Curb Rights: A Foundation for Free Enterprise in Urban Transit.

Over the last 25 years, a near-consensus has been achieved by those U.S. urban transportation researchers disposed to economic analysis (not all of whom are necessarily economists). It is widely agreed that (i) high-capacity rail transit systems are inappropriate to modem American cities, where they cannot compete with private autos (yet, new rail systems keep being added, grand monuments to successful rent seeking); (ii) conventional bus transit systems, subsidized and usually run by legalized transit monopolies, are also falling behind; and (iii) most roads, highways, and workplace parking spaces are used inefficiently because they are not priced. Not surprisingly, the policy prescriptions that follow have been mostly ignored. Roughly speaking, they are (i) stop building expensive rail transit systems; (ii) deregulate and privatize the transit (and taxi) monopolies; and (iii) charge the opportunity costs of roads, parking spaces, and airshed, including time-of-day road pricing and emissions taxes. Most of the recent literature simply adds further empirical (and occasionally theoretical) embellishments to these views. Daniel B. Klein, Adrian T. Moore, and Binyam Reja (KMR) are different. They add a new and original twist to the argument, namely transit deregulation and privatization cannot be expected to succeed unless property rights at curbside (hence the book's title) are firmly established.

The authors begin with a review of the near-consensus. The universal appeal of private autos makes perfect sense in dispersed and rapidly decentralizing cities (just 5.12% of work trips were via public transit in 1990). Indeed, widespread automobile use contributes to further suburbanization. There really is no telling how far the process will go. Some say that, in the information age, geography is irrelevant. Others (including many city planners and new urbanists) recommend more compact development. Doomsday traffic forecasts have routinely been invoked to make the case for huge public investments in transit. Yet, in 1990, the U.S. census reported that average commuting speeds had gone up over the previous 10 years. Pisarski (1996) used the same data to show that just 12.53% of U.S. commuters traveled 45 minutes or more (one way); the national average trip duration was 22.38 minutes. These data probably understate the good news because they do not control for the increase in multistop, multipurpose trips.

If there is any future for transit, it has to approximate many of the advantages of private autos: It has to be flexible enough to connect origins and destinations that are increasingly ubiquitous. It also has to be managed by entrepreneurs rather than by politicians. Can we really invent alternative modes that are a good enough substitute for enough people to make a market? KMR suggest how we can do it. Transit privatization along with curb rights are necessary conditions. Whereas the former is an old idea, the latter has not been fully developed.

The authors find support for their idea from studying the U.S. jitney experience of 1914-1916, the mixed record of recent transit deregulation (here and abroad), and also jitney operations in various Third World cities. Are there instabilities when jitney operators practice interloping vis-a-vis pre-existing scheduled transit service? Will bus deregulation fail when curb rights remain unclear?

Interloping did occur in the U.S. when early autos became available and entrepreneurs did what comes naturally - they saw a market for jitney services and scrambled to supply them. "Jitneys no doubt skimmed some of the cream of the streetcar business yet they also served more passengers than were lost from streetcars and filled important market niches. They were used mainly for short-distance trips and provided transportation to people who would otherwise not have been served by the streetcar companies. Although they charged no more than the streetcars, their gross revenue far exceeded the streetcars' loss of revenue" (p. 35). Unable to compete, the streetcar companies managed to have most of the upstarts regulated out of existence. The authors emphasize that this was a brief and rare "change and discovery" episode in the annals of U.S. public transit history. It also highlighted the interloping problem. Moreover, conventional transit's current woes could have been foretold; today, "virtually everyone can afford to be his own jitney driver" (p. 36).

Another lesson can be learned by studying the developing countries, where regulation is often so widespread that underground industries proliferate. The common problems that occur at curbside (especially at public transit stops) are recognized and avoided via route associations that have emerged in various places. They become the governing units, making "rules against interloping and deviating from schedules" (p. 38). Not surprisingly, the associations become cartels, fixing fares and limiting market entry. Intimidation and strong-arm enforcement tactics are not uncommon. Nevertheless, the importance of curb rights is illustrated by the developing country experience. Likewise, "The central failing of British bus deregulation is the difficulty that bus companies have had in appropriating their investment in waiting passengers" (p. 72).

There are illegal jitneys currently operating in some U.S. cities, usually in poor neighborhoods, dramatizing the service shortfalls of the public transit monopolies. Moreover, KMR report that legal taxis provide more service than conventional transit. The "gypsies" persist wherever they are widespread enough to cause the regulators to eschew enforcement, sometimes even acquiescing to limited legalization. Legalized jitneys operate most widely in Atlanta.

Could U.S. cities manage interloping without creating a new group of cartels? The flipside of the interloping problem is conventional bus companies' inability to appropriate their investment in setting up and tending a route, mainly the times and places that waiting passengers congregate. Jitneys certainly benefit from existing bus routes but, by doing their job, threaten to destroy them (the dissolving anchor). This is what the authors label the "thin market" case; in the "thick market" case, there is enough demand for the jitneys to survive without the cultivated bus route. If there had been a bus route in the thick market and it is dissolved, that is not a problem for consumers because there are enough cascading jitneys. Further complexity is added by considerations of the level of conventional bus subsidies and the trade-offs that consumers make between low fares and faster jitney service.

In light of KMR's analysis, a property rights framework that encourages jitneys but also gives some exclusivity to the bus anchor is called for. This is where it gets tricky. The authors' recommendations are admittedly speculative. They suggest various patterns of alternating curb commons and exclusive but stop zones. Demarcations vary by time-of-day and peak versus off-peak passenger demand. Big-city airports may have developed some useful experience in this area.

There are also discussions of the usual rights transferability and enforcement issues. There is certainly room for more research. KMR get the credit for posing research questions not usually considered in the urban transportation field. Property rights auctions in newly deregulated industries and in the transition economies have, likewise, spawned new areas of research.

In light of a near-consensus plus the interesting research presented in the volume under review, what is the likelihood of an enlightened transit policy in the U.S.? Will rent-seeking be superseded? In Los Angeles county, 10% of eligible voters turned out to narrowly pass a transit-dedicated sales tax hike measure that appeared on their 1980 ballots. At voting rates like this, interest groups easily win. In addition, Hopkins (1996) has shown that, although there has been considerable deregulation of key sectors of the U.S. economy, the gains have been nullified by expanded environmental regulation. Many people are prepared to ignore costs when it comes to the environment. Transit providers (a large group in the case of pricey rail) and their unions have benefited, promoting the erroneous notion that more conventional transit capacity means less pollution (correlation between annual transit use and annual transit subsidies is negative [Cox 1997]) and making common cause with clean air advocates. As happens so often, economic common sense cannot match the constituencies energized by expensive public works projects.

References

Cox, Wendell. 1997. The public purpose urban transportation fact book. http://www.publicpurpose.com/.

Hopkins, Thomas. 1996. Regulatory costs in profile. Center for the Study of American Business, Washington University, St. Louis, Policy Study No. 132.

Pisarski, Alan E. 1996. Commuting in America II. Landsdowne, VA: Eno Transportation Foundation.

Peter Gordon University of Southern California