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Hey, Fidelity.
How can I remember to invest every month? With the Fidelity app, you can choose a schedule and set up recurring investments in stocks and ETFs. Oh, that sounds easier than I thought. You got this. Yeah, I do. Now, where did I put my keys? You will find them where you left them. Investing involves risk, including risk of loss. Fidelity Brokerage Services LLC, member NYSE SIPC. How important is public transportation where you live?
In most of the U.S., at least, the answer is not very. But in New York City? In New York, transit is like air and water. You need it to survive. And so we've done, I think, a pretty good job of making transit affordable. In New York, it's like between 10 and 15 percent the cost of owning an automobile. That is Jano Lieber. I'm the chair and CEO of the MTA in New York City. Also known as the Metropolitan Transportation Authority.
MTA is the New York State agency that operates the subways, the buses, the paratransit operation, and the commuter railroads, as well as a lot of our tolled bridges and tunnels in the New York area. I read here that the MTA network has not only the nation's biggest bus fleet, but also more subway and commuter rail cars than all other U.S. transit systems combined. Is that possibly true? Yeah, that's definitely true.
We carry close to half of the nation's mass transit passengers. So, yes, public transit in New York is pretty important. Maybe not quite as important as air and water, like Lieber says. But still, before COVID, the subway system had five and a half million riders every weekday and another two million on buses. The agency's annual operating budget is around $20 billion. And how much of that comes from the fares paid by riders?
Not as much as you might think. About 25% of our budget is pure fare box from mass transit. Totals are about $2.5 billion. And then the balance is a mix of
dedicated taxes and fees some state and local government support. There is a growing argument that public transit is good for the environment, good for economic opportunity and social mobility, basically good for everybody. So we
We thought it might be worth asking, should public transit everywhere be free? Well, we're studying it right now, so it's premature for me to have formed an opinion. Ah, but other people have formed their opinions, haven't they? I cannot answer that without context.
Today on Freakonomics Radio, one large serving of public transit context. This is an updated version of an episode we first ran in the summer of 2022, and the update starts right now. This is Freakonomics Radio, the podcast that explores the hidden side of everything with your host, Stephen Dubner. My name is Markus Finbom, and I work as a traffic planner in Stockholm, Sweden.
I understand that in a previous life, and maybe still in your current life, that you were a pretty devout, I don't know what's the best word for what you were, a transit protester, a transit anarchist, a populist.
a public transit advocate, bringing more access to public transit for people. Can you just pronounce the name of the organization? Is it Planca? Planca. So it means fair dodge now. Talk about how you dodge a fair. If it's a train, are there turnstiles that you have to jump, things like that? In the metro and the commuter trains, there were back then turnstiles. The turnstiles had a sensor. So if you just stretch your leg in, you would reach the sensor and it would open up and you would slide through.
Markus Fienbaum didn't just dodge fares himself and encourage others in Stockholm to do the same. He and his comrades at Plancka also had a scheme to mitigate the risk of fare dodging. We mainly did this by organizing a solidarity fund. So if you got caught and you got a quite hefty fine, at the moment I think it's...
somewhere in the vicinity of $150, the solidarity fund would pay this. So this is a group you join where you're not going to pay for the transit that you ride, but then you contribute to, it's kind of like an insurance fund, right? You contribute a little bit and if you get caught and get fined, the fund will pay it for you. Is that the way it works? You can say that. Yeah, for sure. Were you ever caught? For sure. Yeah. How did it happen? The
The ticket controllers, they found it quite easy when someone were a member of Planca because we never got aggressive or tried to get away because like, OK, I got caught. Here's my ID. La la la. And they were like, oh, you're a member of Planca. OK, cool. Here's your ticket. It's a clever idea, this fare dodging insurance plan. But that wasn't Planca's only goal, or at least its primary one. They wanted to challenge the idea that anyone should pay for public transit.
For Fienbaum, this gets at some bigger questions about the relationship between transit and society. What kind of city do you want? Do you want one open and accessible for everyone? Or do you want one with barriers and borders that hinder some and makes life just more miserable for some? Markus Fienbaum is not the only one asking such questions. Let's move from Stockholm back to the U.S., to Boston. ♪
If I were to ask you, let's say 10 years ago, which would you say was less likely? That the mayor of Boston would be Michelle Wu or that all public transit in Boston in, let's say, 2030 would be free? I'm not sure. Both would be completely impossible. So the first one we now know is not at all impossible. In your heart of hearts, what do you think about the second one? I think we can get to...
a free bus system, that would be transformational for our city's economy, climate, and opportunity. That is Michelle Wu, and she is the mayor of Boston. She grew up in Chicago, came to Harvard for undergrad and law school, then served on Boston's city council for eight years before winning the mayoral election in 2021. As mayor, she wants to be aggressive. It's very easy to be aggressive.
just reactive in these roles. And we have to exercise every bit of planning and capacity and organizational muscle to be proactive. I keep a countdown clock, a little widget on my phone that shows me exactly how many days are left in the term because every single day should count. And we have to move at a pace that is closer to the urgency in the communities as opposed to the usual pace of government.
