CURB RIGHTS
A Foundation for Free Enterprise in Urban Transit
By:
Daniel B. Klein
Associate Professor of Economics at Santa Clara University
Adrian T. Moore
Policy Analyst at the Reason Foundation, Los Angeles
Binyam Reja
Graduate Student at University of California, Irvine.
A Presentation By:
Kristi Heitt
Leland Levin
Cara Price
Curb Rights Road Map
Section One:
Diagnosing Traditional Transit
Section Two:
Transit Markets Improperly Regulated and Improperly
Deregulated
Section Three:
Property Rights and Route Based Transit Markets
Policy Recommendations and Conclusions
Limiting Cases for the Continuum of
Social Governance
Regulation
or
government ownership
Property Rights
Regulation tells you what
you may or may not do
with your property
Property rights tell others what
they may and may not do with
your property
Order created by central
direction, regulation, or
government enterprise
Order emerges from
decentralized interaction within
property rights framework
Fig. 1-1
Goal of Curb Rights
•
Curb Rights calls for the reform of public
transit to take shape within the order of
free enterprise that is framed by a system
of property rights.
Example of Exclusive Curbs and
Commons
Commons
Exclusive
Bus Zone
Commons
Exclusive
Bus Zone
Exclusive
Bus Zone
Commons
Street
Exclusive
Bus Zone
Fig. 10-1
Commons
Goals of the Authors
•
•
To reveal how the forms and effectiveness of
transit service depend on the character of
property rights as they exist in transit markets.
To use the knowledge gained about the status of
property rights in existing transit markets to
devise new forms of governance for transit.
Section One
Diagnosing Traditional Transit
Understanding Traditional Transit
•
To understand traditional transit, three
areas must be examined:
•
The Triumph of the Automobile
•
The Fizzle of Traditional Transit
•
Why Traditional Transit Fizzles
The Triumph of the Automobile
•
“Edgification”: the development of areas
that lack definite urban form yet
nonetheless function as cities. This is
caused in American cities by:
•
•
Prosperity
The rise of the private automobile
Automobiles Satisfy All of
Travelers’ Values
•
•
In order to compete with automobiles,
transit must emulate their characteristics.
Therefore:
•
“[A] property rights proposal would favor
transit services more like the private
automobile, blurring the distinction between
the private car and mass transportation.”
Benefits and Problems of
Automobiles
•
•
•
•
•
•
Benefits
Superior flexibility
Privacy
Accommodation of
diverse lifestyles
Speed
Access
Affordability
•
•
Problems
Congestion
Air pollution
Characteristics of the Travel Experience
That Travelers Value:
•
•
•
•
•
Short trip times
Avoidance of transfers
and waiting time
Door-to-door service
Reliability
Comfort
•
•
•
•
•
•
Seat availability
Storage space
Security
Flexibility
Privacy
Autonomy
The Fizzle of Traditional Transit
•
History of the Transit Fizzle:
•
•
•
•
•
•
Decline begins in the early 20th century.
During WWII, ridership surged, and government regulations
imposed restrictions.
In 1950s transportation shifted from streetcars to motorbuses.
In the 1950s and 1960s household incomes increased and
people bought cars, and moved to the suburbs.
Urban Mass Transportation Act of 1964 provided funding for the
purchase of local mass transit systems.
Market trend since 1960s has been against mass Transit.
Public Transit Operating Costs and
Passenger Trips, 1960-1992
Fig. 3-1
Why Traditional Transit Fizzles
•
Two bodies of thought attempt to explain the
fizzle of traditional transit:
•
Hayekian view:
•
•
•
Emphasizes the importance of understanding local
conditions.
Assumes public officials are scrupulous and diligent.
Public Choice:
•
•
Self interest and incentives influence the actions of
government.
Assumes public officials are not especially scrupulous.
Hayekian Critique of Traditional Transit
•
•
•
Centralized authority makes it easier to integrate
service, coordinate parts, and ensure reliable
schedules.
Economic terrain consists of particularistic
conditions that are constantly changing.
Hayekian theory warns that unified planning will
reduce the innovation that comes with specific
local knowledge.
Compared to the Free Market, Public
Agencies Have Three Limitations.
•
•
•
Regulation or subsidization of the public
system serves to deter competitors.
The public agency has little knowledge of
local markets.
The public agency is less responsive.
Compared to the Public Agencies, the
Free Market Has Three Advantages.
