Markets, Politics, and Environmental Policy Issues for Public Transit

Abstract

Economic deregulation of local bus services remains controversial in terms of the claimed gains and losses relative to competitive regulation in the form of competitive tendering or negotiated protected monopoly. The uncertainty over demonstrable net benefits has delayed, if not eliminated, any prospects for unleashing market forces in London where competitive tendering is claimed by its supporters to be at least as attractive as economic deregulation in terms of quantity and quality of service. While the literature has focused predominantly on the economic and social impacts of market reforms, some of the changes have brought about environmental gains and losses. These rarely have been documented, being overshadowed by the initial objectives motivating economic reform. One particular feature of economic deregulation in the United Kingdom (and to a lesser extent in Australia and New Zealand) has been the noticeable increase in minibus services. The impact that economic deregulation has on entrepreneurial innovation has been neglected in the public transport literature, yet it is a centerpiece of competitive strategy. We use the experience with minibuses in Britain to show how markets create environmentally compatible incentives. Environmental gains attributable to market reform counter in part the negative evidence that minibuses in Britain have ““failed” to stimulate an aggregate increase in ridership. Without knowing the counterfactuals, one might speculate that the outcome would have been even worse without the introduction of the minibus.