“Curb Rights” at 20: A Summary and Review

At 4:30 am, alarms on my cellphone and tablet start beeping, just enough out of sync to prompt me to get up and turn them off. By 5:00 am, I riding as a passenger along an unusually sedate New Jersey Turnpike, making friendly conversation with my driver and survey partner to make sure he stays awake. At 5:30am, as most of the city sleeps, we find a drab concrete picnic table outside the bus depot and chow down on our cold, prepared breakfasts. Around us, buses are revving up and their drivers are chatting and smoking cigarettes. At 5:50 am, we find our bus and introduce ourselves to our driver for the day. All of the Alliance drivers seem to be Hispanic. Our run begins. You wouldn’t expect it, but the first run is always the sweetest. The riders trickle on, making it easy to approach them, and unlike the typical 8:00 am rush hour rider they are usually friendly and receptive to my request. I approach them and mechanically incant “Good morning Sir/Ma’am. Would you like to take a survey on your commute today for NJ Transit? It will only take a few minutes of your time.” My partner sits in the front, tallying the boardings, exits, and survey refusals. We will spend the next eight hours zigzagging across the New York City metropolitan area, asking harried riders about their commute.

For the past month or so, this has been my part-time job: surveying bus riders about their origins, destinations, and travel preferences for NJ Transit. The job is just engaging enough that I rarely have time for sleeping or class readings, but has enough slow periods that my mind can wander on the question of bus planning. Although I am not authorized to read any of the surveys that I collect, it is clear that many of the people I am surveying have a tough commute. In many cases, they are disabled and/or evidently quite poor, wearing uniforms characteristic of low-wage service positions. Their circumstances leave them dependent on the bus for access to work. Often they mention how this bus ride, which may run more than an hour, is only one chain link in their broader commute. While the average bus rider is receptive once they find out you are not trying to sell them anything, it is more than clear that they are under a fair amount of stress. The general crumminess of their lot, and the incredible importance of making it better for their sake, often leaves me thinking about how we could improve bus service and transit broadly. For this reason, I decided to pick up and read a bus planning book that is a mainstay in market urbanism book recommendations, Curb Rights: A Foundation for Free Enterprise in Urban Transit. With the book turning 20 this year, it seemed worthwhile to draft up this short summary and review along the way.

Curb Rights, by Daniel B. Klein, Adrian T. Moore, and Binyam Reja, is an attempt to develop a market alternative to status quo bus planning. Published in 1997 by the Brookings Institution Press, the book arrived at a time of great enthusiasm for privatization and deregulation, and the authors’ prescriptions reflect this fact. In the following review, I will broadly sketch out their argument and conclude with a few of my broader critiques. This review is broken out into three broad sections: First, the challenge facing transit today as the authors see it (addressed in Section One of the book). Second, recent attempts to address this challenge through new regulation or deregulation (addressed in Section Two of the book). Finally, the solution proposed by the authors, namely a system of urban curb rights (addressed in Section Three of the book), as well their broader recommendations for transit policy (addressed in Section Four of the book). This review concludes with some critiques of their system and reflections on the continuing relevance of their ideas for 2017, 20 years after its publication.

The Trouble of Transit in an Automobile Dominated World

The key challenges facing transit, as Klein et al. see it, are the now unquestionable dominance of the automobile and the general mismanagement of public transit. Unusual for a book about transit planning, Curb Rights begins provocatively with a chapter titled “The Triumph of the Automobile.”^[i] Early on, the authors point out that in 1990 over 90% of Americans commuted by private automobile. While these numbers have declined somewhat in the intervening 20 years, there is still little question that Americans prefer private automobiles for commuting and personal trips.^[ii] Whatever your personal predilections about travel are—personally, I commute exclusively by bicycle and don’t own a car—it isn’t hard to see why: private automobiles are great for short trips, don’t involve any waiting or transfers, offer door-to-door service, guaranteed seating, and even storage space. Traffic congestion and car crashes notwithstanding, they are also generally reliable, safe, and comfortable.^[iii] As the authors see it, the main drawbacks of the private automobile—traffic congestion and air pollution—could easily be addressed using congestion pricing and pigouvian emission taxes, respectively.^[iv]

While some of this shift from transit to private automobile was likely inevitable, Klein et al. lay a fair share of the decline of transit at the feet of public mismanagement. Most urban transit systems were, after all, privately managed as heavily regulated monopolies up until the 1950s and 1960s. The deal was simple: municipalities would provide private companies with a portion of the right-of-way and a guaranteed monopoly over transit along a specified route, and in exchange private operators would own and operate the transit line subject to heavy public regulation of fares, stops, and frequencies, among other things. While private automobiles siphoned off some riders, the authors point to deferred capital investment due to rationing during World War II, the inability to cut unprofitable lines or frequencies, and the inability to freely adjust fare as important reasons for the wave of private transit bankruptcies in the post-war era.

