Costs and Benefits Public Transport

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 be spent effectively -- some would argue more effectively -- if they remained in the private sector. 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 -- but also less traffic. Traffic is a significant barrier to commerce, as it represents time and fuel spent on an activity that otherwise has no economic value. Any step that reduces traffic thus benefits the economy. With enough public transportation, infrastructure investment can be lower -- you need fewer roads the fewer people use cars. In areas where there is no more room for more roads, public transportation saves wear and tear on the existing infrastructure by reducing its usage.

The above constitute a broad class of indirect benefits, but there are some direct benefit and induced benefits as well. Direct benefits relate to the employment that is created by transit systems. There are a variety of jobs within a transit system, from the menial to the technical to the managerial. A transit system with hundreds or thousands of employees benefits the community in that these workers contribute to the tax base, and they spend their money in the communities in which they live. There have even been cases where a large transportation system has mandated that vehicle stock be produced or maintained locally.

Induced benefits refer to the re-spending of consumer income that arises from their savings on transportation. Even a pricey transit system, where a pass might run $100/month, is much cheaper than car ownership. The savings that workers accrue from using public transit instead of a car, is typically spent in the community, and those profits are more likely to stay in the community than if that money was spent on cars and gas from global corporations where profits were almost always taken out of the community (Weisbrod & Reno, 2009). There is also often a benefit to land values as well, as areas with public transportation service are worth more than areas that are unserved.