It's not just the pace of government Wu dislikes, it's how little risk they usually take on. If you maximize the chance that nothing will go wrong, then we won't get close to the scale of change and transformation that's needed.
So in a 2019 Boston Globe op-ed, you were a city council member then, you wrote a piece titled Forget Fair Hikes, Make the T Free. The T being the Boston public transit system. It's the T in MBTA, which is the Massachusetts Bay Transportation Authority. Free public transportation, you argued, is the single biggest step we could take toward economic mobility, racial equity, and climate justice. Right.
I read that now, even now, even knowing what you've been doing. And I say, wait, what the single biggest step before transportation? I look, I'm no mayor. I'm no city council person. But I would have thought the single biggest step might have been about early education or child care or health care or affordable housing. So why start there? Why start with free public transit?
We know that the foundation for equitable access to opportunities is connectedness, the ability to get around. A 2015 longitudinal study of several hundred people that Harvard conducted
showed that the factor most closely linked to a family's ability to rise out of poverty, in fact, wasn't the test scores of schools in the area. It wasn't the public safety statistics. In fact, it was the average commute time to work. So there's a relationship between
and particularly transportation infrastructure decisions and which communities have access to economic opportunity. When I'm thinking it through, I'm thinking, well, even for low-income workers, transit fares just can't make up a very large share of income, especially compared to housing, childcare, healthcare, and
And so on. So how much of the argument for free public transit is about actually helping people afford transportation versus all those other incentives, including lessening carbon emissions, lessening traffic, increasing mobility generally?
Even if it feels like compared to your rent or the cost of food that the fare for the bus is smaller than that, it does add up. MIT helped lead a study here a number of years ago where a number of low-income families were given a 50% discounted fare card to the MBTA. And what we saw was that families
saw a significant increase in their MBTA usage, 30% more trips. And it turns out that people were using the transportation for basic life necessities, to get to their medical appointments, to get to the grocery store, all things that they had previously been rationing because it was just one more cost that you had to undertake.
New York City has means-tested transit discount, 50% off for people below a certain income. Boston doesn't have that. So why not start there? Why go from zero all the way up to free transit for everybody? We are proud as a city to be home to the innovations that have shaped our society in many ways. We were the first to drop
the prices for access to education, for example, or libraries or parks. And we're still home to the first public school in the country, the first public library, the first public park at Boston Common. All ways in which we recognize that by investing in our shared destinies, our common wealth, that we are all better off. And so in line with that vision, public transportation is just as fundamental. To get there, it's not going to happen overnight.
And there are different starting points. So I have been very forcefully supportive of a means-tested discount program as one step in the right direction. Free buses are the ideal place where we would capture so much of this value. It's a place where we see the widest inequities.
Across our transit system in Boston, 64 hours more per year that black bus riders spend on city buses compared to white riders because those routes tend to be longer, stuck in traffic more. This is also a place where the act of paying slows down the service because people are lining up, digging out their wallets, uncrinkling the bills. So that's the ideal place to start.
If Boston were to eliminate transit fares, it would become the biggest American city to do so. Michelle Wu would therefore steal those bragging rights from this man. Robbie Mackinnon, I'm president and CEO of the Kansas City area.
Transportation Authority. Actually, Mackinnon is now the former president and CEO. He left his job not long after we spoke with him. But on his watch, Kansas City, Missouri became the first major city in the U.S. to make the move to free public transit. We didn't just flip a switch and say, hey, everything's free. We did a methodical, strategic process. We first made transit zero fare for our veterans. All you had to do was show your veterans card and
come on board. Next, we went to the school districts and we said, if a child wanted to stay after school for a chess club or football or whatever, and they missed that one yellow bus at 530 to get home, well, then what's going to happen? Mom would have to come get them or they'd have to walk. So just giving them access to public transit was a big deal and they enjoyed that. The third step was we went to our safety net providers, mental health agencies, domestic violence shelters,
So by the time we got to where we were going to flip the switch to make zero fare throughout the region, we were already...
Now, you may be asking yourself, when a transit agency stops charging its passengers, where does the money come from to run the system, to buy and maintain buses and trains, to pay drivers and other employees? We have a $100 million budget. Less than 10% of that we were getting from the fare box.
Among transit people, this is called the farebox recovery ratio, and it varies a lot from place to place. Here is Brian Taylor, a transportation scholar at UCLA. People often may not have an idea of how much the fare they pay goes for the cost of transit. Nationwide, fares cover about a third of the operating costs.
of a system, but they don't cover any of the capital costs. So the buses, the trains, the equipment, the stations are all paid for with federal grants. And the cost of operating the service, the operators, the drivers and the mechanics, fuel, tires, wear and tear, things like that, about a third of that is covered out of fares and about two-thirds by government subsidies.