While the Urban Mass Transit Act of 1964 provided local governments with funds to take over private transit companies, the situation only worsened in the decades to come.^[v] The share of commuters using transit fell from 12.6% in 1969 to 5.1% in 1990.^[vi] During this same period, operating costs per passenger trip have increased by a startling 175%, largely owing to increases in labor compensation.^[vii] Between 1960 and 1990, transit management transitioned from mild unprofitability to heavy dependence on subsidies, with over 70% of revenue coming from public coffers.^[viii]

Why has public management been so ineffective at turning around the fortunes of transit? Here Klein at al. offer two major critiques of public management: the Hayekian Critique and the Public Choice Critique. The heart of the Hayekian Critique is as follows: it is difficult, if not impossible, to efficiently centrally plan a multi-faceted and constantly changing system like urban transit.^[ix] As the economist F. A. Hayek observed in a different context, relevant knowledge related to consumer route, speed, and comfort preferences, and the price tradeoffs these consumers face, is widely distributed among riders and is not easily accessible to planners.^[x] While the survey project I am involved in is one such attempt to address this issue, a 25-question survey can only gather so much information, and only that information that planners already see as important. Every few surveys, a respondent will tell me something valuable that wasn’t asked about on the survey—often their perceptive ideas about how to improve the service. I nod and listen and promise to pass the information along, but in reality, this information is lost.

There is simply no way that a single agency could collect and integrate such knowledge about unique and changing local conditions. To collect and use this knowledge, as the economist Israel Kirzner explains, we require a process of competitive entrepreneurial discovery.^[xi] That is to say, we need a system in which easy entry and exit and the profit motive allow and incentivize entrepreneurs to collect local knowledge about what commuters need and test this knowledge in a competitive marketplace. While it is easy to observe the lack of incentives facing public transit agencies, these agencies are almost certainly doomed to provide less than optimal service given their inability to exploit the knowledge produced by the discovery process that is a byproduct of trial-and-error entrepreneurial activity.

Even if we assume that public transit agencies could collect perfect knowledge about the needs of consumers and opportunities for optimization, they may face conflicting incentives that lead them to produce suboptimal service. The authors refer to this as the Public Choice Critique.^[xii] Consider: what is the purpose of a public transit agency? To enhance intercity mobility? To renew and maintain certain neighborhoods? To connect suburbs? To minimize environmental impact? Vague comprehensive plans and idealistic transit advocates often muddle these purposes, leading to poor results toward any given end. Compare this situation to the singular incentive of private operators: to turn a profit by efficiently serving customer needs.

Even where policy makers provide their transit agencies with a clear goal, internal and external special interests may further meddle with the operation of the public transit agencies. As William Niskanen observed, the personal goals and poor incentives facing leaders within public agencies often lead to overprovision of the service in question, inflated costs, and reduced efficiency.^[xiii] Then, of course, there are the conflicting purposes of powerful external groups, including public sector unions, manufacturers, and developers, which often conflict with the actual needs of local residents. Together, the Hayek Critique and the Public Choice Critique paint a picture of public transit agencies that are in many cases unable and/or unwilling to efficiently provide riders with the best possible service.

Failed Attempts at Creating a Competitive Transit Market

Before setting out their proposal, Klein et al. turn to failed attempts to address the declining status of transit through expanding markets. The authors examine three alternatives to the status quo: jitneys, edge transit services, and bus privatization.^[xiv] Jitneys, essentially informal taxis, burst onto the scene in 1914, picking up waiting riders from streetcar stops in a process known as interloping.^[xv] During their heyday jitneys functioned as a competitive private transit market, operating along routes but without schedules. This dramatically reduced streetcar revenues, prompting municipal officials to prohibit them. At the time of publication in 1997, jitneys and informal taxis were still common, particularly among low-income migrant communities. The descendants of jitneys live on today as commuter shuttles and carpooling services, although these services are often heavily regulated and strictly limited.^[xvi] Today, ride-sharing services like Uber and Lyft almost certainly fill many of these functions. But any attempt to reintroduce traditional jitneys—following a route but without a schedule—would need to contend with the problem of interloping, which could bankrupt scheduled services, and the threat of jitney cartelization, which would eliminate the benefits of a competitive jitney market.

