Fares and Fairness
Good for one fare - but how good is that? A fair question. Flickr photo by SliceofNYC.

Good for one fare - but how good is that? A fair question. Flickr photo by SliceofNYC.

Treehugger has a post up by Alex Pasternack asking “What makes a fare fair?” It’s quite a good question, though I think that it’s one that Treehugger does a poor job of actually asking. Pasternack essentially argues that a price is fair if the value you get from riding the subway outweighs the fare: “Thus, cost isn’t the biggest question. How do we estimate the value we’re getting out of each fare?That is, how fair is the fare?”

This, however, is no definition of fair at all. It is the definition of whether you will want to ride the subway at all. You will ride the subway to the extent that it is more valuable than the fare is. Increasing the value beyond the fare doesn’t make subway pricing more fair in any sense.

Fairness is essentially a philosophical question, and I think it’s one that is worth interrogating. I’m not a philosopher, but I can think of four different ways to get to fair pricing that you might want to use with regards to subway fares (so no labor theory of value included here):

1. Market pricing

The subway should act as a profit maximizer, This is considered fair because everyone is paying a price that they consider fair, or they don’t participate in the system. Crucially, exit is considered completely acceptable; there is no right to take the subway any more than there is a right to have a flat screen TV.

In the case of subways, I have to imagine that the New York or D.C. subway system could increase fares and increase net revenue, even if it was at the expense of ridership. Put differently, if we privatized Metro and gave them the same monopoly rights, wouldn’t we expect to see fares go up?

2. Cost replacement

This says that you should pay what you cost the system. It’s basically an attempt to enforce economic equilibrium, where prices should equal marginal cost. Since subways are monopolistic, even those who actually believe the micro models wouldn’t expect you to get this outcome on the market. Transportation planners who are very worried about farebox recovery rates fall into this category. Why this would be fair is intuitive and attractive: you have to pay for what you took, but no more.

3. Public good

Let’s say that the subway is a public good, in that we all benefit from the mere existence of a subway (making it non-rivaled and non-excludable, to be technical). This makes sense, as subways have environmental and economic implications that affect non-riders and riders alike. If this is true, we should all be willing to pay for the existence of a subway, though we will mostly act as free riders and not pay. In this case, fares should only reflect the difference between the value of a subway to a rider; the rest should be paid from tax dollars. We think about roads as a public good, as they are mostly untolled. To a lesser extent this is also how we think about transit, which is always subsidized (though the Duany line about “road funding” versus “transit subsidies” should always be remembered). This would be fair for the same reasons as market pricing or cost replacement, just expanded to account for a broader pool of people who benefit from subways. Someone like Ryan Avent, who is always thinking about how to internalize the externalities of transportation, might be an example of this perspective.

4. Moral economy

Now we’re moving away from ideas from economics towards anthropological and historical concepts. The idea of the moral economy is that there are social concepts of justice or morality that precede and constrain market behavior. A classic example is the nearly universal outrage in most societies across time over things like raising food prices during a drought or “war profiteering.” Here ideas of fairness refer to external moral codes, so there are lots of ways for subway fares to be fair in terms of a moral economy. Two examples that jump to mind in the American context are ideas of equal citizenship and a right to mobility, which very much affect what we consider fair pricing: there is no first class on the subway; there is a sense that excluding low-income or low-ridership communities from subway access is unjust; etc.

5. Incentivization

While the moral economy is a bottom-up cultural process, you could also have a pricing scheme that is fair based on some top-down external morality. For example, you subsidize the fares for low-income neighborhoods on grounds of socioeconomic fairness or you might subsidize fares in neighborhoods with high car ownership because your overriding goal is to get people out of cars. In this case, you would be imposing the morality onto people rather than it emerging more organically from long-standing culture. The line between #4 and #5 are blurry at best. Again, though, this scheme is fair according to some external referent.

Without actually taking sides on this one, I do want to explore what these different theories would imply.

First off, I think that breaking it down like this really argues against fixed-fare systems and for price discrimination based on distance. It costs more to build out further and to operate trains further. It is also more expensive to travel from further by other means of transportation, usually, so people should be willing to pay more to take the subway further. To argue for fixed-fare systems (ignoring practical concerns, which I will do for the rest of the post), you’d have to claim that either we should subsidize longer-distance trips at the expense of shorter-distance trips or that there is inherent value in everyone paying the same price. The first claim seems unsupportable from any perspective. The second seems plausible if you argue from the perspective that mobility is a shared civil right and that we only pay a fare at all because we have to but simultaneously believe that only subway riders should have to pay. I can imagine a few people who would agree with this, but only a very small number.

Second, monthly passes are generally an unfair pricing scheme. There are two arguments I can see for them that pass muster. In one case, you believe that the subway should be run like a business and the discounts built into passes either act like loyalty programs or are predicated on the assumption that people won’t completely use their pass and the subway will profit off their miscalculation. The other case is that there is a social good to high ridership and we should incentivize frequent travel. Note that this isn’t incentivizing the subway over cars, which can be done single fare prices, but incentivizing more trips by subway over fewer. Neither pulls my conscience particularly.

Finally, this whole exercise mostly shows that fares are not in any way based upon fairness. Perhaps they ought to be, but layers of path-dependency, technological ability, and political expedience have basically eliminated that concept from how decisions about fares are set.

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