Private buses and the government as a business

CC Photo by Flickr user Mr T. in DC

Yglesias suggests that the future maybe should involve privately-owned intracity bus lines:

Bus lines don’t have the power to transform neighborhoods that rail construction possesses. But buses are by far the cheapest and simplest way of adding mass transit, and municipal leaders should always have their eyes on potential ways to improve things. One possibility that naturally suggests itself is to let entrepreneurs start private intracity bus lines just as we have inter-city buses running from New York to DC, Philadelphia, Boston, etc.

Unlike the barbering field I would want to see regulation of this kind of activity since there are genuine public safety issues and it would be useful to consumers to impose some kind of uniformity so that buses are recognizable, have interoperable farecards, etc. New York City features sufficient demand for this kind of thing that the local authorities sporadically find themselves doing “dollar van” crackdowns. I’m not sure real market opportunities for this kind of thing would exist anyplace else, but it would probably be worth other cities’ while to try to find out. Ultimately, instead of a publicly-operated and publicly-subsidized set of bus lines, you could have a set of competing private bus companies with government subsidies provided directly to the consumer.

Here in the District of Criminals, we’re (basically) serviced by two bus services. The first and bigger of the two, Metrobus, is operated by the Washington Metropolitan Area Transit Authority and runs across the region in D.C., Maryland and Virginia. The DC Circulator, on the other hand, is much smaller and is run by the city’s Department of Transportation.

Metrobus is gigantic and broad. It runs almost everywhere and stops as frequently as every couple of blocks in most places. It also runs on a generally reliable set schedule that can easily be looked up on a timetable or online. The fare is relatively inexpensive ($1.50-1.75). The routes are very commuter-oriented and are generally geared toward and efficient at moving people from the downtown core to outlying residential areas and vice versa. In short, it can be described as a quite generic city bus system.

Originally conceived in 1997, the D.C. Circulator opened in 2005 with a much different mission: basically to cart people around the city between commercial centers. To this end, the system only operates within D.C. It also brought along a good number of innovations that have made it a very popular and innovative bus system. It operates with far less frequent stops, in some cases only one in a neighborhood, a feature much more similar to a subway system. This allows buses to move faster and drastically reduce travel times, although at the expense of convenience. It also does not run on a timetable schedule, and instead merely launches a new bus every ten minutes. It’s also only a dollar to ride.

This could be an argument, then, for greater competition between bus services. The upstart brought with it innovative new ideas, a lower price, and has assumed a good amount of bus ridership from the Metrobus system. The Circulator is quite popular; city council members now almost all vie for expanding the system into their districts.

The Circulator is more efficient, costs less, and is more popular than the region’s aging Metrobus system. To a business perspective, competition has won out. Additionally, the Metrobus has subsumed some of the Circulator’s innovations: some Metrobus lines in busy corridors now operate “express” services that are similar to the less-frequent stops of the Circulator. So competition wins. Right?

Well, the good news is that the Circulator is not, in fact, competing with Metrobus for riders. They do not operate similar routes (with a few exceptions, which are impossible to avoid). They serve different audiences. The Circulator is still a very small system, only operating five routes (Metrobus serves 300 routes). But, could the Circulator expand and compete with the Metrobus? Could it possibly put it out of business? And, if so, would that be a good thing?

In the business world, the only motive is profit. Let’s assume that the Circulator’s only motive is likewise profit. If the two were to compete, Circulator would remain its efficiency only if it could remain profitable, and it would only serve profitable routes. The Metrobus operates, however, under a different mandate: to serve the transportation needs of the people in the region, not to maximize profit. Profitable routes subsidize unprofitable routes, and generally the system merely hopes to break even (of course, it doesn’t have to, and transit often doesn’t).

If the Circulator were to compete against Metrobus, it would only do so on the more profitable routes. This would absolutely cannibalize Metrobus’s cash-flow. The Circulator would have no motive whatsoever to serve less profitable routes, and, as Metrobus collapsed, so too would those routes. As a result, a good portion of the region would lose public transportation altogether.

This awakens a constant argument about the final cause of the government as well as the method by which it should operate. We often like to think of business leaders as good executives, and we think the government should operate as a business would. People tend to latch onto candidates who promise to “run the government like a business.” But, I doubt anybody ever stops to wonder what that means.

It widely accepted that business, as it is guided by profit as its sole mission, is the most efficient system. And, there is a lot of motivation there to cut excesses in budgets. However, what’s missing is any evaluation of whether the business is even the most efficient system, and, really, if financial efficiency should be the only aim of government.

Businesses operate under pressure to secure short-term profit. This acts to squeeze budgets, sure, but this kind of thinking also advances a push for short-term profits over long-term investment. We saw this in the past decade to an extreme, as corporations spent far less on investment than ever while maximizing profit margins to their highest ever. It was the pinnacle of efficiency. And absolutely unsustainable. Investment is absolutely necessary for long-term security, but doesn’t look as efficient.

Additionally, as anybody who has called a customer service representative in the past decade can attest, service suffers. So does quality, if you’ve noticed the cheap plastic goods that now come from the developing world.

In our example above, we saw how maximizing profit, and therefore efficiency, ended up with far fewer people and areas with public transportation. If you were to operate the government like a business, that would extend, as much of government’s “profitable” activity actually subsidizes its lesser efficient activity.

Government should not be about maximizing profit, government should be about maximizing service and the quality of that service. Perhaps that does mean cutting service. But it shouldn’t be for profit sake; it should be for the people’s sake. The government is the embodiment of the people together. The motive should not be efficiency. The motive should be doing what the people can do better together than alone.

The government should learn to better innovate. And that means investment. Real, long-term investment. The kind that wouldn’t be acceptable to a titan of business. Energy solutions that may have no short-term profit forecast, but in the long-term will solve the majority of our security, environmental and economic problems. Education solutions that sound like giving money away, but prepare those who are now children to compete in the global economy ten or twenty years from now. A transportation system that may not be fiscally efficient, but move a majority of people faster and more effectively than without it.

It’s no surprise that our “First MBA President” has now been dismissed as a failure.

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2 thoughts on “Private buses and the government as a business

  1. But why can’t the government run buses on routes where we think there’s a compelling public interest in routes while also letting private firms run buses where they think there are profits to be made?

    1. Well, there are definitely points to be made on either side, and the question is by no means categorically answered. I just fear that by running competing systems on similar lines would cannibalize the funding of the government-run buses, which would force the government-backed agency to either drastically raise fares on less-profitable or profit-less routes, or increase direct funding through the governing body (city/state/etc.), both of which make for a less tenable transit situation, which could end with the transit system shutting down due to lack of funding or public support. If the private firm can make a cheaper and more efficient system because it doesn’t have to support less profitable routes, then public support for publicly funded transit will also crumble, making them less amenable to funding it with tax money.

      Now, of course, the other answer is it would force the publicly-funded system to innovate, which the WMATA system has done. But how would you control that situation?

      One thing I never mentioned, despite really meaning to, is the job that Gabe Klein has done at ddot in bringing in newer innovative “best practices” to the department. I think that’s the best intersection of government and business, not running it as if it were a business or letting businesses do government job.

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