Not long ago, I proposed that Washington, D.C. Metro consider variable pricing as a way to both manage transit usage during peak periods and raise revenues based on marginal cost pricing. Recently, however, the Washington Examiner inadvertently poked a hole in my idea. It turns out, nearly 40 percent of peak riders on the Metro are federal workers, and hundreds of thousands of them get steeply subsidized fare cards. Notes the Examiner:
Tens of thousands of federal workers ride Metro for free and wouldn't feel the pain of proposed fare increases that could raise one-way subway fares to as much as $5.95.
Some 120,000 federal workers in the Washington region receive up to $230 a month for transit, which amounts to taxpayer-funded free rides or at least a hefty bite out of even the most expensive trips.
The transit benefit program boosts transit agencies across the country but particularly elevates Metro, since federal workers make up an estimated 40 percent of the 255,000 Metro trips taken during the average morning rush.
In other words, even if fares were increased, huge shares of transit riders would be impervious to the change in price. Unfortunately, this is a consequence of making transportation policy based on political criteria rather than economic criiteria.
Perhaps not surprisingly, this is one of the major challenges facing Chinese cities as they attempt to more efficiently manage automobile use. Since such a large share of automobile use is by government and military personnel, where the cars are perks, market-based pricing is difficult to implement.