The authors also turn to the mixed results of bus privatization and deregulation in the United Kingdom. The 1985 Transport Act privatized and deregulated all bus lines in the UK outside of London, allowing bus lines to use any stop they choose so long as they post and adhere to official schedules.^[xvii] While this change lowered operating costs, dramatically scaled back tax expenditure on transit, and expanded service access, it also failed to reduce bus fares as intended. What kept fares from falling? Given that bus lines didn’t have exclusive access to riders at certain stops, new companies could schedule their stops minutes before competitors, stealing their riders in a process known as schedule jockeying. This prompted a tit-for-tat process of schedule changes that undermined the customer experience and led to administrative waste. In response to this threat, bus companies would often temporarily operate high, inefficient frequencies to keep out competitors, a process known as route swamping. This unhealthy competition over riders lead to greater consolidation and waste, which undermined fare reductions. In a prelude to their titular prescription, the authors point out that possessing rights to the riders at certain stops during certain times of day, or curb rights, could have avoided this issue.

Reviving Transit Markets Through Curb Rights

In the final third of the book, Klein et al. turn to the question of how learn from the mistake of the past to stimulate a private competitive bus market. In characterizing the challenges facing bus transit, Klein et al. draw a conclusion that is key to their proposed solution: attempts to create a competitive market of transit entrepreneurs through unsophisticated jitney legalization or bus deregulation can eliminate or seriously hinder the ability of private bus operators to offer scheduled, route-based service. The missing ingredient, as the authors see it, is a system of publicly and privately managed curb rights.

The key investment made by route-based, scheduled bus operators is in their bus stops. Beyond buses and staffing, a major cost for any bus operator is to make prospective riders aware that if they stand at a specified location at a specified time of day, they will receive comfortable and efficient transportation to a designated location. The goal is to create a level of service such that, when a bus comes through, there will be enough customers waiting to make the line profitable. However, in an under-regulated market, jitneys can easily come along and take those waiting riders and their fares, essentially expropriating the returns to the bus operator’s investment. In thick markets, where even with jitneys interloping there are still enough customers for bus lines to break even, this isn’t an issue. But in thin markets, where buses are drawing just enough passengers to break even, jitney interloping can kill scheduled bus routes. This in turns leads to fewer customers waiting at what were once bus stops, in turn killing the jitney market and reducing mobility overall. As in the case of UK bus deregulation, competing private bus lines can also have the same effect.

Once we realize that these the passengers standing at a stop are the results of investments made by bus operators, the need for curb rights becomes clear. Without them, rational bus operators won’t invest in high quality service, information dissemination regarding route schedules and fares, or high quality bus stops, knowing that jitneys or competing bus lines can come in and snag the returns to their investment. In short, the authors envision these curb rights as the exclusive right to pick up passengers at certain locations at certain times of day. These curb rights on public right-of-ways would be administered by public officials and would be auctioned off, encouraging bus operators to do the difficult work of finding the most efficient curbs for their routes and rearranging themselves as local conditions change. Separate “jitney commons” would offer curbs on which jitneys could freely pick up waiting passengers. This would keep competitive pressure on bus operators and provide greater choice for customers, without the standard problems related to interloping.

Beyond this basic framework, the authors are forthright in their agnosticism about the details of how the system would work. How far would curb rights zones need to be from each other? How would public officials prevent bus monopolies? Would bus operators or traffic police enforce curb rights? The authors leave these questions to be resolved by a distributed process of municipal trial-and-error. Klein et al. conclude by suggesting eight further policy suggestions.^[xviii] They include general deregulation of transit services, privatization of public transit agencies, ending federal involvement in transit, keeping transit planning local, creating curb rights systems, instituting highway pricing, using individualized rider vouchers for equity goals, and reforming taxi regulation.

Concluding Thoughts

In some ways, the transportation landscape in 2017 is dramatically different than it was in 1997. The introduction and subsequent explosive growth of ride-sharing companies like Uber and Lyft has led to something of a jitney renaissance. This has in turn led to the relaxation or gradual elimination of twentieth century taxi regulation in many cities, making door-to-door transit easier than ever. Unlike the jitneys of yore, today ride-sharing does not depend on interloping and may in fact support transit by providing “last mile” service.^[xix] Further, unlike in 1997, many more people are living in cities, bicycling, and working from home in 2017.^[xx]

In other ways, the transportation landscape in 2017 still looks very much the same as it was in 1997. Road tolling and emissions taxes remain uncommon in the U.S., and congestion taxes are virtually non-existent, meaning that commuting via private automobile remains underpriced and thus disproportionately popular. While some states and cities are exploring mileage-based fees and congestion taxes, these proposals are still only in their early phases.^[xxi] Transit ridership has effectively remained flat during this entire period and in many cases may be falling.^[xxii] Finally, against the suggestions of Klein et al., many cities continue to heavily regulate and/or prohibit private transit options, including route-based jitneys, private buses, and commuter shuttles.^[xxiii]

