Get On the Bus, Gus

I’m not impressed by the great debate over Zohran Mamdani’s free bus proposal. I have loads of problems with the standard economic methodologies, but in public economics, my old field, there is a nice literature on “public prices.” Little of this illuminating theory has seeped into the foofaraw about the Mamdani proposal. (By the way, I totally endorse Mamdani and free buses.)

The latest chew toy for assorted lefties is an Annie Lowrey piece in The Atlantic that I have not read. That is unfair, but I don’t have to be fair. That aside, I refuse to subscribe to The Atlantic, even though it has at least two writers of whom I think the world — Adam Serwer and Liz Bruenig. The Zionist propaganda component of The Atlantic is just too big of a deal-breaker for me. Per Nathan Robinson, it is “the worst magazine in America,” which is saying a lot.

Anyway, Matt Bruenig and Nathan Robinson are both teeing off on Lowrey, as indeed I have myself in the past. Since then, Lowrey’s partner Ezra Klein and I have not exchanged messages, though I knew Ezra before he became huge, when we were both obscure bloggers.

The simple notion that has gotten lost in the debate is that revenue is secondary to the correct bus policy. The primary question is how much service to provide, so that the total social benefits exceed the total social costs to a maximum extent. (The academic version of this is to set service levels such that marginal social benefit equals marginal social cost.)

Once you arrive at the correct service level, fares are only relevant insofar as they affect ridership. It has nothing to do with the difficulty of substituting tax revenue for fares. In fact, it ought to be much cheaper to extract the necessary funds with changes in taxes that already exist then to maintain the administrative burdens of fares.

There is a popular myth out there that public agencies ought to be able to finance themselves with user fees. Unfortunately this principle is never applied consistently. It is used to target institutions disliked by the Right. I wrote about this at length regarding the U.S. Postal Service. As Matt notes, we don’t have user fees for public schools, though that has not stopped assorted evil-doers from making inroads into the system via privatization. (I wrote about that too.) Basic economic theory does not at all prescribe self-funding for public services. Quite the contrary.

Under capitalism, user fees are a weapon of Capital to stifle competition from public enterprise and reduce economic efficiency. One of my favorite examples is passenger rail. In the U.S., passenger rail—Amtrak—is nearly suffocated under the pressures of self-funding. In no other country is passenger rail financed by fares. Somehow everybody else is wrong and we are doomed to third-class public transportation.

I am fond of the link between the theory of public prices and the socialist calculation debate. The correct price for New York City buses is the price, possibly zero, that fosters a usage level such that net social benefits are maximized. That would be the efficient result. As Oscar Lange and Fred Taylor showed many decades ago, a socialist government that arrived at the correct prices for everything would maximize social welfare, by conventional standards. Whether that would be possible is another story. The point is that private, individual ownership of capital is not required for efficient resource allocation. (I was tickled to see Bush economic genius Greg Mankiw once employ a “planner model” in on of his macro papers.) Of course, under capitalism prices are frequently wrong, leading to a waste of resources and a plethora of other problems.

Could zero be too low a price for buses or the subway? Common sense suggests otherwise. In the big, bad city, there are ample entertainment alternatives to riding the bus (which I do enjoy, by the way; above ground, the city is a feast for the eyes) or the subway. On the other hand, more bus rides benefit riders, even if all they do is gawk like me at the street scene. Naturally it could bring more shoppers to retail merchants, encourage tourists, and increase tax revenue of its own accord.

Lowrey raises the difficulty of getting the state legislature to permit higher taxes in New York City. This is not an unreal concern, though one might remind onself, in the matter of New York City versus the rest of the state, which one is the dog and which the tail?

There is a deeper political matter. The sites of greatest left activism in the U.S., featuring the success of candidates supported by Democratic Socialists of America, are cities which, under U.S. federalism, are obliged to function at great fiscal disadvantage. The only solution to this contradiction is for lots of ass to be kicked. I’ve been ranting about the U.S. Left’s oversight of the potential for policy progress via state government. The growing right-wing lock on national policy ought to encourage interest along those lines.

Lowrey lampoons the idea of free this and free that. Well excuse me, but free stuff, to each according to her need, is what it’s all about. I took a stab at this too, citing the writing of Adam Przeworski. If you’re not for that, what are you for? Premature old-fogeyism? I would argue that through the centuries the U.S. has done as well as it has thanks to its free public schools. Yes, the cost is massive and undoubtedly marbled with waste, but a reductionist accounting mindset resting on faux economic nostrums is not the right tool to evaluate this job.

I’ve referred to an argument that free buses could be efficient. There is also the question of whether it is fair. Isn’t that fucking obvious, that using taxes rather than fares is better for lower income persons? This is not rocket science. In any fiscal system, the benefits of services will have a broader distribution than whatever tax system is used to finance them. Tax and tax, spend and spend.

The biggest missing piece for socialist New Yorkers is the golden goose in the room: commercial real estate. Tax the land, and watch the city boom. There is also a little thing called Wall Street.