Subwayconomics / by Todd Yarbrough

I have lived in New York City (by way of Brooklyn) for about three and a half months. For about two and three quarters of that time I have taken the subway into Manhattan aboard an R train four days a week to campus in lower Manhattan. Economic issues abound on these transcendental 45 minute-ish journeys into the heart of civilization. 

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One such issue is congestion. In economics, road or city congestion is most often related to the concept of a public good. Public goods are special kinds of goods that cause markets to fail to produce an efficient outcome, because you typically cannot stop folks from using them and their use reduces the potential use to others. A road is a good example of this, because its quite difficult to stop someone from using a road (even with tolls) and each vehicle on a road is less space for other vehicles. Under these circumstances, humans under the auspices of rationality put themselves in wholly uncomfortable and sub-optimal situations. Getting stuck in traffic is annoying, stressful, and inefficient, but we choose to do it everyday. Why? Why don't we just leave earlier to avoid the worst congestion? But what if everyone chose to leave early, would it not then be better to wait? 

A particularly interesting component of this issue is that we cannot help but frame the issue in a self-interested way, but self-interest is precisely what leads to the congestion in the first place. This is why public goods are considered market failures, because rational self-interest, the juice that makes markets operate, leads to an inefficient outcome in their presence. This helps justify public provision of national defense, public education, and environmental protection. We simply cannot expect a private market to provide enough of these goods. But how do we know? Are there examples in our everyday life that point to this outcome? Yes!

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Space on a subway is a public good. As each of us pile into the car of a train, we begin to take up space. And since the trains have no assigned seating, and nothing about buying a train ticket implies you will have an unadulterated spot on said train for your journey, we fill space on a train by simply moving to an open area. An open area that is getting smaller and smaller often with each stop. We pile on because we each have somewhere to be, we are being rational by taking the train. Yet, our presence on the train is space occupied, is space that someone else cannot fill, and is space that we are not prevented from using (assuming another being isn't occupying said space). So, what happens? Do we efficiently maintain available space? Do we all try to take up as little room as possible?

Almost assuredly... no! If you've ever taken the subway, especially at peak hours, then you know what kind of fresh hell can be waiting. Hot, cramped, awkward train rides are the bane of our existence in the city, but we are doing this to ourselves. Let's revisit the question "why don't I give myself more time to perhaps wait for the next train?". Because you're behaving rationally! More time spent waiting on trains in the subway station is less time in bed, in the shower, getting ready, eating breakfast, watching the news, playing with children, talking to our spouse, etc. So, we try to minimize the amount of time we spend in the train station. We don't give ourselves the luxury of waiting for that next uncramped train, because it isn't a luxury but a cost.

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When we use our mental calculus to determine when we should leave the house to catch the train, we think of when we need to get to our destination, how long the walk is, how long we may have to wait on the train. Because we value our personal time higher than our wait for the subway time, we try to minimize the wait on the subway time. And most people are behaving in this way. Sure, there are almost certainly some that leave early to avoid congestion, but the majority of train passengers want to limit their subway time as much as possible, even if this means cramming ourselves onto the train. And once on the train, since their is no efficient mechanism to sort out where we should stand or sit, we do so in an efficient, uncomfortable way.

The concept known as the Tragedy of the Commons is a version of the public goods problem that arises from the over-exploitation of a 'commons' good, like a fishery or cow grazing area. Like subway trains, the ocean is an extremely difficult thing to prevent the use of, and catching and selling fish is a wholly rational activity to undertake. But since there is no barrier to catching fish, we may over-fish, a concept called fishery collapse.  A fishery collapse occurs when the catch amount exceeds the natural spawn rate for fish. You could say that we have a sustainability problem with commons goods. Despite the fact that catching fish in an unsustainable fashion hurts us in the long-run, our rational self-interest causes us to ignore this fact. Even worse, as fish populations dwindle, the prices of fish rise, which makes catching them even more economically rewarding. Which means that we behave even more unsustainably.

A way to solve the Tragedy of the Commons is coordination. Since fisherman want to earn profits in the future, and not just now, coordinating with their fishing competitors can lead to agreements that limit the yield of fish catches. The limits may reduce short-term profits, but are also likely to mean that fish will be around for much longer, meaning that profits can be made in perpetuity. Subway riders could also coordinate, creating agreements of when riders choose to take trains, smoothing congestion over many trains instead of just a few right at morning or evening rush hour. The easiest way to do this would be to encourage riders to give themselves more time in the morning to wait on trains. While this will require that we voluntarily give up our own personal time to limit the congestion felt by others, we will also benefit from this reduction in congestion. Instead of thinking about what's best for ourselves, we think about what's best for ourselves and everyone else!

This of course may not work, as you have a huge coordination problem with many different riders, but it would be better than an alternative approach to alleviating congestion which would be to charge higher ticket prices at peak hours to encourage off peak hour travel. This isn't likely a workable strategy since peak hours exist precisely because that is when we need to use the subway. 

A tragedy indeed.