I came out of the book feeling like the authors slightly overplay their hand. Yes, proper pricing of private automobiles, a competitive transit market, and vouchers for select groups could obviate the need for public transit services in low- and medium-density cities. But what about the needs of high-density cities? While open to being surprised, I remain skeptical that competitive bus markets alone can service the high job densities seen in many legacy cities. How would this competitive market interact with publicly managed rail? How could rail be integrated into a private transit market? What is the role of bus rapid transit? The authors leave these answers largely answered, beyond calling for the full privatization of all public transit.

On the other hand, I admire the authors’ creative attempt to develop a “property rights” approach to stimulating private transit markets. It is evident that we underprice private automobile use, especially in heavily congested areas. Getting this right could lead to an influx of commuters into transit, an influx that public transit agencies today simply aren’t equipped to handle.^[xxiv] Even without this influx, it is clear to my mind that the riders who I encounter while surveying deserve the greater choice, improved service, and lower fares that are only likely to come from the introduction of a competitive transit market. Toward this end, I appreciate the project of Curb Rights and hope to see more creative, economically literate thinking of this kind among transit planners and entrepreneurs.

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^[i] Klein, Daniel B., Adrian T. Moore, and Binyam Reja. Curb Rights: a foundation for free enterprise in urban transit. Washington, D.C.: Brookings Institution Press, 1997. p. 7

^[ii] Passenger Travel Facts and Figures 2016. Report. Bureau of Transportation Statistics, U.S. Department of Transportation. 2016. 20.

^[iii] Klein et al., Curb Rights, 9.

^[iv] Ibid., 8.

^[v] Ibid, 11.

^[vi] National Transportation Statistics. Report. Bureau of Transportation Statistics, U.S. Department of Transportation. 1995.

^[vii] Baumol, William J. “Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis.” American Economic Review. 57 (June). 415-426.

^[viii] Office of Management and Budget. “Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs.” Circular A-94. 1992.

^[ix] Klein et al., Curb Rights, 17-21.

^[x] Hayek, F. A. “The Use of Knowledge in Society.” American Economic Review, XXXV, No. 4; September, 1945. 519–30.

^[xi] Kirzner, Israel M., Peter J. Boettke, and Fre?de?ric E. Sautet. Competition and Entrepreneurship. Indianapolis, IN: Liberty Fund, 2013.

^[xii] Klein et al., Curb Rights, 22-29.

^[xiii] Niskanen, William. Bureaucracy and Representative Government. Chicago; Aldine-Atherton. 1971.

^[xiv] Contracting out bus service is also very briefly discussed.

^[xv] Klein et al., Curb Rights, 33-46.

^[xvi] Klein et al., Curb Rights, 47-61.

^[xvii] Ibid., 62-72.

^[xviii] Ibid., 119-125.

^[xix] “Last Mile (Transportation).” Wikipedia. September 16, 2017. Accessed October 21, 2017. https://en.wikipedia.org/wiki/Last_mile_(transportation).

^[xx] US Census Bureau. “Biking to Work Increases 60 Percent Over Last Decade.” May 08, 2014. Accessed October 21, 2017. https://www.census.gov/newsroom/press-releases/2014/cb14-86.html.

^[xxi] Pevto, Mary, Bob Sallinger, and Adriana Voss-Andreae. “Portland Leaders Have a Choice: Increased Congestion or Courageous Leadership (Guest opinion).” OregonLive.com. September 15, 2017. Accessed October 21, 2017. http://www.oregonlive.com/opinion/index.ssf/2017/09/portland_leaders_have_a_choice.html.

^[xxii] Walker, Jarrett. “Researchers! Why is US Transit Ridership Falling? — Human Transit.” Human Transit. March 18, 2017. Accessed October 21, 2017. http://humantransit.org/2017/03/researchers-why-is-us-transit-ridership-falling.html.

^[xxiii] Berliner, Dana. “How Detroit Drives Out Motor City Entrepreneurs.” Institute for Justice. January 1997. Accessed October 21, 2017. http://ij.org/report/how-detroit-drives-out-motor-city-entrepreneurs/.

^[xxiv] Smith, Max. “Metro Ridership Drops 12 Percent; $125 million Revenue Shortfall Projected.” WTOP. February 21, 2017. Accessed October 21, 2017. https://wtop.com/tracking-metro-24-7/2017/02/metro-ridership-drops-12-percent-125-million-revenue-shortfall-projected/.