Transit as a Public Good

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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.