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

Rain: An Original Public Good

I opened the door Tuesday morning expecting the usual September weather, only to be greeted with a downpour. My facial expression brightened–rain has always brought me joy. Dressed in a t-shirt and shorts, I strolled to class without a care in the world, reveling in the downpour as I made my way to Public Choice. Yet, while I don’t mind the rain, not all my peers share this sentiment.

Over the past few days, rain has been a constant presence across UVA grounds, provoking a mixture of opinions from the student body. In class, we discussed man-made public goods, but natural phenomena like rain can be considered a public good as well. Among many things, rain can improve moods, grow new life, cleanse the air, and contribute to a healthy ecosystem overall. Importantly, it is non-rival–my enjoyment of the rain doesn’t detract from anyone else’s. The state of our class on Tuesday morning certainly showcased this fact with students shaking out umbrellas and adjusting damp hair, all while sharing this experience together.

The other essential characteristic of public goods is non-excludability. The rain cloud passing over our city of Charlottesville doesn’t discriminate. When it rains, everyone in the area benefits and no one can be excluded, whether they embrace it or try to escape it. While rain may not be the average college students' favorite weather, there is plenty of it and everyone can enjoy it without diminishing someone else’s experience, making it a public good.

A Rambling Response to Another Class's Problem

My Intro to Public Policy class has several connections to Public Choice. More than just acting as a helpful review for this class, it’s fascinating to see public choice from the policy side so I can get a complete picture of the topic. We’re currently discussing market failures and comparing the effects of government intervention and failures to market intervention and failures, specifically around the climate crisis. An article by the economist Paul Krugman, advocating for government intervention, promoted Pigouvian taxes to limit pollution. Another article by the economist John C. Goodman advocated for a Coasian solution, trying to limit transaction costs by using the market instead of government.

I disagree with many of Goodman's points, but I'll focus my attention on his view of politics and climate change. He claims politicians have no incentive to move toward a Pareto optimal condition. I would disagree. In a representative form of government, politicians only hold power because the people placed them there in the first place. To argue that politicians won’t move toward a socially optimal equilibrium is wrong. Take, for example, the use of Pigouvian taxes mentioned in Krugman's article. There, politicians tried to manipulate the market toward a socially optimal point, minimizing the negative production externalities of climate change.

Goodman claims climate change results from a government failure, not a market one. Government inaction has indeed placed us in this position. However, a push toward profit maximization, spurred by Adam Smith’s ideas, led to the Industrial Revolution. The Industrial Revolution led to massive amounts of pollution and climate change. Government has had the chance to mitigate the effects of climate change through Pigouvian methods, but proponents of a free market solution have curbed their ability to succeed. Effective governments can help their citizens in ways markets cannot, a point Goodman seems to miss here.

A Pure Theory of College Classes

College classes seem to mimic Tiebout’s explanation of neighborhoods, in a way. Just as local government public goods provisions are given and the entity that adjusts is consumer-voters, class rules, policies, and topics are given and students must pick between them. Just as with realistic neighborhoods, Tiebout’s assumptions do not hold up perfectly when applied to the world of college classes. Perfect mobility ends with the add/drop deadline and may never exist at all given that some classes require prerequisites or approval to get into. Perfect information is helped by sites such as Course Forum, but one doesn’t know exactly what the assignments and professor will be like, even after reading the syllabus. There is a relatively large set of class choices, but availability depends on one’s enrollment time. “Job constraints” in this context translate to one’s required major classes, which of course constrain choices. In terms of externalities, I would argue that classes absolutely affect each other in terms of how the room is left and how much energy/time students have left to devote to other classes. However, optimal n* class size definitely holds up and professors make attempts to reach this size by setting a cap and may even promote their class to arrive at n* students.

Despite these imperfect assumptions, we can learn something from the application of Tiebout’s model to classes. It makes the case for “local” decisions. By letting departments/professors design their own courses students are left with a market of choices from which to choose from, as opposed to administration mandating all classes to be offered. With this system students are able to choose their optimal revenue-expenditure patterns (how much work a class requires and what one can learn from it).

Allies or Freeloaders?

In 2006 NATO mandated its members to spend 2% of their GDP on military defense. As of 2023, only 10 of the 32 countries were hitting this target. Without any enforcement mechanism, this is an example of the free rider problem. 

The mandated spending program exists to share the burden of protection amongst all members of NATO, making them stronger as a collective. Although all countries are required to spend 2%, this does not mean the same amount is contributed by each member. The United States is projected to spend 3.38% of its GDP in 2024 compared to Poland’s 4.12%, however, the U.S.’s contributions account for two-thirds of NATO’s overall military spending. Other countries have an incentive to free ride off of the contributions of these big spenders without contributing their share, secure in the expectation of aid. Instead of pushing to reach their 2% minimum, they drag their feet, slowly increasing over years. Following Summer 2024, 23 countries are expected to reach the required spending, a massive increase in one year. This suggests two things: first, they were capable of reaching the spending floor the entire time and, second, there is a threat incentivizing them to increase individual military spending. The first reinforces the notion that this has been a problem of free riding for 18 years and the second is a sign of a potential war.