspondence tables, crosswalks, be developed among those classification systems.  That way information developed for use by customs officials can be used by economists, and so on.  Those establishing systems should at least develop a crosswalk to one other commonly used system.  If enough correspondence systems are developed, then perhaps one of those tables could serve as a Rosetta Stone to translate that information from one from those who have information to those who would like to use that information.  That way you can still refer to a “horse in striped pajamas” if that is what makes sense to you.

Transportation and Racism

The Freedom Rider

By the time you hear that siren sound
Then your soul is in the lost and found
Forever, Forever, Freedom rider

What does transportation planning have to do with the fight against racism?

Transportation has played a key role in the Civil Rights movement, from  Rosa Parks not giving up her bus seat, to the Montgomery Bus Boycott, to the Freedom Riders.  Transportation should be prepared to play a role in the current struggle against racism.

The Civil Rights struggle is not over. Racism can be measured and has endured.  The US Census reports on household wealth in the United States and differentiates that wealth by race.  If there was no racism, then wealth should be distributed evenly across all races.  However, there is a considerable gap in the reported wealth by race.  

While the inflation adjusted median wealth of households headed by whites has been increasing, the median wealth of households headed by Blacks has remained fairly constant during the reported period. The median wealth of white households has been growing at a Compound  Annual  Growth  Rate, CAGR, of 2.66%, the median wealth of Hispanic Households has been growing at a CAGR of 2.35% while the median wealth of Black households has been growing at a CAGR of only 0.52%.

While there was a bubble in median wealth during the housing bubble of the early 2000s, that  bubble was experienced by Black and Hispanic as well as White households and all households have returned to the trend before that bubble.

Transportation forecasts and decisions need to acknowledge this disparity to ensure that transportation does not exacerbate this gap.

Rich and Poor

Ain't We Got Fun

The rich get rich and the poor get poorer        

In the meantime, in between time       

Ain't we got fun?

The richer are getting richer.  But are they getting so rich that it has become a problem?

Nature hates extremes.  It finds a way to return to an equilibrium and a statistically normal distribution.  It is our choice whether that is a gradual or catastrophic return.  A gap between rich and poor is part of society.  Going back to ancient times, Jesus said, “The poor you will always have with you” (Matthew 26:11)  While the poor may always be with us, it is not a Christian thing to create more poor by transferring wealth to the rich.

The US Census reports annually on income, but it reports irregularly on household wealth, based on a statistically chosen panel.  Those results are reported in current year dollars.  To adjust for inflation, the reported values have been adjusted by the Bureau of Labor Statistics Consumer Price Index to 1993 USD.  

Figure 1 includes both the mean and median adjusted for inflation.  The mean is easier to compute from totals of data, while the median requires access to the all of the data.  However, the median corresponds more to what people think of as the “average”, the value at which 50% are higher and 50% are lower.  When the distribution follows a normal statistical distribution, the traditional “bell shaped” curve, the mean and the median are identical.  However, when the distribution that is being measured is skewed, there can be a difference between the median and the mean.  The mean inflation adjusted wealth is growing at a Compound Annual Growth Rate, CAGR of 2.6% , while the median CAGR is only 1.4%.  This difference between the mean and the median, demonstrates at least that the richer are getting richer and the gap between the mean and the median is getting larger.  Hopefully we will do something to address this inequity before there is a catastrophic response.

Remembering versus Glorifying History

Do You Hear The People Sing?

Singing a song of angry men?

It is the music of a people

Who will not be slaves again!

 DJT ( and Santayana) are correct. "Those who don't remember history are doomed to repeat it".  But there is a difference between remembering and glorifying.

The protests since the end of May have an echo in history.  In happens whenever one group tries to enrich itself by enslaving another.  The shackles may be iron, as they were before the US Civil War, or economic, as they were in France at the time of Les Misérables.  Neither set of shackles should be glorified.  In recent times in the United States, the shackles have also been economic.  While total wealth and income has been increasing, it has been concentrated in just a few, while the majority  has seen their income and wealth stagnant or falling. 

It is not an imagined inequality.  It can be shown that inequality has been increasing in America both by income and by wealth.  This is in contrast to the conditions in the rest of the world, including places where inequality has long endured.  The gap between rich and poor is decreasing within most other countries. The gap in the United States has been increasing and arguably has reached a critical point.  Those of us who are invested in this system, must hope that the angry men will be satisfied with a reform of that system which we will make by remembering and addressing our wrongs, and not that the angry men will demand the  destruction of that system.

Who Can Work From Home?

It Ain't The Meat (It's The Motion)

It ain't the meat, it's the motion
It's the movement, it isn't the stock

Working from home is not available to everyone.  Knowing  the employees by industries isn’t what is important. It is the occupation within those industries that make working from home possible.