But as we said, the fare box recovery ratio can vary. As Jano Lieber told us in New York, it's around 25%.
Consider the pre-COVID numbers for two big California transit systems, Los Angeles Metro and BART, or Bay Area Rapid Transit. LA Metro is down in the teens, where BART is closer to 50%. And remember what Robbie Mackinnon told us about the $100 million transit budget in Kansas City. Less than 10% of that we were getting from the fare box. Meaning?
meaning the vast majority of the operating costs were coming from federal, state, and local funding. And if you're down that low from a Fairbox recovery standpoint, you cannot tell me that I couldn't walk in there and find that 10%. You can't tell me there's not a way to help the folks that need it the most.
Who need it the most financially, he means. The demographic makeup of public transit ridership also varies from place to place, depending on the geography, economics, even the history of a given city. In places like San Francisco and Boston and New York, traveling by car is time-consuming and expensive. Therefore, more middle and high-income people in those places use public transit.
In Kansas City, meanwhile, where driving is easier and cheaper, there's a much larger share of low-income transit passengers. And to me, charging a fare is a regressive tax on the people who need it the most. When we started down this road, everybody wants to go back to some study that was done in 19-whatever-the-hell. Excuse my language. Everybody said, oh, my gosh, you can't do it. Society's going to break down. You know, crime everywhere. Cats living with dogs. Mass hysteria. That's what's going to happen.
Well, let me tell you, exactly the opposite happened here in Kansas City. And I'm going to tell you why. Over 75% of any incident we ever had on a vehicle was over a fare box dispute. Okay? Think about that.
And since we took the fairway, we've had less than 20 incidents out of, you know, 10 to 13 million rides. That's fantastic. And then the other part was they said, yeah, but now the houseless folks are just going to get on and stay on and live on your vehicles. Well, you know what? First of all, there but by the grace of God go I and you, right? These folks are people, and they're just people that need help. So what we've done is invent a pilot program where—
Some of the homeless providers are putting case management teams on our vehicles based upon heat maps of where we need the most help, and they can help them get to the shelters and the services that they can actually use rather than just putting more, you know, police with guns on a vehicle.
Once Kansas City went fare free, McEnan and his transit agency did have to make up a $9 million budget shortfall. They got $5 million from the municipal government and used federal COVID relief funds to cover the rest. But that money will run out soon. And with McEnan, the program's main champion, out of his job, the future of free transit in Kansas City is uncertain. The agency says it is currently studying whether to start charging again.
But advocates of free transit like to point out that eliminating fares can actually save money by saving time. Here again is Boston Mayor Michelle Wu. We've already seen significant operational savings from the cost efficiencies of making our routes run faster.
In early 2022, Wu helped start a pilot program that eliminated fares on three bus lines that serve lower income areas, routes 23, 28, and 29. And you saved some of the costs of fare collection. So when you do a net accounting on the enforcement and fare collection costs versus free fares on those three lines, where do you come out?
In some ways, there's an elasticity question. How much are more people riding because the price has changed? The estimate across the entire bus system previously was that it would be about a $30 million cost for revenue replacement just for bus fares.
And the MBTA system has separately estimated that it would be a $29 million cost savings in the fuel and all the efficiencies from speeding along bus service with all-door boarding. But is that at a steady state? Because theoretically, if you're inducing demand by making it free, right, so now you need more buses, more drivers, more depots for those buses and so on, yes? Yes. And that's part of what we're trying to measure with this pilot.
But what we did see was that relative to other bus lines that did not have free fares, the ridership of the 28 bus was about 92% of ridership pre-pandemic. That is compared to most bus lines at 50%, 30%.
This is all starting to sound pretty convincing in favor of fare-free transit. You've got easier and cheaper access for passengers, especially low-income passengers. You've got fewer private cars, theoretically at least, and the congestion and pollution they create...
Even the price tag sounds manageable. So coming up after the break, does this mean that all transit should just be free? Just saying generally make it fare free for everything, for all types of trips. I would not agree with that. I'm Stephen Dubner. This is Freakonomics Radio. We will be right back. T-Mobile has home internet on America's largest 5G network for 50 bucks per month. It's how I stream the game. Oh yeah, that one's out there.
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The thing about transportation is that it's a very, very important part of our lives.
is that everybody does it, and so everyone thinks they're an expert at it. That, again, is Brian Taylor. I go to a party and people come up and say, you know what they ought to do?
They ought to put a monorail down the middle of the freeway. And I said, what do you do? And they said, well, I'm a cardiologist. I said, you know what you ought to do? You ought to do more angioplasties and less coronary artery bypass. They said, well, why do you say that? I said, well, I have as much expertise in cardiology as you do in transportation. I have a heart. So what are Taylor's transportation credentials?
