Public Transport Subsidies
Public transportation represents an example of a social policy that has some economic implications as well. A typical public transportation system will carry with it varying degrees of self-sufficiency. In some cities, fares are held low through heavy subsidies, while in other cities fares are higher and the system a lot closer to being self-sustaining. As with any public good, there are costs and benefits to the public associated with it. The costs tend to be fairly evident, as they are the direct costs associated with running the system -- vehicles, staff, transit centers and other infrastructure. In addition to these direct costs, there are indirect costs. Financing the system via subsidy requires using taxes, or lieu of taxes, borrowing. Both of these come with costs. Taxes represent money taken from one area of the economy -- consumer spending or saving, and applied to government spending. Borrowing -- many public budgets are unbalanced -- only increases the tax burden by virtue of interest payments. So the indirect costs relate to the financing of the system. Tax monies can...
Even if tax monies remain in the
public sector, there are alternative things in which to invest other than public transport, so there are public investment opportunity costs to consider where transit subsidies are concerned. Litman (2015) notes that caution must be undertaken when examining the costs of public transport -- for example a decision by
government to issue bonds is not necessary incremental to the decision to subsidize transport, so it may not be reasonable to include financing costs.
The benefits are more discreet in
nature. They come in three varieties -- direct, indirect and induced (Weisbrod & Reno, 2009). First, public transport systems allow for greater economic participation for people who do not own vehicles. An efficient economy has people working at the optimal job for their abilities, but lack of access to those jobs because of geography creates economic inefficiency. Public transport systems help to resolve this issue by allowing people to expand their job search and
careers over a much larger geographic footprint. This is a clear economic benefit, if one that is difficult to calculate.
Another benefit of public transportation is that it is efficient transportation. Not only does this mean less pollution -- and fewer costs associated with pollution…
