Comment: Successful €9 pass in Germany – should buses and trains be free?

This highlights a general problem with subsidies. Unlike price signals from markets, they generally distort rather than correct a sector of the economy.

Making public transport free or cheap, for example, stimulates demand but does nothing to also increase the quantity or quality of supply. Bus and rail operators, whether private or public sector, cannot easily add capacity.

In Germany too, many frustrated 9 € passengers were left on the platforms as their overloaded trains departed without them. People who live in places where the bus goes once a week, if at all, weren’t much better off either.

INEQUALITY PROBLEM, NOT JUST CLIMATE CHANGE

In reality, therefore, public transport subsidies are usually a response to the problem of inequality, not climate change. The affluent continue to drive, regardless of the price of gas.

And they pay more taxes to allow cash-strapped people to ride at little or no cost. In this case, much more: Germany’s subsidy, just for these three summer months, is estimated to cost the federal government – and therefore the taxpayer – 2.5 billion.

The 9 € ticket, however, suggests that a well-designed subsidy could still encourage more people to leave their cars at home at least part of the time, thereby mitigating greenhouse gas emissions as well as inequality. But for this, the subsidy should be combined with other policies.


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