On the inevitability of fare hikesBy
As the MTA’s public hearings for the looming fare hike move ever closer, the public comments surrounding the price increases start to sound the same. “How can they do this?” “More money for worse service.” “I’m going to stop taking the train and start driving.” We hear this litany of complaints with increasing frequency, and yet, when the MTA raises the fares, ridership numbers do not decrease. In fact, they’ve gone up over the past decade. Why?
To many, the answer is obvious: Even with subway fare increases, transit remains the cheapest way to get around the city by far, and it’s reasonably efficient too. So far all the bluster, straphangers aren’t about to start shelling out thousands for parking just because the cost of a Metrocard goes up. So the MTA can continue to raise prices forever, especially as other costs increase.
Today at Capital New York, Dana Rubinstein explored this phenomenon of pricing:
Logic tells us that at some point such hikes become unsustainable; excessively high prices deter customers and end up hurting the bottom line, as everyone knows. Except not when it comes to transit. “The answer is, that never happens,” said Jeffrey Zupan, a senior fellow at the Regional Plan Association, in response to a question about the point of diminishing returns for fare hikes. “Obviously if you charged $100 a ride for using the subway, no one would use it and you’d have no revenue. There’d be millionaires on it … if they wanted to use the subway.”
“It’s sort of like talking about the far reaches of the solar system,” said Charles Komanoff, a transport economist. “We are not remotely close to that. You could just as easily say, ‘If people had to swim to get down the staircases to the stations, then they’re not going to ride the trains.’ OK, that’s true, but so what?”
These are people, mind you, who are vigorous advocates of publicly subsidized transit. But with one exception (Robert Paaswell, director of the CUNY Institute for Urban Systems, who said that “if you even mentioned $4, people would panic”) none of the transportation experts I spoke to believed fares could ever realistically get high enough to repel riders in big enough numbers to cost the M.T.A. money. That’s actually the problem, politically: other than the complaints of straphanger advocates, there’s nothing to discourage the M.T.A. (or the governor, who controls the authority) from making up revenue shortfalls with fare hikes. In terms of what the market will bear, the price of a ride can always go up.
Rubinstein gets into some of the economic theory behind elastic and inelastic pricing schemes, but it would take a massive shock to the system to get people to change transportation modes. The real question though concerns the subway system as a public good. It’s not an issue for those who begrudgingly accept fare hikes because they can ultimate afford the additional $96 a year. Rather, it’s for those who can’t, and there’s where government support of transit comes into play.
If the role of a subway system is to move people throughout a wide space efficiently and cheaply (thus encouraging economic growth and easy access to job centers), how much money should governments contribute in order to keep the fares artificially low? That seems to be the underlying issue plaguing Albany, transit advocates and the MTA right now.