The Privatization of Roads and Highways - Ludwig von Mises Institute

94 The Privatization of Roads and Highways
Moreover, since prices are the only reins through which consumers
“control” producers, free fares will remove any vestige of
this effect. Not compelled to earn profits, with their costs subsidized
out of general tax revenues, the managers of the transit
operations will find that their efficiency and responsibility will be
eroded. Roth states: “Free fares fail to relate expenditures to the
wishes of the consumers . . . and do nothing to insure that existing
[stocks] are used in an efficient manner.” 75
Scheiner and Starling, however, would be disposed to argue
with this contention. They ask:
Would an open ended federal subsidy become an invitation to
inefficiency and excessive wage demands? Clearly, a carefully
designed program would have to deal with this question. One
possibility would be to have the federal government pay local
communities a flat subsidy per passenger trip. This approach
would provide a built-in incentive for transit systems to
improve service since the more passengers it carries the more
assistance it receives. 76
This would indeed encourage the local community to provide
service, but the quality of service encouraged would only be
at that level necessary to tempt use at a zero price. And commuters
who put up with rush-hour crunches in some of our
larger cities could be expected to continue use of free transit
unless it deteriorated very seriously indeed. So there would be
some incentive for quality service; but it would only become
operational at levels where the service was practically nonexistent.
Additionally, without prices there would be no way in which
to gauge the importance that each rider places on his trip. With
75Schneider writes: “There would be no quantitative measure other than
‘public benefits’ or ‘last year’s budget’ by which to judge the performance
of the system,” (“The Fallacy of Free Transportation,” p. 86).
76Scheiner and Starling, “The Political Economy of Free-Fare Transit,” p.
177.