•
•
•
The free market makes use of existing dispersed
knowledge of local conditions.
The free market permits flexibility in response to
perceived changes in local conditions.
The free market fuels the discovery of
opportunities that go unnoticed by public
agencies.
Public Choice Critique of Traditional
Urban Transit
•
•
•
Corrective government action may show
imperfections more severe than those of free
enterprise.
Lurking behind official goals of serving the public
are personal goals of public servants.
The official goals of a transit agency are
multiple, confused, and conflicted.
In Summary
“The intervention dynamic [of government in
transit] leads to the decline of the industry,
public takeover, further decline, and finally
re-privatization, bringing the situation back
to the starting point.”
Section Two
Transit Markets Improperly Regulated and
Improperly Deregulated
OR
What Not to do When Designing an Urban
Transit System
Transit Free-Markets
•
•
All of the systems which we will discuss had
some measure of success, however they all also
had flaws.
In order to ensure the best possible service and
the lowest price we must ensure competition,
this requires an approach quite different from
those discussed previously.
A Property Rights Based System Is Needed
Jitneys and Interloping
•
•
Jitneys: small unscheduled vehicles plying a
route.
Four different Jitney experiences will be
explored:
•
•
•
•
Jitneys in the United States: 1914-1916
Jitneys in Less Developed Countries
Illegal Jitneys in the United States
Legal Jitneys in the United States
Jitneys in the United States: 1914-1916
•
•
•
In 1914, the prevalent form of urban transit was the
tracked streetcar.
Private automobile owners would drive the routes of the
street cars, and pick up passengers for a nickel.
Jitneys adversely affected the revenue of streetcar
companies, LA trolley companies lost $3 million a year.
•
•
The jitneys were making more than that however, and serving
customers that the trolleys didn’t.
The government, at the behest of the trolley lobby,
cracked down on these jitneys, and they faded from the
scene.
Jitneys in Less Developed Countries
•
•
•
•
In LDCs, especially those in Latin America,
jitneys are very common.
These jitneys are usually in competition with
subsidized bus services.
Jitneys are sometimes granted official
recognition and sometimes not, but in both
cases they ignore official rules.
Jitney operators tend to form cartels and
exclude competition, thus they have the same
problems as government sponsored transit
monopolies.
Illegal Jitneys in the United States
•
•
•
Illegal jitneying in the US never persists on a
small scale, it either persists as a significant
force or is wiped out by law enforcement.
Illegal jitneying in the US comes about as a
result of a shock to the system, normally a strike
(in the case of NYC) or a sudden loophole in the
law (as in Florida).
While these two experiences in the US are
unique, they go to prove that unsubsidized
transit in the US can succeed and prosper.
Legal Jitneys in the United States
•
•
There are a few place in the US (Atlantic Cit,
San Diego, Los Angeles, San Francisco) where
jitneying is legal.
Legal jitneys tend to fail for a number of
reasons:
•
•
•
They tend to interfere with scheduled service, thus
provoking crack downs.
They cannot compete with the subsidized fares of city
busses.
They cannot survive in thin markets.
Edge Transit Services in the
United States
•
•
These are transit services that operate on the ‘edge’ of
route based services.
There are four major types of edge transit service:
•
•
•
•
•
Illegal (“Gypsy”) Taxicabs
Taxis (and Deregulation of Taxis)
Commuter Transit Services
Non-commuter Door-to-Door Services
All of these types of transit go to show that private
transportation can prosper and do well, however as all
these systems lacked protections for property rights,
they were not perfect.
Bus Privatization and Deregulation
in Britain
•
•
•
The 1985 Transportation Act deregulated all bus
services in Britain, except in London, making all
public lines private companies and allowed
competition to be introduced in the deregulated
markets.
This process resulted in imperfect deregulation
and a lack of competition because the reforms
were enacted without a guarantee of property
rights.
If reform is to work, a system must be enacted
which is signifigantly different from Britain’s.
Contracting Out Bus Service
in the United States
•
•
•
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In the 1980s the Reagan administration required transit
agencies to consider whether services could be provided
by the private sector.
Most of the services which are contracted out are dial-aride and para-transit services, not regular bus service.
This represents a form of competition, where companies
are forced to compete for a contract, but the inherent
advantages that are held by the incumbent contractor
function to prevent any great deal of innovation after the
first few years.
While contracting out may be good for a while, it is not
as good as true privatization.
