The Brookings Institution is America’s oldest public policy think tank. Based in Washington, DC, it is well-respected and generally considered to be moderate-liberal in orientation. As American Enterprise Institute is informally considered a place for Republican office-holders to reside when out of power, so Brookings is regarded for Democratic icons.
One of Brookings Institution’s leading transportation policy experts is Clifford Winston, a well-respected economist and author of numerous books and papers dealing with transportation issues. His most recent paper is “On the Social Desirability of Urban Rail Systems,” co-authored with Vikram Maheshri, an economist at the University of California at Berkeley. It appears in the Journal of Urban Economics and is available online at http://www.sciencedirect.com
The purpose of the paper is to estimate the contribution of U.S. urban rail systems to social welfare. The authors define the net benefit of a rail transit system as the difference between its benefits, broadly measured, and its net cost to taxpayers. If this difference is positive, it means that the dollar value of the rail system’s benefits is greater than its net cost to taxpayers (i.e., the difference between what the rail system’s customers pay as fares and the total cost to build, operate, and maintain the rail system).
On average, rail transit systems cover about 40 percent of their operating costs from farebox revenues and none of their capital costs, according to figures in the National Transit Database. That means their net taxpayer subsidy is large.
Winston and Maheshri construct an elaborate econometric model to estimate the “consumer surplus” of 25 rail transit systems. This is economists’ term for the benefits to users, over and above the fares they pay. The large systems (New York, Washington, DC, San Francisco’s BART, etc.) all produce significant consumer surpluses. But most of the smaller ones do not.
Next, the authors compare the consumer surplus of each system with its net taxpayer cost. On this measure, every single one of the 25 systems has negative net benefits