The London Underground: A Public Good or Public Monopoly?

    The London Underground, better known as the “Tube,” is a mass transportation system that connects 272 train stations in the greater London area and provides an essential public service. This public transportation system may seem like a public good due to its widespread societal benefit and support through public funding, but does it meet the criteria? By definition, a public good must be non-rivalrous and non-excludable. As explained by Paul Samuelson, a public good is “[a good] which all enjoy in common in the sense that each individual’s consumption of such a good leads to no subtractions from any other individual’s consumption of that good” (Samuelson 1954: 387). Given that there is a limited amount of space on the Tube and that one must pay a fare to ride, it is both rivalrous and excludable. Therefore, if the Tube is not a public good, what is it?

    I would argue that the Tube is a public sector natural monopoly. This is because it is operated by Transport for London (TfL), which, as a government entity, has exclusive control over London’s underground transit system. Due to the high fixed costs required in constructing and maintaining this infrastructure, it would be impractical or inefficient for multiple firms to compete. Through state regulation of this natural monopoly, the government can prevent the exploitation of monopoly power, promote universal access, coordinate long-term planning and investment, as well as improve efficiency. The goal of this, much similar to providing a public good, is to reach the allocative efficient outcome that maximizes the total social benefit. Overall, the Tube is not a public good, but rather a service provided by a public sector natural monopoly.

(Photograph: Nicolas Economou/Getty Images)

Works Cited

Fowler, J. and Gillett, A. (2021), "Making a hybrid out of a crisis: historical contingency and the institutional logics of London’s public transport monopoly", Journal of Management History, Vol. 27 No. 4, pp. 492-518. https://doi.org/10.1108/JMH-01-2021-0003

Samuelson, Paul A. “The Pure Theory of Public Expenditure.” The Review of Economics and Statistics, vol. 36, no. 4, 1954, pp. 387–89. JSTOR, https://doi.org/10.2307/1925895.

Transport for London. “How we work.” About TfL, https://tfl.gov.uk/corporate/about-tfl/how-we-work