Should government Run Public Transport or Leave it to the Private Sector?
Public transport such as trains creates positive externalities. When people take the train rather than driving we get a reduction in pollution and congestion which benefits society. Therefore, the social benefit of taking the train is greater than the private benefit. However, in a free market individual consumers ignore the external benefits so there is underconsumption.
The free market equilibrium is at Q1. But, Social efficiency occurs SMC = SMB. Therefore the government should intervene to either subsidise trains or provide them directly.
Government provision will also help to increase equality. It makes transport affordable for those on low incomes. Government can also offer discounts for low income groups like pensioners.
However, it can be argued that the private sector have a profit incentive. Therefore, they have a motivation to provide better quality service with more efficiency. Often, government run public services become inefficient and squander taxpayers money.
In Oxford public transport is left to the private sector and there is a comprehensive bus network. Government subsidies may reduce the price, but, demand is likely to be inelastic. Therefore, it is an expensive way of increasing use of public transport.
A government monopoly faces no competition. If private firms compete for custom, there is likely to be an added incentive to improve service. However, it is difficult to increase competition for trains, the infrastructure is a natural monopoly, therefore these is little scope for competition.
Private sector have helped provide a better quality service. There is adequate provision. However, with the problem of congestion increasing, there are quite high positive externalities of public transport and therefore, the government should subsidise some aspects such as investment in the infrastructure and improving safety. it is mistake to leave it all to the private sector