Transit Reform in Santiago: Part II

Original post date: October 22, 2013
Article by: Ben Douglas

The success of any endeavor is dependent upon the metric being used. If the goal of transit reform in Santiago, Chile was the elimination of profit from transit and the homogenization of bus services, the new Bus Rapid Transit (BRT) system, Transantiago, was a wild success. Prior to reform, Santiago’s bus system operated entirely without public subsidy—an astonishing feat for the densely populated city—generating $60 million in profit per year. In contrast, the system lost $600 million per year as of 2008 under the new system. Subsidies cost every citizen of Santiago $100 just to have a bus system. Initial estimated capital costs of $250 million proved to be entirely too modest.

Taking into account extensive expansions on the original BRT project, the final bill for Santiago’s transit consolidation and reform amounted to $2.5 billion. Moreover, the product differentiation offered by private bus companies was replaced with a one-size-fits-all monopoly in an attempt to eliminate “inequalities” in quality of transport. More soberingly, if the success of a public transit system is to be measured by occupancy and ridership, Transantiago has been a failure. A failure, in fact, deemed worthy of presidential apology by the Chilean administration. Ridership has gone down slightly, although it is difficult to tell for certain because commuters began sneaking in the rear doors of the 1,200 massive new articulated buses (colloquially referred to as “bendy buses”) purchased by the government. A cornerstone of BRT systems around the world, these buses are intended to pick up large numbers of passengers for efficiency’s sake.

However, perverse incentives under the new system resulted in many buses driving around almost empty much of the time. The reasons were as follows: Average commute times rose from 40 minutes to 1 hour 40 minutes following the opening of Transantiago. This resulted in widespread substitution of private car and taxi usage for transit, further increasing the congestion problem. Bus drivers were now paid for being on time rather than the number of passengers they transport. Thus, late drivers caught in traffic often decided to forgo a bus stop along their route entirely, leaving commuters high and dry, in order to meet their on-time performance benchmark.

When they actually stopped to pick up passengers, drivers sometimes declined to make them pay at all. The new bendy buses have a rear entrance (meant for hopping off) that unscrupulous commuters often used to sneak on for free. Compounding the problem, the bendy buses were 6-8 inches wider than the lanes and prone to causing accidents. For all of their flaws, the small, nimble buses of the old competitive system were much better suited to operating Santiago’s narrow lanes and mountain foothills.

Another cornerstone of the new system was the elimination of bus routes that ran parallel to the metro rail routes. This decision stemmed from planners’ desire that commuters should ride feeder buses to the metro and then use that as their primary long-distance method of transportation, rather than buses. Duke University political scientist Michael Munger explains the failure of this plan by pointing out that if this is what people wanted, this is what transit providers would have done. Economists refer to this concept as demonstrated preference—people indicate preferences by their actions, not by what they say or what an expert seems to think is the most efficient course of action. If buses were faster and cheaper, people would use them to commute.

Chilean planners failed to use the information given to them by the previous system, and instead designed a new one from the top down. They tried to implement the perfect system in a vacuum, rather than serve the demands of commuters. “Instead of looking at what people wanted,” Munger explains, “say as evidenced by what the map had evolved to look like, they drew it as what they thought it should look like from a planning perspective.”

Privatization-friendly Chile is not a corrupt country. Nor is it authoritarian. According to the Frasier Institute’s Economic Freedom Index, its economy is one of the freest in the world. In spite of this, it has provided us with a case study in how not to reform transit. Transantiago demonstrates the importance of information as conveyed by prices in competitive markets. The number and size of buses, where bus routes should run and at what times is information that can only be conveyed through the grassroots, bottom up market process. Transantiago’s failures are the result of what happens when experts make the choices instead of leaving them to consumers.

About DeVoe Moore Center

The DeVoe L. Moore Center is conducts economic research and policy analysis focused on state and local policy issues and is located in the College of Social Sciences and Public Policy at Florida State University in Tallahassee. As an educational institution the DMC provides professional research experience to undergraduate and master’s students through an extensive program of internships and independent study, preparing them for a future in public policy, economic development, public sector accountability and entrepreneurship.
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