Freakonomics Tackles Public Transit Fares: Progressive Fares More Equitable, Efficient

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In a recent New York Times Freakonomics blog post writer Eric Morris makes the case for progressive fares on public transit. Admitting it’s likely an overgeneralization, Morris states, “there are two major constituencies for mass transit. First are wealthier workers who commute to jobs in city centers where parking is expensive. The other group consists of the very poor. Unlike the “choice riders,” who could drive if necessary, low-income “captive” riders often have no other option.

In St. Louis that first group is largely absent from public transit altogether. Part of the reason is that wealthier riders are more likely to ride commuter rail. Of course in many cities, such as New York, Los Angeles and Chicago, the suburbs not only contain immense wealth, driving to and parking in the central city is difficult and costly. And their suburbs are served by commuter rail.

This is pertinent to discussing any expansion of our MetroLink system. Who should a new line serve? Who uses MetroLink and who is likely to ride in the future. At what time and to where?

As Morris notes, wealthier transit riders are more likely to be stereotypical commuters, traveling during morning and evening rush hours. The less wealthy take shorter trips, use transit on a more irregular timetable, in part because they are more likely to work more than one job, work second or third shift and/or utilize transit for errands and other reasons.

What Morris concludes is that “In pretty much every respect, the trips of the wealthier impose heavier costs on the system than the trips of the poor.” Buses are cheaper than trains, light rail is more efficient than “heavy” or commuter rail. In St. Louis I believe there is disproportionate demand for MetroLink to serve Cardinals baseball games, special events and event Highway 40 commuters. Why doesn’t this make sense?

And even though vehicle occupancy is much higher during the peaks, on a per-rider basis it is still cheaper for transit agencies to provide service at off-peak times and in off-peak directions. This is because accommodating rush-hour traffic means purchasing extra vehicles and hiring extra staff which will be underused at midday, at night, and on the weekends. It also means problems with trips like reverse commutes; for example, commuter trains often travel outbound during the morning peak and inbound during the evening nearly empty.

Should this issue be addressed by transit agencies? And if so, how?

Flexible pricing. Of course, I believe the purpose of public transit to have as many people ride as possible, so I’ve advocated for a fare-free system, which is surprisingly affordable. As I see it, the problem isn’t full trains at peak times, it’s that fewer people who could ride are riding. Progressive fares are already in place in places like airports where a large percentage of riders are likely visitors and the distance traveled in likely greater.

Here’s Morris’ take:

Yet despite the very different burdens different types of trips impose on the system, most transit agencies prefer the simplicity of flat fares, regardless of time of day, day of week, mode, distance, or other forms of costs imposed (excepting, to a degree but not completely, commuter rail service).

This is why it was with considerable happiness that Professor Brian Taylor and I read this article announcing that the New York MTA is considering cutting fares during off-peak times.


This policy would be progressive in that it would benefit poorer riders who disproportionately travel at off-peak times. It would also be equitable in that it would reflect the lower costs those riders impose on the system. This would help equalize the subsidy each passenger receives.

And in addition to being more fair, this policy would be more economically efficient. By using price signals to increase demand at off-peak times, it would put underused staff and equipment to work.

Consider that transit vehicles can be packed during the peaks but are decidedly light on traffic much of the time; economists Clifford Winston and Chad Shirley calculated that as of the mid-1990’s rail vehicles ran only 20 percent full. Yet there is usually no flexible pricing mechanism to fill those seats. Compare this with the commercial airlines, which are continually (perhaps maddeningly) adjusting prices to be sure every seat is occupied, and which have succeeded 81 percent of the time this year.

Unfortunately, for the moment new MTA chairman J.H. Walder is ruling out fares that are higher for longer trips, but this would be the logical next step. As with time-sensitive fares, this would combine greater equity with improved economic efficiency. Distance-based fares sound confusing and logistically difficult, but they need not be: San Francisco and Washington (which also offers an off-peak discount) already charge fares based on distance without any major problems.

But for now, off-peak discounts are definitely a step in the right direction. In a world where economic efficiency and social equity are often at loggerheads, this policy promises to increase both. Let’s hope the new ideas will represent more than a (sorry) token effort.

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