Working from home, e.g. telecommuting, has been promoted as a key strategy for sustainability, reductions in energy consumption, cleaner air, etc.  However, if there is one thing that the COVID‑19 pandemic has taught us is that not everyone can work from home.  Classifying industries as essential is tempting, particularly since travel demand models may already classify employment by industry type (e.g. Office, Service,  Retail, Manufacturing, etc.).   However, it is really the occupation of the employee, and not the industry that determines who can work from home.

A Transportation Equipment  Manufacturing Firm (NAICS Code 336) might be non-essential, and its employees could work from home.  However, while a lawyer (Occupation Code 23) or an accountant (Occupation Code 13) employed at that Transportation Equipment Manufacturing firm might be able to work from home,  a production employee (Occupation Code 51) at the same firm would  be unable to work from home.  This assumes that the firm is in business.  If the industry itself is shut down, then there may be no employment for the lawyer or accountant working at that firm.

The Bureau of Labor Statistics, BLS,  provides data of Occupations by Industry by area type. That data indicates that perhaps 50% of the total employment in the country is employed in an occupation that  can work from home (excluding self employed and employees in agriculture).  The BLS data does not provide breakdowns by industry in metropolitan areas, but the employees in all industries might also be 50% in occupations that might work from home.

There is a difference between being an essential industry and an essential employee.  Not all essential employees work in essential industries, and not all employees in essential industries are themselves essential.

Income Response to Tax Rates

Taxman

Let me tell you how it will be
 There's one for you, nineteen for me
  Cause I'm the taxman yeah, I'm the taxman

Taxes should be a way to grow the economy, not to  increase inequity.

No  one likes paying taxes.  Taxes are levied to raise revenue for governments. In the United States, the principal source of federal government revenue is the income tax.  However, the purpose of the income tax code is not only to collect revenue.  It is enacted to promote economic growth, while arguably not unnecessarily adversely affecting various economic sectors.  Income inequality is a measure of how the poor (lower income percentiles) compare to the rich ( upper income percentiles).  A proposed measure of income inequality is the ratio of Mean household income (i.e. total income divided by total households), divided by Median household income ( i.e. the income above, or below, which 50% of the households occur).  For a perfect normal distribution of household income, the mean and median would be the same. 

A measure of success of the income  tax code might be that total income increases, but the income inequity does not increase.  The Federal Reserve Bank of St Louis provides Mean and Median household incomes, as reported by the US Census.  The reported Mean and Median household incomes are shown in Figure 1.

Figure 1 Mean And Median US Household Income: All Years Current Dollars

If the goal of the Tax Acts were to increase economic growth, those Acts have fallen below an Compound Annual Growth trend line established by income from all years.  Also, from that figure, the  gap between Mean and Median household incomes has been increasing over time.

To account for inflation, the reported household incomes were adjusted by the Bureau of Labor Statistics Consumer Price Index, CPI,  to convert incomes to 1967 dollars ( any year could be used as an index, which would change the values on the y-axis, but would not change the data or curves because the impact of inflation would be the same.) These results are shown in Figure 2.

Figure 2 Mean and Median US Household Income, Adjusted For Inflation, By Tax Act

The major Tax Acts during this period are shown, which regress very well to the reported household incomes.  The analysis does not include the impact of the Tax Cut and Jobs Act of 2017 because it was signed in law in December of 2017 and not enough time yet has occurred to compute its impact on household income.  Shown in Table 1 is the Compound Annual Growth Rate, CAGR,  computed for the reported respective mean and median household incomes during these periods. If the intent of the Tax Acts was to promote economic growth, then arguably  growth has been less during each of Tax Act periods.  What has occurred is that the gap between mean and median incomes has increased during the period of these Tax Acts.

Table 1 Growth Rate During Periods Of Tax Acts.

	pre 1981	1981-1990	1991-2001	2002- 2018
Mean Income CAGR	2.30%	1.63%	1.93%	0.40%
Median Income CAGR	2.23%	1.21%	1.46%	0.13%

While the Tax Acts were adopted during, or immediately following, economic downturns, recessions, economic downturns, and recoveries have also occurred during periods with no changes to the tax codes.  The official National Bureau of Economic Research beginning and ending dates of recessions are shown in Table 2. There have been more recessions than there have been changes to the Tax Code during the reported period.  Based on the reported incomes, it is possible to recover from a recession without  any corresponding changes to the Tax Code.

Table 2 NBER Reported Recessions Corresponding to the Years In Figures 1 And 2

Beginning date	Ending date
1953-07-01	1954-05-01
1957-08-01	1958-04-01
1960-04-01	1961-02-01
1969-12-01	1970-11-01
1973-11-01	1975-03-01
1980-01-01	1980-07-01
1981-07-01	1982-11-01
1990-07-01	1991-03-01
2001-03-01	2001-11-01
2007-12-01	2009-06-01

---

[1] https://alfred.stlouisfed.org/

Income Equity

A Bohemian Rhapsody

Is this the real life,
 Is this just fantasy?

