Evidence based on urban transport in U.S. cities reveals substantial allocative and technical inefficiencies that have led to large public transit deficits and severe highway congestion.

The author argues that it is futile to expect public officials to remedy the situation by pursuing more efficient policies, such as congestion pricing and weighing costs and benefits when deciding transit service. The problem is that urban transportation policy is largely shaped by entrenched political forces that inhibit constructive change.

The only realistic way to improve the system is to shield it from those influences and expose it to market forces by privatizing it. This position is supported by empirical evidence based on simulations for the United States and the United Kingdom’s early experience with privatization.

Improving the urban mobility of elderly and low-income citizens is an important social goal that should be addressed by government. But in their official capacity as regulators, service providers, and investors, public officials have generally instituted policies that have led to inefficient and inequitable urban transportation. A case for privatizing urban transport is developing because these actual government failures
most likely outweigh potential market failures.

Governmental involvement in the transportation systems of U.S. cities illustrates the problem.

Intercity deregulation in the United States became politically attractive in the 1970s when the political benefits to policymakers from working in harness with carriers and labour were overwhelmed by the potential political gains from reducing inflation.

When policymakers were ready to act, academic research was available to guide their understanding of the likely effects of deregulation.
Similarly, the probability of privatizing urban transport in the United States will increase if the prospect of major political gain becomes clear. Unfortunately, it won’t in the near future because recent successes in eliminating budget deficits at all governmental levels have eased pressure to cut wasteful spending on urban transportation. There is no escaping the evidence that the U.S. government’s activity in this area is marked by failure.

AEI-Brookings Joint Centre for Regulatory Studies
Clifford Winston (Researcher)

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01/11/2000

research

Urban Policy > Transport and infrastructure

Public transport, Roads and road transport