I'm a professor of urban planning and public policy, and I direct the Institute of Transportation Studies at UCLA. Let me ask you to just brag for a minute, Brian. The UCLA Institute of Transportation Studies is to transportation studies as blank is to blank. The Yankees to baseball, maybe? It's one of four branches in the UC system. So there's a branch at UC Berkeley, UC Davis, and
UC Irvine and the one at UCLA. The four branches together are pretty unambiguously the premier transportation research institution in the world. What are you actually trying to accomplish with this research? I try to make it difficult for public officials to make bad decisions. So there are a lot of things about transportation that are counterintuitive and
And because of that, it's a challenge to explain to members of the media, to elected officials who have to make decisions, to members of the lay public, because so many things seem obvious, which aren't. Like widening a road will get rid of congestion, for example. There's a name for that, right? Brazes Paradox or something? Yeah, it's basically the idea of latent demand. There's a demand for the use of the roadway, and the congestion increases the time cost of travel, so it raises the price of travel,
When you add capacity, in the short term that congestion goes down, the time cost of travel goes down.
And so it becomes cheaper to travel on that roadway from the user's perspective, and they fill it up until the price brings it back into equilibrium. It fits very consistently with economic theory, but the idea that demand is somehow fixed is something that people assume. They can't imagine that people's demand changes. If this paradox exists with new lanes of a highway, does it exist with public transport as well? There's this idea of elasticity. When there's a change in price...
How do users respond? If it's very elastic, a change in price causes a big change in behavior. If it's inelastic, a change in price elicits a small change in behavior. In this case, we can think about price elasticity, which is if the fare goes down to zero or goes up. And we can also think about service elasticity. So if the service becomes more frequent, people don't have to wait as long. And it turns out that people are at least as service elastic as they are price elastic.
OK, let's do a thought experiment. Imagine you run a big city transit agency and you get a financial windfall like a few hundred million dollars extra from the federal government, which happened quite a bit as part of the covid response. Considering what Brian Taylor just told us, that people are at least as service elastic as they are price elastic.
How do you want to spend that windfall? One thing we could spend it on is making the service free to everyone, and that might encourage more people to ride. Another thing we could do is to have more frequent service, and we know that people hate to wait, and that more frequent service would also encourage people to ride. What do you know about the pilot program in Boston for free buses and Mayor Wu's desire to expand that over time?
They found that there was an increase in ridership as a result of the fare-free in comparison to other services that were similar in their operating characteristics. One of the things I want you to notice about that evaluation is what the riders commented on. The most frequent positive comment was that it sped boarding and alighting.
and increased service reliability. Okay, remember I was talking about how people are very service elastic? They really like reliable service. We know that people wait wait time, they W-E-I-G-H-T-W-A-I-T time at about one and a half to four and a half times in vehicle time. So let's just call it three times. That means if you wait 10 minutes for a bus, in your perception of the burden of that trip, you waited it like it was a half hour.
So what I would say is that experiment tells us both that people responded to the free fare. They also responded to the fact that the boarding and alighting times are faster. If you have systems where people are fumbling in their pocket and uncrumpling dollar bills and sliding them in, that takes time. And that brings us to a thing about the way we charge for fares.
Ah, the way we charge for fares. This is one of Brian Taylor's pet peeves about public transit. A few years ago, he took his daughter to Boston to look at colleges. We did not wonder how we would pay for the hotel we stayed in.
When we walked into a restaurant, we didn't say, do you take cash or credit cards or what? How will we pay for this? There was no uncertainty. But when it came to the public transit in Boston, we walked out to get on the T and I'm someone who works in this field. We had no idea what to do. Absolutely no idea what to do. There was eight point type traffic.
laying out all of the fare policies, and I needed to go to a convenience store and buy a card. Could I pay cash? I didn't know. There was confusion. Why public transit? Should it be so complicated and difficult?
to figure it out. I have cards from Sydney, Australia, from Brisbane, from London, from Tokyo, from Shanghai, all of which are different, all of which have different rules. To be fair, some of these places are much easier than others, and some use technology better, including, and this may surprise you, New York City. In New York recently, I was visiting my daughters. I used Google Pay to use the train.
What a breakthrough that was. So why don't all transit systems let you just use an app on your phone to pay? The problem is, because public transit is publicly owned and operated, and we see as our goal to give mobility to everyone, not everyone has access to a smartphone or to a credit card. So in our efforts to try and be as inclusive as possible, we end up making paying to use transit as confusing as possible.
And that's a serious problem. In one sentence, is free or as people like you call it, fare-free public transit a good idea or a bad idea on balance? I cannot answer that without context. First of all, I'm an academic, so don't ask an academic. What I can tell you, I'll just give you a very clear example. BART in the San Francisco Bay Area going into downtown San Francisco, those peak hour, peak direction commuters that is going downtown in the morning,
have higher incomes than the average driver. So you're saying making public transit free for those commuters doesn't make a lot of sense. First of all, they're not that price sensitive. And secondly, it's just transferring a benefit to very high income commuters. On the other hand, local bus service in Lubbock, Texas, the users are almost uniformly low income.