Income equity is a real phenomena based on real data, not just the product of fantasy,

Many measures have been proposed to measure income inequality: the Gini coefficient, the Atkins coefficient, various percentiles of income, etc.  If Standard Deviations of household income were available, the Median, Mean, and Standard Deviation of those household incomes could be used to compute the Skew of household income compared to a normal distribution of household income.  The Standard Deviations of household incomes are not often reported, while the Mean and Median household incomes are commonly reported. Zimmerman[1] suggested comparing the Mean and Median household income as a measure of equity. 

The LIS Cross-national data Center in Luxembourg reports on various economic measures .  It reports Median and Mean household incomes for 51 countries during the period 1967 to 2016[2].  An Income Equity Index (Mean income divided by Median income) was computed from this data.  The results of this analysis are shown below.

  

Figure 1 Income Equity Index by Country

By inspection, an equity index of less than 1.2 appears to be common in most countries, particularly in the more developed countries.  If income followed a normal statistical distribution, the  Mean would be equal to the Median and the Income Equity Index would be 1.0.  However, this is only possible if negative incomes were also possible.  Since income less than 0 are not reported, an Income Equity Index of greater than 1 should be expected.

In most countries, the Income Equity Index is either decreasing or stable over the period of the LIS data. Only four countries have a forecast 2018 Income Equity Index greater than 1.2 where the Income Equity Index is also increasing over time.  In two of those countries, Lithuania and Romania, this forecast is based on only 2 years of data and the forecasts for these countries are not statistically significant.  The forecasts in the remaining countries, the United Kingdom and the United States are based, respectively, on 13 years and 12 years of data and are statistically significant. This historical data is shown graphically in Figure 2.

Figure 2 Income Equity Index: United Kingdom and United States

. 

For both countries, the largest and fastest increase in the Income Equity Index occurred during the period between 1980 and 1994 although the Income Equity Index is still increasing after this period. A common thread in both counties during this period is Arthur Laffer, who served as an economic advisor to both the Reagan and Thatcher administrations

---

[1] https://fredblog.stlouisfed.org/2016/12/the-puzzle-of-real-median-household-income/

[2] http://www.lisdatacenter.org/data-access/key-figures/

Transit as a Public Good

The Best Things in Life Are Free

The sun belongs to everyone
The best things in life are free

Is transit a public good, or a private good?

Is transit a public good that should be provided to the general public?  This question becomes more important since transit is likely to be adversely affected by the COVID-19 recovery while at the same time it is essential for the commute trip of essential workers.

Economists have found it useful to categorize goods using definitions of rival, if some one uses a good then that good can not also be used by another, and  exclusive, a price can be charged for using that good.  Private goods are exclusive and rival.  I am charged for eating a piece of food, and if I eat that food no on else can eat that food.  Public goods are non-exclusive and non‑rival.  No one can charge me for basking in  sunshine and my basking in sunshine  doesn’t prevent some one else from basking in that same sunshine. 

Economists also categorize goods that are rival and non-exclusive as common resources, such as fishing grounds.  For example, no one charges for catching a fish,  but my catching a fish means no one else can catch the same fish.  Economists categorize goods as natural monopolies if they are exclusive and non-rival.  I can be charged for watching cable TV, but my watching cable TV does not prevent some one else from watching that same cable TV.

Source: https://www.reviewecon.com/rival-excludable

Transit is an example of a natural monopoly, in fact the original transit systems were formed as licensed private natural monopolies.  In my home of Massachusetts, the MBTA, the public transit authority, is a successor to the private Boston Elevated Company.  Natural monopolies are also categorized by having high fixed costs and low marginal costs.  The fixed cost of a subway line and its trains far exceed the marginal cost of adding an additional rider.  Governments grant a licensed monopoly to transit systems to protect that high fixed investment.

While transit is exclusive, in that while a rider is charged a fare for using transit, it is only partially non‑rival.  My riding transit does not prevent some else from riding transit, but the space in the transit vehicle itself is rival.  Movie theaters are another example.  A movie itself might be a non‑rival good, e.g. my watching a movie does not prevent someone else from watching that same movie, but the seats in the theater showing that movie are rival e.g. if some one is occupying a seat no one else can occupy that same seat.

The problem is treating rival and exclusive as an either/or proposition.  They are not like pregnancy. You can be a little bit rival, but you can’t be a little bit pregnant.

Transit itself might be a more like a public good.  While it is a natural monopoly, it is a public natural monopoly.  The fare that makes it a natural monopoly, exclusive, is a public choice, and most likely reflects political and not economic values.  Transit itself is non-rival; my using transit doesn’t prevent someone else from using transit, while the space on a transit vehicle is rival; if I occupy space on a transit vehicle no one else can occupy that same space.

Common Resources are regulated to prevent the “tragedy of the commons”.  Fishing quotas and licenses are imposed by governments to make that common resource more exclusive .  There is no economic problem with subsidizing transit and treating it more like a public good. The fact that transit has a cost doesn’t mean that it should be treated only as a private good or a natural monopoly.  The subsidy of transit for the commute of essential workers as a public good is a government, public, choice.