A branch of Microeconomics, Urban Economics focuses on the location of firms and even households that other economics branches sometimes neglect. It is about the spatial relationships between organizations and the individuals to further recognize the economic motivations that have something to do with the development, performance, and progress of cities. Technological advancement, modes of communication, and even transportation are some of the things that trigger the said emergence of the urban economy.
(O’Sullivan) This paper will focus on the transportation aspect of urban economics, specifically the issue on the Chicago Transit Authority (CTA) and the efficiency of one of its policies. Background on Transportation Being one of the prime movers of the urban economy, transportation, or sometimes being referred to as public transit, is the process of moving large numbers of people in urban areas often through means of commuter trains, subway, light rail, and bus, among others (“Public Transit”). Public transit is one of the very significant public services.
This is because it enables mobility for people that do not have direct access to automobiles, especially those who have low or just enough salaries and could not afford to purchase one for their own consumption. Also, this service gives alternative to people with vehicles, thus minimizing air pollution and even traffic congestion. (“Public Transportation: Wherever Life Takes You”) Background on CTA Usually, transportation is not a public good, but the public transit offered by CTA is an exemption.
In economics, a public good means that government intervention is necessary because the current market system could not provide the said good on its own nor could handle the externalities that arise when providing the good. In turn, externalities are the effects of a person’s activity to another person, which may either be positive (positive externality) or negative (negative externality) (Figure 1). More often than not, public goods are funded through the taxes that are paid by individuals in the area. (Cowen) In the case of CTA, some of its costs are being funded by the government through subsidy.
Subsidy is the financial aid that the government gives to CTA in order for them to continue or sustain their operation (“Subsidy”). History Chicago Surface Lines (CSL) was the only prevalent local street railway during the year 1914s. After a decade, a new blend of small companies namely the Chicago and South Side Rapid Transit Company (1892), Lake Street Elevated Railroad Company (1893), Metropolitan West Side Elevated Railroad Company (1895), and Northwestern Elevated Railroad Company (1900) merged to form the Chicago Rapid Transit Company (CRT).
To arrive at a single transit company that would benefit the consumers and the companies alike, CSL and CRT combined and become the CTA that is still well-known today. (“Cta Overview”) Operations and Service Area In the United States, the second largest public transit is being held by the CTA up to this day. It encompasses the entire city of Chicago and 40 other neighboring suburbs (Figure 2). On an average weekday, approximately 1. 5 million passengers get to their destinations using the transport services offered by CTA. (Jimenez)
Approximately, CTA has about 2,000 buses that maneuver over 150 roads and 2,300 route miles on the average. This mode of transportation supplies about 1 million trips each day and serves around 12,000 bus stops. On the other hand, almost 2,000 CTA transit cars drive approximately 10 routes and 220 miles of track. Lastly, its trains offer 500,000 consumer trips each day in its 144 stations. (Cox and Love) Moreover, only a few cities in the world offer a fast transit service to main airports like that in Chicago, offered by the CTA.
From the business district, the Blue Line of CTA takes passengers to O’Hare International Airport in about 40 minutes. On the other hand, the Orange Line only takes 30 minutes to take its passengers to the Midway Airport. (“Cta Overview”) CTA Mission and Commitment Statement CTA ensures that their goal, which is to convey excellent, inexpensive transit services that connect the public, their professions, and different societies, is always put into action.
This could be made possible through: (1) setting unambiguous objectives, principles, and precedence; (2) communicating openly with consumers and its workforce; (3) aiding the development of CTA employees’ fullest potential in the course of improved instruction and education; (4) being responsible to fellow workers and consumers; (5) in order to better serve the clients, employees should help each other; and (6) to have a stronger sense of possession with their employees, CTA ensures that every worker’s voice is heard, especially those that directly affects them.
(“Cta Overview”) Aside from the mentioned procedures that the CTA would engage in, another way of ensuring the implementation of its goal is through policy making. In the case of CTA, its policies are proposed by any of the members of the organization (as stated in commitment number six), but the decision is made by the Chicago Transit Board members (Figure 3). CTA Policy A policy is a general plan of action implemented by an individual or a contemporary (“Policy”), and in this case, the CTA.
Specifically, it serves as a guiding standard that has an effect on actions, decisions and the likes. Normally, it assigns a mandatory course of action within the organization. (“Definition of Policy”) In the case of the CTA, there are many policies that are quite interesting to focus on. But perhaps the most challenging is their policy of increasing the subsidy that the government of Illinois is giving to them. Background on the Policy Some studies show that CTA is unsustainable.
This is because they are experiencing budget crises for decades already. They are not running out of money, instead some say that this is due to the decrease in the ridership of the transit for quite some time now (Figure 4). With this, the policy that CTA imposed was to clamor for an increase in subsidy from the government (Cox). They even threaten Chicago and the entire state that they would shut down their operation, even on peak season, if this was not implemented.
With the problems-at-hand faced by the CTA, government, and the taxpayers, what should be done? Is the said policy efficient? Obviously, the policy that the CTA implemented is inefficient because all the stakeholders became worse-off. Not to mention, the welfare of the entire society became worse-off as well. Welfare economics is a branch of economics that deals with the evaluation of policies in terms of their effects on the well-being of the society (“Welfare Economics”).
With this, a case analysis should be done to study the options that could eventually lead to the improvement of social welfare. It cannot be said that from the case analysis, all the parties would be better-off. As an alternative, the case analysis would help achieve the social welfare. It may be the case that at least one party would be worse-off, but if the social welfare is to be considered, it is better-off. Thus, it must be taken into consideration that social welfare improvement is more acceptable than just mere improvements in individual welfares.