Transit Markets Conclusion
•
•
All of the systems which we will discuss had
some measure of success, however they all also
had flaws.
In order to ensure the best possible service and
the lowest price we must ensure competition,
this requires an approach quite different from
those discussed previously.
A Property Rights Based System Is Needed
Section Three
Property Rights and Route Based Transit
Markets
And
Policy Recommendations and Conclusions
Transit Market Theory
•
Two core premises:
1.
2.
•
Jitneys have market advantage over scheduled
service
There are route-specific sunk costs in scheduled
service
Transit Market theory considers market
conditions for 2 variables:
1.
2.
Status of curb rights along the route
Volume of passenger demand on the route
Jitneys vs. Scheduled Service
•
Jitneys
•
•
•
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The Market Advantages.
The Market Disadvantages.
Free wheeling jitneys: Market Parasitism.
Scheduled Service
•
•
If jitneys are free to interlope, they will dissolve any
scheduled service.
Without scheduled service, there may be fewer riders
congregating at the curb and thus there will be fewer
jitneys.
The Absence of Curb Rights
•
The Thick Market:
•
•
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Can Jitneys be sustained in the absence of scheduled
service?
(YES) The Jitney Cascade Is Sustained.
The Thin Market:
•
•
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The Dissolving Anchor.
Setting up scheduled bus service entails sunk costs.
“Tragedy of the commons.”
Transit policy operates at 2
extremes:
•
Exclusive monopolies (for bus service)
No curb rights protection (allows jitneys)
•
Solution
•
•
Property Rights Proposal for Transit Markets
•
A policy with:
•
•
A policy with a limited degree of exclusive rights (to
prevent dissolving anchor)
The permission of freewheeling competition on the route
The General Idea of Curb Rights
•
System that guarantees some exclusivity and
allows jitneys
•
Must be adapted to particularistic conditions
•
2 classifications of curbs:
1.
2.
Exclusive (bus zones)
Commons
Example of Exclusive Curbs and
Commons
Commons
Exclusive
Bus Zone
Commons
Exclusive
Bus Zone
Exclusive
Bus Zone
Commons
Street
Exclusive
Bus Zone
Fig. 10-1
Commons
Temporal Demarcation of Curb Rights
Property Rights Assignments to Curb Zones
Fig. 10-2
1
A
B
A
B
2
Commons
Commons
B
B
3
A
B
A
B
4
Commons
Commons
B
B
8:00 a.m.
8:15 a.m.
3:00 p.m.
3:30 p.m.
Peak
Off-peak
Curb Zones
•
Auctioning Curb Zones
•
•
Zones sold/auctioned off by authorities as
leases
Curb Zone Entrepreneurs
•
Leaseholders sublet
Four Participants in Curb Rights
System
1.
2.
3.
4.
Local officials
Curb zone leaseholders
Transit operators (bus companies, jitneys, etc.)
Passengers
These parties will all follow the principles of
explicit property rights and contracts (not
government ownership or regulation)
Further Issues in Curb Rights
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Enforcement of Curb Rights
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Emergence of Staging Areas on Private Property
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Governing the Commons
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Curb Zone Robber Barons
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Government Imperfection in Creating Curb
Rights
Ideas for Transition Policy
•
Curb rights can be incorporated into
existing transit routes
Why curb rights?
Reliable, scheduled service
AND
Real competition
•
Problems of transit that are avoided:
•
Lack of on-the-road competition, schedule jockeying,
jitney interloping
Curb rights are an antidote to political
intervention, government takeover, and transit
service deterioration
Criticisms against market-based
transit
•
The problems that curb rights will solve:
•
•
•
•
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Cutthroat Competition
Failures to Achieve Economies of Density
Dis-coordination of Transit connections
Failures to provide good consumer information
Curbside Conflict
Inadequate Passenger Facilities
Property rights system should largely dispel
these traditional criticisms of free-market transit
Conclusion:
Curb rights introduces the combination of
monopoly and lawless competition
Two features of market process
•
1.
2.
Competition
Discovery of new opportunities for service based on
entrepreneurial changes of local conditions
Incorporation of both kinds of markets:
•
•
•
Scheduled (unsubsidized) bus service
Unscheduled jitneys
Policy Proposal:
•
Property rights system needs to
become the core of transit policy
•
•
Proposal: Create exclusive and transferable
curb rights (to bus stops and other pickup
points) leased by auction.
This would ensure both the availability of
public transit and the benefits of a free
market system.