Common Tragedies

Thoughts on Environmental Economics

ToC: Washington Metro Edition

Posted by Evan Herrnstadt on December 10, 2007

One of the most interesting aspects of Washington, DC, is the fact that any planning decision falls at a nexus of federal, local, and Maryland and Virginia state interests.

I’ve been reading The Great Society Subway, a history of the Washington Metro system written by George Mason historian Zachary Schrag. The book delves into the nitty-gritty of the planning process; some of the most interesting bits are the intense political struggles.

Washington is not the only American city that has built a postwar rapid transit system (see: BART). However, it is unique in that the federal government, local authorities, Maryland, and Virginia all held a dear interest in its design and construction. Building such a system reminds one of the importance of political economics. The relevant commissions and authorities could not simply design a system that optimized ridership while minimizing net costs and impose it on the region:

Even with the federal government paying the bulk of the expense, local jurisdictions still needed to divide up the local share of the cost. On the one hand, if each jurisdiction paid only for the portion of the system on its own territory, there would be an enormous incentive not to build, and instead to bus one’s citizens to the county line and let them ride someone else’s train into work. One the other hand, if each jurisdiction paid a fixed proportion of the total system regardless of the amount it chose to build itself, a tragedy of the commons would arise: each would be tempted to build as large and extensive a system as it could, knowing that the additional expense would be diffused across the region.

An intermediate cost-sharing solution was eventually designed, and the disproportionately common downtown DC infrastructure was folded into the project’s general expenditures. Although DC faced unique political constraints on its urban policy, this is an instance in which the federal government’s inherent interest made the process more tractable. Hmmm…are there any other tragedies of the commons to which this lesson might apply?

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2 Responses to “ToC: Washington Metro Edition”

  1. Daniel Hall said

    if each jurisdiction paid a fixed proportion of the total system regardless of the amount it chose to build itself, a tragedy of the commons would arise: each would be tempted to build as large and extensive a system as it could, knowing that the additional expense would be diffused across the region.

    Actually, wouldn’t each region have kept building until the marginal value to their district dropped below the portion of the costs they were paying? For example, if a region was responsible for 30% of the total system cost, they would only make a $1 million investment if it provided at least $300,000 of value to their residents?

    Given how poorly current political leaders seem to understand the benefits of mass transit, one wonders if we would not have been better off if this had been exactly the funding system used.

  2. Evan Herrnstadt said

    Good point. The resulting plan was that an entity’s capital contribution would be based 40 percent on construction cost in its territory, 30 percent on the operating costs in that territory, 15 percent on the number of citizens projected to ride in 1990, and 15 percent on projected 1990 population. Basically, it created some fixed costs (population and ridership projections–one doubts these were endogenously forecast given a particular construction plan) that encouraged development in regions that would be stuck with freeriders from other areas, but left some variable costs in there to prevent overeager development. In the end, I’m guessing it was probably just created some really convoluted incentives that placated all the necessary interests. The meeting probably went something like this: “I don’t get it. Screw it, looks good to me, let’s vote.”

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