posted at Knowledge Problem: Wanted: Economic Analysis of Urban Rail Transportation (five months’ belated thanks to Derek for the heads-up; a follow-on to Funding Redux‘s diss on privatization)
Privatization [of CTA] would hardly be a panacea; one of two companies hired in a privatization of the London Underground recently entered receivership, and taxpayers could be held responsible for its tremendous cost overruns. Our local “traction kings” hardly fared better: Insull made his fortune from energy, not the “L”; Yerkes profited off subterfuge and subdivisions, not the streetcars. In fact, both used securities fraud to cover the steep losses they faced on transit operations, which is why both were run out of town on the rails.
Those men faced no real competition, as their empires predated today’s heavily subsidized and regulated freeways, parking, sprawl, etc. By the end of Insull’s reign, the railroad industry had become the most regulated public utility in American history, wearing far heavier regulatory yokes than those which the cable, phone, and electric companies “toil” under these days.
This little history lesson hardly disproves that contracting out operations might reduce costs — particularly when public bureaucracies have ossified and become unresponsive to change — but do use caution before bandying about “PPP” without understanding its ramifications. One could even look back at the same Yerkes/Insull history and draw the conclusion that urban transit is a natural monopoly (thus enabling free transfers, for instance) and inherently requires local government involvement, or one might draw the conclusion that Illinois politics vis-a-vis transit have forever been poisoned by collusion and power-broking at the public’s expense.
In any case, I have it on good authority that a great many MBA-diseased minds (not least Rob Huberman, Chicago GSB ’00 and Carole Brown, Northwestern KSM ’89) are being put to work on the CTA’s problems now. This may not have quite the results that we bargained for.