Michael Munger on Santiago's Private Buses
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But the real jewel in Santiago's transit crown, or so I would have thought, was the bus system. Hundreds of different bus lines, most of them entirely privately owned, operated freely throughout the city. Some of the lines ran on surface streets parallel to the Metro, adding transport redundancy in case the Metro was having mechanical problems or was simply overcrowded. Competition among bus lines kept fares low, and drivers were paid according to the number of passengers they transported. Other bus routes delivered riders to Metro stops, not because anyone had ordered them to do so, but because that is where passengers wanted to go. And there were several classes of service, ranging from posh express buses that charged high prices down to claptrap jalopies that charged pennies and stopped every few blocks.
That seems like exactly what private markets do, provide a wide range of options and services at different price points. You want first class and fast express buses? Pay for it. You want the cheap down and dirty bare bones that pokes along and stops all the time and it can get you there for a dime.
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The private bus system was operated without any public subsidies, or losses. That's right: a major municipal mass transit system was operating in the black! And that's a problem... why?
Well, of course, that's not the way that detractors described things. For a privately owned asset to be operating "without losses" means that the owners were either breaking even (some years) or making actual profits (most years).
For more than a few members of La Concertacion, Chile's center-left ruling government coalition, having companies profit by providing a public service smacked of theft. And so a consensus started to build. Citizens were upset about the rude, aggressive bus drivers. And the "planners" who run city agencies objected (first) to having only routes people seemed to want, and (second) to the injustice of different levels of service. They preferred a comprehensive, "rational" transportation plan, one that treated everyone equally badly, like the DMV in the United States.
The result was the new "Transantiago" public bus system, rolled out on February 10, 2007, during the summer vacation period, when Santiago seems asleep. Nonetheless, almost overnight, the new "planned" system cut mass transit ridership, increased congestion everywhere in the city, and tripled average commute times from forty minutes to two hours. As President Michelle Bachelet later said in a speech, "It is not common for a president to stand before the nation and say 'Things haven't gone well.... But that is exactly what I want to say in the case of Transantiago.... The inhabitants of Santiago, especially the poorest, deserve an apology."
The roll-out was not a total disaster, however. The new planned system did solve one of the major problems it had targeted: profits were eliminated overnight. Where the old system had made $60 million a year, the new planned system immediately began to lose, and has continued to lose, more than $600 million per year. Mission accomplished.
I love the reaction to the word "profit". You can see the same sort of mentality in this thread. If we had a private bus line that made a profit it would be bad, precisely because they are making a profit. Those greedy companies would take advantage of us and rake us across the coals.
Also, leftists were pissed about "different levels of service". If I pay more and get a nice comfy seat with wi-fi on an express bus, it just isn't fair to someone that wants it but doesn't want to pay the extra cost. Some people might want wi-fi, or television screens, or snack service by an ailse vendor. Some people might want to pay more to be able to sit and have nobody stand in front of them. With the private market you can get several different levels of service. You limit is both your imagination and what the market will bear. In the name of social justice though you can't have fancy buses for the rich, run for all of those dirty profits!
Look at the numbers of the effect of losing the private bus service and replacing it with a public system. Ridership declined. Travel times increased from 40 minutes to 2 freaking hours. The old system put $60 million dollars in profits into taxpaying citizens hands without any public subsidy. The new system costs 600 million per year. What an incredible transformation. And all in the name of Big Government Social Justice.
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Finally, one cannot emphasize enough the advantages of allowing competition over routes and level of service. The argument that bad service is "fair" because literally everyone suffers places the value of equality over every other public goal, no matter how desirable. In a large, diverse urban area, some people want higher-speed express service, with amenities and perhaps an attendant. Others want rock-bottom prices and are willing to accept more inconvenience and less service. Charging everyone the same price and providing only one state-mandated level of service ensures that nearly everyone actually wants something else, but can't get it.
Preach it! Why isn't this obvious?
And the closer to his article:
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Here is the real problem with the "greed is always bad, public provision is always good" perspective. As James Buchanan pointed out in "Politics Without Romance," it makes no sense to assume that, under some circumstances (private buses), people are greedy, and under others (government buses), people are benevolent. The fact is that in both cases people behave purposively, pursuing their own goals filtered through the incentives and costs the system presents to them. Yet, the idea persists that removing profits and using government planning results in a kind of moral transubstantiation. Many planners think that profits are evil and would prefer a system that eliminates profits, even it means accepting substantial losses and no improvement in service.
No matter how many times this notion is killed off by experience and evidence, the hydra of planning grows another head, and political leaders trumpet the new reform in public service. Then, when the reform fails, commissions are formed, implementation is blamed, and budgets are raised.
The Transantiago bus reforms took an imperfect private system, operating without public subsidy and serving well over a million people a day, and "publicized" it. The expectation, almost pathetically naïve in retrospective, was that outlawing profits and demotivating drivers would change human nature. Worse, planners believed that they could dictate choices to commuters, who turned back to private automobiles instead. Why don't they ever learn?
I highly recommend reading the whole thing.
A podcast of an interview with Mr. Munger is here: Munger on the Political Economy of Public Transportation