There, fare-free transit is essentially a transfer to lower-income disadvantaged populations. Just saying generally make it fare-free for everything, for all types of trips, I would not agree with that. Okay, so that context is noted and appreciated, but it sounds as though one simple adjustment might be, hey, let's just make it means-tested. We do means-testing for a lot of things in society. Right.
Is that a sensible way to think about public transit, fare-free public transit for, let's say, students and seniors, which a lot of places already have, and everybody under X dollars annual income? Yeah, there's a movement around trying to do that. The criticism is, well, you have lots of undocumented residents. You have other people who aren't able to document their income. You create bureaucratic barriers that the most disadvantaged travelers can't overcome. And you may end up excluding people that you ought to help,
On the other hand, the question is, do we need to give something valuable away to rich people for free on the argument that we want to help low-income people? The more you talk, the more complicated fare-free public transit. Isn't it great? Coming up, as we consider free public transit, we also need to ask, where do cars fit into all this? I want to make driving great.
but rare. And if you'd like to hear some earlier Freakonomics Radio episodes about transportation, I would suggest episode 548, Why is the U.S. so good at killing pedestrians? Episode 454, Should traffic lights be abolished? And if you want to go way back in the archive, episode 118, which we called Parking is Hell. You can get all our podcasts on any app for free. I am Stephen Dubner. We will be right back.
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Visit PBC Incorporated to try the flavor merger of the century, Jif, PB, and C. I think we often talk about economics and policy and decision-making through data and graphs, and that's all really important. That, again, is Michelle Wu, the mayor of Boston.
But it's really hard to actually conceptualize what this means for people unless you experience it directly, unless you are a daily commuter or need to get to work with a big double stroller with two little children under the age of three in it on our public transportation system. Woo wants to make public transit in Boston free. Fare-free transportation is funding public transportation as a public good and recognizing the right
to mobility for every person to belong in every space and to be able to benefit from all that our city has to offer. So that's Wu's argument for Boston. But again, different places have different transportation needs and styles. The thing to understand about public transit is
is that public transit is very context-specific. And that, again, is Brian Taylor, a transportation researcher at UCLA. We operate public transit in places like Bakersfield, California and Tulsa, Oklahoma, and its relative utility compared to private vehicles is a fraction of driving because the environment in those places is around rewarding having an automobile and punishing its absence.
So when we talk about public transit, abstracting it from the environment within which it operates is almost meaningless. Overall, the use of public transit is highly asymmetric. That is, not everybody rides a little bit. A very small share of the population rides a lot. Another chunk of the population rides occasionally, and most people don't ride at all. The thing you have to understand about public transit is there's New York and everything else.
And in fact, I just reviewed an academic paper where they simply held New York out of the equation because New York accounts for about four out of 10 transit trips in the entire United States. There was a period where New York was gaining riders during a boom time a decade or so ago, and much of the country was losing riders. But it appeared, if you looked at the top line figures, that public transit was doing very well. New York was so big, it could by itself move the needle.
Not long ago, Taylor and his colleagues were approached by the Southern California Association of Governments to figure out another drop in transit ridership. Los Angeles, Southern California, in fact, the state, was on a pretty good run of increasing investment in public transit and rolled out a lot of new rail lines, improved bus service. And yet, ridership was eroding at an accelerating rate. What'd they figure out? There were many factors associated with eroding ridership.
But the most important one was that households with no access to motor vehicles were gaining access to motor vehicles. You had lots of low-income households, immigrant households that were quite low-income that over time the economy had been doing reasonably well and people were accumulating assets and among those assets were motor vehicles. And even in middle and higher income households you were going from one vehicle and two adults to two vehicles and two adults. We're
Were there other factors that drove the decrease in California public transit use? There's evidence that the rise of Uber and Lyft had some effect, but it was relatively modest. If one reason to have really great public transit is to increase mobility generally, and I don't know of a single economist or other social scientist, any scientist who doesn't think that increasing access to mobility at least is a really good thing.
rather than building these monstrously expensive public transit systems,
Would it just make more sense to buy cars for low-income people? I have another colleague who has gotten herself a lot of trouble over the years doing research showing that when low-income households get access to automobiles, all sorts of good things happen. The colleague he's referring to is, in fact, his wife, Evelyn Blumenberg, another transit scholar at UCLA. Better access to food, better access to health care, to education.
which many concerned about the problems of dependence on automobiles chafe against that and say, well, that's a problem. Her response is that we shouldn't balance our environmental policy on keeping poor people out of cars. You all have spent the last century building cities around automobile travel. Why should it surprise you that when low-income people get access to cars, they're better off? We can say that low-income travelers drive too little and most of us drive too much.
Is there within you as a human and researcher, someone who says, hey, we need to do much less subsidizing and encouraging of car travel and more subsidizing and encouraging of public transit? Well, the question is, do we need to subsidize travel to use economist parlance if we properly priced automobile use? The need to subsidize transit would go down a lot because the demand for transit would go up a lot.
