Former New York mayor Bill de Blasio appeared on MSNBC earlier this month in support of mayoral candidate Zohran Mamdani. Speaking of Mamdani’s signature policy proposal, de Blasio declared that “Free buses have been proven to work in many parts of the country.”
“Where?” host Joe Scarborough immediately asked.
De Blasio was unable to answer.
This awkward exchange sums up fare-free transit: it sounds appealing but fails in practice. Eliminating fares seems compassionate and progressive, but when implemented, it misallocates scarce resources, making everyone worse off, especially the lowest-income riders the policy is supposed to help.
Advocates of fare-free transit deserve credit for taking aim at a real problem. Fares are a regressive cost: the poorer one is, the harder transit costs bite. The poorest households can spend up to 10 percent of their income on transport. Eliminating that burden would make many riders better off. The data confirm this: when fares disappear, ridership surges.
Reducing costs to riders is an obvious gain, but there are also more subtle benefits. Depending on the system, eliminating fare collection speeds bus boarding times by as much as 20 percent, meaning buses reach their destinations sooner. Also, fare collection is the most common flashpoint for conflict between riders and drivers, so getting rid of it can make drivers safer.
Given all of this, charging fares seems so obviously bad, and eliminating fares so evidently superior, one wonders why virtually all transit agencies worldwide collect them. If going fare-free is so wonderful, why have so few systems done it?
Economics tells us why. Running a transit system isn’t cheap, and making it fare-free imposes a variety of bad trade-offs.
The first trade-off is that going fare-free eliminates revenues but doesn’t eliminate costs. Transit agencies are expensive to run, with operating costs for fuel, maintenance, labor, and overhead. No system in the world, outside a handful of dense Asian metros, recovers these costs through fares alone. New York’s MTA, North America’s highest-ridership operator, certainly does not: it requires nearly a dollar of subsidy for every dollar collected in fares. Eliminating fares would remove this revenue stream at the very moment ridership, and therefore costs, balloon, making operation fiscally unsustainable — absent even further subsidy.
How much subsidy would fare-free buses in New York City require? Estimates run from $600 million to $800 million annually. Raising such sums through taxes imposes deadweight losses, since those dollars are diverted from productive private uses or from other public services. Even if taxpayers are willing to spend this much on transit, opportunity costs loom: is eliminating fares really the best use of scarce resources? The same funds could expand fleets and hire more drivers, making buses arrive more often, or improve stations and shelters. Riders value these things more than fare reductions: one national survey found that “fares are generally less important than fundamentals like frequency, crowding, safety, and reliability,” even for low-income riders.
So going fare-free is a costly exercise that even riders do not seem to prefer. Even so, it might still be a good thing to do. Any dense city benefits from a thriving, accessible transport system, so much so that it would be worth paying large annual costs to have one. The problem here is that as much as society benefits, riders benefit more. Transit users receive immediate, concentrated benefits from transit, while society gains only more diffuse spillovers such as reduced congestion or emissions. It’s only reasonable, as well as fair, to expect users to pay, at least partially, for the benefits they obtain.
This is the user-pay principle, and it’s why universities charge tuition and cities send out water bills, even though education and water are considered necessities by many. Indeed, it’s also why New York City charges motorists a fee to drive in lower Manhattan: when it comes to driving, New York recognizes that the ability to get around the city quickly and reliably benefits everyone in aggregate, but individuals the most, and they should pay for the privilege.
Finally, there is a subtle way that charging fares helps transit systems, which is that prices carry informational value. Paying even a modest fare signals that the service has worth, while paying no fare communicates the opposite. The world recently ran a natural experiment that showed this to be the case. During the pandemic, transit agencies across North America suspended fare enforcement, meaning they went fare-free. The result was outbreaks of disorder and vandalism: even modest fares filter out abusers. Absent such a filter, bad actors drive out the good.
The pandemic is only the most recent example. For decades, transit systems have experimented with going fare-free, and have always retreated: not only because of exploding fiscal costs, but also because they found that their systems became ungovernable. Denver eliminated fares in 1978-79, and got increased rowdiness; Austin’s 1989-90 experiment led to spikes in vandalism and disorderly conduct. Both cities quickly reversed course.
Contemporary examples reveal similar patterns, where going fare-free leads to system unreliability and unsustainable costs. Kansas City, which operated America’s most extensive fare-free program at a cost of $8 million annually, reported persistent operational challenges, including driver shortages and service issues; last month the local transit authority announced it would begin charging fares again. Richmond has chosen to extend its program through 2026, but is scrambling to find money to sustain it through university partnerships and state grants. Its patchwork approach to financing the program suggests fundamental unsustainability the city may prefer not to discuss.
Transit advocates must confront an uncomfortable truth: transit systems work precisely because people pay to use them. Wanting to improve transit is a noble goal, but the best way to do so isn’t to wish the costs away, it’s to invest in service that provides genuine value. On that metric, it would be better to have an affordable bus every ten minutes than a free one once an hour. If New York has $600 million to spend on the bus system, it should start there. It may not sound as appealing as de Blasio’s ‘free buses for all’, but we know it works.
