It’s Only a Positive Externality if the Government Does It
A positive externality happens when the “good” of a product or service can’t be contained to the people who paid for it. Others benefit too, even if they don’t pay. As a result, goods with positive externalities get underproduced relative to the utility they might offer, when supplied in greater amounts, which they would be if everyone had an incentive to pay.
Intercity transit is a good with a positive externality. Even if I never leave the city, I benefit from living in a city that’s well-connected to lots of others.
Positive externalities help make the case for public funding of intercity transit, and that case isn’t considered a terribly difficult one for doing things like the interstate highway system or even Amtrak, pathetic as it is. So why is the District of Columbia imposing hefty new fees on the providers of intercity transit?
As far as I can tell, it’s because they’re private companies. WAMU reports:
Near the corner of Sixth and H streets in Northwest D.C., a few people waiting on a bus to New York City. They have their luggage ready to go.
“If you look in the Washington, D.C., market, you can make a pretty good assumption that there’s a bus leaving, I would say…every 20 minutes to New York City,” says Pete Pantuso, head of the American Bus Association.
He says the competitively priced bus industry has thrived during the recession.
“People are looking for alternative ways to travel. The bus, all of a sudden, creates an alternative to air, maybe to rail, obviously to driving as well and paying the high tolls and the cost of gas,” Pantuso says.
But these D.C.-to-New York bus companies can keep prices low because they don’t need a bricks-and-mortar bus depot. They just use the curb for free. But not for long.
“There are no regulations and there’s no cost associated with it — that’s an opportunity for growth. Which is fine, but from the city standpoint that puts us at a disadvantage in managing public space,” says Euolis Cleckley, with the D.C. Department of Transportation.
Proposed in the spring, the new regulations have just taken effect. Says Cleckley, “The days of people coming into the District and using curbside space for free are over. We just can’t do it.”
“We?” one is tempted to ask. While curbs are also public goods — gosh, where’d we be without ’em? — I find it difficult in the extreme to justify the fees of $10,000 to $80,000 that are now being charged to private bus companies. These firms are providing a good with an obvious positive externality, they’re doing it very cheaply, and if we can infer anything about them, it’s that they might just deserve a subsidy, not a hefty new fee. (Their going without skeezy bus terminals also prevents a negative externality.)
I suppose the subsidy theory only applies to government-run corporations. All others are treated as a nuisance, not a benefit.
Some questions I’d like to see answered: Who exactly has complained about the use of curb space? How badly were they inconvenienced? How were the fees for curb use set? Will the inconvenienced people and businesses get some share of the money, or is this just a cash grab perpetrated against a successful business? Why not establish bus-only parking meters, and charge market-based rates?