Imagine for a minute that Pete Buttigieg decided the transportation department is just too boring. He wants something saucier and he steps down and you, Brian Taylor, are
are immediately installed as Secretary of Transportation. Give me your top, let's say, five priorities. Well, first, my opinion of President Biden would probably slip a little if he made that choice. We have to think about climate change. We have to think about access by people who are disadvantaged. Those would be two really important things. I think the third thing would be related to our ability to cope with shocks while
wildfires in the West, pandemics, sea level rise, things like that. And I would certainly try to manage private vehicle travel. I want to make driving great travel.
but rare. So, Secretary Taylor, I did not hear you name public transit at all, and especially fare-free public transit. What number on your list might that come in? To me, right now, the problem with public transit is the problem we have with cars. In fact, in the United States, we're investing more in public transit.
And that's all for the good, except that it's undermined by policies that keep trying to make it easier and cheaper to drive. And now we say, okay, well, we're not going to make drivers responsible for the cost they impose on society. Let's see if we can make it even cheaper to go on public transit.
When Taylor says that we don't make drivers responsible for the costs they impose on society, he's really talking about two things. The first is that car travel produces a lot of what economists call negative externalities, things like pollution and congestion and accident risk that are not priced into the cost of travel. But there's also the fact that most of our roads are essentially free.
They aren't priced according to supply or demand. The argument forever has been that you can't price for roads because it's a public good, and that's fundamentally not true. That is Shashi Verma, a longtime senior executive at Transport for London, which oversees pretty much the entire transportation network in London, including the roadways. And some of those roadways now cost a lot of money to use. The congestion charge came in.
2003 to discourage people from driving into central London. The congestion charge today means it will cost you 15 pounds, that's around $19, to drive into central London during the day. It's estimated that this has helped reduce roadside emissions by up to 44%. If you can get cars out of the way and get more buses on the road, that is an overall benefit for society.
It's also a benefit for all the other things for which roads need to be used, which nobody would ever argue against. You wouldn't want to be in an ambulance caught up in traffic. So did congestion pricing in London increase public transit use? That question is not so easy to answer. It's very difficult to distinguish between the effect of the congestion charge versus other improvements we were making on buses. That's
That's because at the same time congestion pricing came online for private vehicles. We were improving the quality of the bus network to give people an alternative anyway. That made it hard for researchers to isolate the effect of congestion pricing.
Still, if you look at things in the aggregate, the aggregate impact of all of those things was that bus ridership increased by 60%, 6-0% in a six-year period from 2000 to 2006. Does this mean the key to increasing public transit everywhere is just to make driving painfully expensive? The negative incentive is very much on driving. But the answer cannot be, well, we've started charging you
and go to the public transport system that already exists, which is now going to become worse because there are more people using it. That cannot be the answer. So the two things, the incentive and the disincentive, have to go hand in hand. If you tell people you can't use your cars, you also have to give them an alternative.
People won't start using public transit unless they have actual access to it. And that, again, is Markus Finbom, the Swedish traffic planner who used to be a fare dodger. By decreasing the cost of public transit and at the same time increasing the cost of car, you will definitely switch riders. One really good example is when they introduced the congestion fees in the Stockholm region here.
At the same time, they built a lot of park and ride systems. So if you lived in the outer parts of the region, you would take your car and park it and then take one of the new express buses directly into the city. And at the same time, they also introduced a one zone system. With just two dollars, you could jump on the bus from anywhere. And this really increased the attractiveness of the public transit.
And if you compare this with when they introduced the congestion fees in Gothenburg, it was quite contested. Gothenburg is Sweden's second biggest city after Stockholm. And it's the main port city of Sweden as well. And they did not put as much resources into getting new access to public transit. So it just made car ridership more expensive.
And this got people really, really angry and actually shifted the whole political situation in the local parliament in Gothenburg. The ruling party lost power. It had a big effect. Brian Taylor from UCLA has also looked at the relationship between congestion pricing and public transit in Sweden. If you've ever been in Stockholm, it's shocking. Public transit gets around very quickly and easily. People do drive there, but the streets aren't packed with traffic. You can choose to drive in and out of central Stockholm,
But you have to pay for it. And because of that, when you can take public transit or bike or walk or travel by some other means, people do it. So it's not that it's an unpleasant place to drive. It's that it's an expensive place to drive. It's the same thing as flying over Thanksgiving or Christmas or staying at a hotel during peak holiday periods. The price goes up and down to bring supply and demand in line. Otherwise, we just have people queuing up, and that's what we do now.
What do you know about what you call mode change when transit systems are either improved or made free? If there are new riders, where are they coming from? Are they people who were walking and biking? Are they drivers? Because that's kind of the environmental dream, right? That you take all these people clogging up the roads in cars, making pollution in cars, and convert them to public transit. Does that actually happen? So that's a great question, and it gets to what is the goal of public transit, and
I talked about those two markets for transit, people who, because of age, income, or disability, don't have the ability to drive, and people traveling to places where parking is difficult or expensive. The latter group is more affluent. The former group is poorer. That first group is transit's dirty little secret group.
