

Austin's First Electric Streetcar Era (2013) - benbreen
https://notevenpast.org/austins-first-electric-streetcar-era/?

======
rayiner
> Soon after he had engineered the merger, Shipe withdrew from the streetcar
> business. He knew the real money lay not in collecting nickel fares, but in
> using the availability of streetcar service to boost the value of the land
> he was trying to sell. It was a wise move. After the early 1890s, Austin’s
> streetcar companies struggled financially; though they experienced
> occasional periods of profitability, generally after receiving an infusion
> of outside capital, these were inevitably followed by stagnation, losses,
> bankruptcy, and reorganization. In 1902 the Austin Rapid Transit Railway
> Company gave way to the Austin Electric Railway Company, followed in 1911 by
> the Austin Street Railway Company and in 1921 by Austin Transit.

A pretty succinct example of the free market naturally underinvesting in
things that generate positive externalities, like transit.

~~~
pash
If you see the phrase _positive externality_ and think to yourself, "Oh,
that's good!"—then I hope I can help you see things differently.

Externalities, both positive and negative, mean that somebody other than the
owner of an economic resource is affected by its use. A negative externality
means that somebody else bears part of the resource's cost, and a positive
externality means that somebody else reaps part of its reward. In this sense,
positive externalities (just like negative externalities) are a failure of
property rights with perverse consequences; part of the return to the
investor's investment is placed in the public domain, as economists say. So
positive externalities lead to underinvestment, as rayiner noted, because the
externalized benefit is captured by someone other than the investor.

And indeed there is an emerging narrative that claims a combination of
corruption and over-regulation contributed to the demise of America's early
streetcar systems by eroding the property rights of streetcar operators to the
point that they could not profitably run their lines. That is, regulation
externalized the benefits of streetcars to such an extent that their owners
went bankrupt and streetcars disappeared.

A recent article from Vox makes the case [0]. It goes like this: (1) streetcar
operators sought monopolies from cities, accepting regulation in return; then
(2) regulators fixed fares at a nickel and required streetcar operators to
pave and maintain the roads along their lines (because streetcars were
originally drawn by shod horses and mules), but (3) when the value of a nickel
fell, politicians would not allow fares to rise, even while the paved roads
provided by streetcar operators subsidized the automobiles that began to
compete with them [1].

History and economics are complicated, but it's clear that private property
rights in public transit have just about disappeared in America over the past
century or so. And so private, market-directed investment has disappeared too.
As a result, today almost every dollar that goes into our core transportation
infrastructure comes directly out of taxpayers' pockets and passes through a
political process that allocates investments in a way that gives scant
attention to their marginal benefit. So in cities like mine, we have rather
more billion-dollar suburban highway interchanges than we should have, and
rather too little public transit infrastructure.

0\. [http://www.vox.com/2015/5/7/8562007/streetcar-history-
demise](http://www.vox.com/2015/5/7/8562007/streetcar-history-demise)

1\. A blog post from Market Urbanism offers more details (together with an
excoriation of left-liberal politics):
[http://marketurbanism.com/2010/09/23/the-great-american-
stre...](http://marketurbanism.com/2010/09/23/the-great-american-streetcar-
myth/)

~~~
caseysoftware
There was also a simple _economic_ analysis of the effects of Jim Crow in the
original article. Basically, the streetcar operators opposed segregating
transportation because it would greatly increase their costs (more cars,
segregated seating, etc) without increasing ridership.

I wonder how much longer - if any - options like streetcars would have worked
if they hadn't been forced to follow laws like that.

~~~
akgerber
Probably not much— streetcars disappeared in Northern cities at the same time
as in the South.

A huge problem for many private transit systems was that they signed contracts
specifying a nickel fare in the pre-inflation era, so once inflation became
part of monetary policy, they were unable to properly fund operations.

Beyond that, most streetcars were built before automobiles were common, so
they could move relatively efficiently down the middle of the road,
unencumbered by traffic. Once auto traffic congested roads, streetcars became
much slower, and they weren't able to change lanes to get around an
obstruction. That problem could be solved by reserving lanes for streetcars,
as bus service could be dramatically improved in most cities by striping
exclusive bus lanes and camera-enforcing them, but that wasn't politically
feasable at the time.