The idea that it was providing an absolutely critical social service, a redistributive social service, is not something that you advertised to voters because that kind of a role didn't get as much support to saying, hey, we're going to provide an alternative to driving that's going to help to deal with congestion. It's going to deal with environmental pollution. It's going to help slow climate change. That has broader appeal. So those are two different goals. They're sometimes congruent, but sometimes they're at odds.
I think that's an important thing that your listeners think about is this opportunity cost of spending money to eliminate fares. Could we do things with that money that riders might value even more than a free ride? I would think that anyone before embarking on a fare-free program ought to ask that question. And the answer could be no.
But it could be, yes, the equity arguments are strong, but we have to remember that what the characteristics of the ridership and the system are tell us a lot about who's going to benefit most from fare free. It sounds to me like the median person given a choice between taking a subway, commuter train or bus would much rather drive their car. Is that a true statement? Well, again, it depends on context.
The Onion, the humor magazine, a while ago had an article that said, voters favor increased funding to public transit so that others will use it and get off the road so they can drive better. So a colleague of mine, Michael Manville, essentially studied that question, and he empirically supported the Onion headline. And that is, in fact, why people vote for it, thinking that I'm not going to change my behavior, but other people might, and it'll make driving easier for me.
So the question again comes back to, we are not managing automobile use and we're trying to change pricing. And so what that means is that we may get benefit from fair, free transit, and that benefit's going to be more in terms of social equity benefits than environmental benefits. Well, that's a good thing on its own. But if the argument is that this is going to reduce automobile dependence, that is likely to have modest effects at best.
So what do you think about this wrestling match between public transit and private automobiles? Your answer probably depends on where you live, how old you are, and how much you like your car, if you have one. And what do you think about the idea of making public transit free?
For that, let's go back to the man who oversees nearly half of all mass transit riders in America. I'm Jano Lieber. I'm the chair and CEO of the MTA in New York City. But Lieber's portfolio is even broader than mass transit. It covers road tolls as well. And the MTA is finishing up a plan to charge drivers extra to come into parts of Manhattan, like the London congestion charge we heard about earlier.
In 2019, the New York State Legislature adopted congestion pricing, where we're going to toll the busiest area of the central business district of Manhattan.
So south of 60th Street in Manhattan, there'll be a toll. What it will do is to capture that revenue, which is projected and expected to be under the legislation to be about a billion dollars a year, which we're going to invest in fixing the mass transit system and improving the mass transit system and even people who drive.
who have to drive or trucks that come in because they can't take mass transit and they need to serve the business district will benefit because they're not going to sit in traffic for an extra hour. So let's say there are a couple, you know, maybe 100,000 drivers a day who decide not
to do that but still want to come into the city, theoretically, that could produce a crush of public transit. If it does, no? No. The numbers don't support that. There are 130,000, 140,000 daily commuters who drive to our business district, which has a million and a half jobs in it. And only 20% of them are expected to shift to mass transit. We got plenty of room for those people. That level of transit usage is
is a drop in the bucket. It'll help mass transit agencies around the region to actually fund themselves for the future. So, is any of that new money going to make buses or trains free? And what does Lieber make of the free transit argument generally?
Is it the best way to benefit riders? All of the evidence that we've gathered so far is the thing that riders want and that really turns them on the most is more service, more frequent service, more reliable service, and faster service. The best move may be to invest in service rather than investing in free. That said, New York City has recently begun a pilot program, like Boston, on a few bus routes.
There is one bus line in each borough of the city of New York, each of our five counties, that is free. So we're experimenting to see if that does impact on ridership, how it affects people's usage of the system. So we're in the middle of that. Why are you running the pilot? Was it your idea? If not, how did it come about?
This past New York State legislative session in the spring of 2023, the MTA, like every transit agency in the country, was looking down the barrel of a gun. We call the fiscal cliff. The money that came from Washington during COVID is evaporating. There's lower ridership and all of a sudden you have
in our case, a $2.5 to $3 billion budget deficit opening up. How to deal with that? Governor Hochul stepped up hugely and with the support of the legislature, solved that problem. So the MTA now has a balanced budget for five years and we're running more service. That was what happened. But some of the people in the legislature were quite passionate about the idea of testing out free transit and they put that into that omnibus deal.
And we're executing it right now, that pilot. We're two months into it. Running the MTA, what's your relationship then with that body of legislators who really wanted to have this free transit pilot? Listen, they were our allies. Early on in the legislative session, we got to talking with some of the pro-transit folks that
in the legislature. There are occasionally differences because we have different roles to play and the free fares experiment came out of an initiative on their side, but I'm happy to try it out and we're having fun doing it. Talk to me about how those particular routes were chosen for the free fare piloting.
We have an operations planning group, which is sort of the data geeks in the MTA. It was the amount of ridership, the adequacy of service, equity for low-income and disadvantaged communities, access to employment, connectivity to other modes, specifically rail. One of the things we wanted to make sure is that we weren't choosing it on routes where we would be cannibalizing other routes that would remain paid. But in the end, we got a pretty good mix of routes.
I've read that one of the factors that went into choosing which routes would be free were whether a particular route had a high rate of fare evasion. If you're riding on a bus and you're paying and the rate of fare evasion on that route is very high, let's call it 20, 40, maybe 60 percent evasion.
That means that only, you know, the suckers are paying. Is that part of the impetus to make those routes free? I'm not sure that's the case. I am concerned about a couple of things. One, getting people in the habit only of, you know, if we say, for example, make the buses free but not the subways because we don't have – there isn't $5 billion lying around.
The message that transit is free will cross over, that you will be encouraging people to take a different view of paying in the subways, even if you're continuing to charge. There is definitely a snowballing effect that we have to take into consideration.
And the other reality is when transportation historically becomes free, all of a sudden it becomes not just a transportation facility, but it becomes responsible for dealing with lots of other social issues where people don't have anywhere else to go. And that could have an impact on the experience of the ride. All of these things factor into our concern, but we're studying it and we're doing it in good faith.
You know, if you talk to some of the big thinking economists, there's a guy, Raj Chetty at Harvard, for instance, who works on a program called Opportunity Insights. And his argument is that over the last bunch of decades, it's become much harder in this country to achieve income mobility, to come from a low income family and move up.
much harder than it used to be. The argument, therefore, would be that transit being just essential, as you've said, if you can remove the barrier of paying for transit, whether it's the money itself, the hassle of paying, the concern about taking an extra two rides a day if I want to try to interview for another job, et cetera, especially for the lowest income people that you're really trying to help, that might be a
a massive upgrade. Do you buy that argument in terms of the big macro idea of incentivizing mobility? Yeah,
Yeah, I'm for making it extra affordable. It's already super affordable. It's like 10% the cost of owning an automobile, but I'm for making it extra affordable for people at the lower end of the income spectrum. We were advocating together with the city council for raising the eligibility threshold of the half-fare program to 200% of the federal poverty level. So we're for that.
But what I'm not certain I really want to do is to spread a ton of money to middle and upper middle and even upper income people, which is a big cohort of our ridership, rather than targeting affordability efforts at the people who need it most. On his way out of the studio, Jano Lieber made one more good point about the debate over fare-free public transit.
for politicians, he said. And I would put transit activists in this camp as well. Supporting free transit is an easy win. It makes them look good and it costs them almost nothing. But when you talk to transit scholars and the people who actually run the systems like Lieber, well, like most things in life, it's complicated. Speaking of complicated arguments,
That's kind of what we do on this show. And if you are a diehard on one side of an argument or another, that might leave you unsatisfied.
This isn't how a lot of media works these days. They tend to preach to one choir or the other. What we do, or at least what we try to do, is a bit different. We mostly go after stories that we find interesting and are hopefully important. And then we find people who know a lot more about those stories than you or I do. And we ask them questions and we listen to their answers. This seems pretty basic, but it's not.
Anyway, I just wanted to say that I appreciate your listening to our work. One thing I love about making this show is that we've got one of the most interesting audiences in modern media. It is a very balanced audience and diverse in a lot of different ways, politically, economically, philosophically, also demographically. We've got young and old, female and male, U.S. and international audiences.
and reading your emails, I see that you're also an extraordinarily diverse audience in terms of what you do for a living and what you do for fun. What happens around here shouldn't be rare, but I believe it is. Having conversations with smart people about complicated things, knowing there are a couple million smart listeners out there who want to hear that kind of conversation. So I appreciate that, and I appreciate you.
Coming up next time on the show. Overall, I'm like, I don't want to say shocked, but I am so happy with how well it went. What went so well? We go inside a new project at the University of Chicago. The project didn't really start as a research project. It started as a holy s**t, the city of Chicago is on fire. Someone's got to do something project. Modern policing is under assault.
This new project aims to remake police management in departments across the country. Will it work? That's next time on the show. Until then, take care of yourself and if you can, someone else too.
Freakonomics Radio is produced by Stitcher and Renbud Radio. You can find our entire archive on any podcast app. This episode was produced by Ryan Kelly. We had research help from Samantha Resnick. Our staff also includes Alina Kullman, Eleanor Osborne, Elsa Hernandez, Gabriel Roth, Greg Rippin, Jasmine Klinger, Jeremy Johnston, Julie Kanfer, Lyric Bowditch, Morgan Levy, Neil Carruth, Rebecca Lee Douglas, Sarah Lilly, and Zach Lipinski. Our theme song is Mr. Fortune by the
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Have you considered corporate sponsorship of public transit lines rather than charging fares? The C line could be sponsored by Chase or Citibank. Or I was thinking the M106 bus line could maybe be sponsored by WQXR, the classical station. It's 105.9. You'd have to round up a little bit, but that could work, couldn't it? It sure would be cute. The Freakonomics Radio Network. The hidden side of everything.
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