1. Savage, Ian (1999). Can privatization solve all of Chicago's public transportation problems?
In Allen, John G. & Ian Savage (eds.), Re-inventing Mass Transit: Moving into the Millennium.
Chicago, Ill.: Regional Transportation Authority.
This paper discusses privatization in the context of transit provision in Chicago. The paper discusses
the meaning of privatization in the form of "competitive contracting" and contrasts it with
"deregulation." It then discusses how privatization may assist the Chicago transit market. There is
ample evidence that considerable cost inefficiencies were introduced into CTA operations in the late
1960s and 1970s. Competitive contracting has shown itself to be an effective method to reduce
inefficiencies elsewhere in the world. As a consequence there will be a more socially beneficial
balance between fares and service levels. Furthermore, lower operating costs will reduce the current
need for operating subsidies, thus allowing reduced sales tax levies and/or improved transit service.
This paper indicates where there would be very high social benefits from reinvesting some of the
subsidy monies that are saved.
However, privatization is not a complete panacea for all of transit's ills. There are open questions
as to the appropriate methods of service provision in lower density parts of the city, whether all of
the additional capacity provided in the peak is justified, and whether there should be differential fares
between the bus and rail system and between different times of day. These are also pressing policy
issues for transit, and ones that are not directly tied to the privatization debate.
View this paper [13 pages, 77 kb PDF].
A summary of this work was also published in the Reason Public Policy Institute
Privatization Watch Newsletter for May 2003 [3 pages, 257 kb PDF].
A commentary was also published in Chicago Tribune October 11, 2007 [2 pages, 65 kb PDF].
2. Savage, Ian (1993). Deregulation and privatization of Britain's local bus industry. Journal
of Regulatory Economics 5(2):143-158.
In 1986 the British government deregulated the majority of the local bus industry, cut the amount of
subsidy, and privatized many public bus companies. Unit costs have declined significantly, cross-subsidies have been reduced, and there has been innovation in operating practices. However, mergers
have increased concentration, and demand has declined due to the turmoil of service changes and the
loss of network integration. In London an alternative policy has been adopted whereby there is
Demsetz competition for short-term monopoly rights. The paper argues that this regime will lead to
greater benefits in the long run.
Link to the paper on SpringerLink. You can also view an earlier manuscript version [21 pages, 170 kb PDF].
3. Savage, Ian (1985). The Deregulation of Bus Services. Aldershot: Gower.
4. Savage, Ian (1984). A note on 'unnecessary and wasteful' competition in bus transport.
Journal of Transport Economics and Policy 18(3):303-309. View the published paper [7 pages, 486 kb PDF].
This book and article represents my Ph.D. thesis at the Institute for Transport Studies at the
University of Leeds. It was written prior to the 1985 Transport Act that deregulated and privatized
much of the British bus industry.
At the time the book was written the bus industry had been organized as a system of strictly regulated
route monopolies for over fifty years. Suggestions that this monopoly had led to inefficiencies and
the stifling of innovation prompted a critical appraisal of how a competitive structure might be
generated. The book attempts to determine the economically optimal market structure for the local
omnibus industry in the United Kingdom. both by the development of appropriate models of bus
markets, and by empirical observations of how bus markets work.
The thesis concludes that competition between bus companies "on the road" is liable, in the short run,
to lead to a social welfare disbenefit to society. In addition at the then present levels of service, and
the then subsidy regimes, incentives to enter the market were absent in a large proportion of the local
bus network. Competition that might emerge, on the profitable routes and timings, will reduce
internal cross-subsidy and affect users of unremunerative services. However, the research concludes
that this reduction can lead to social welfare improvement if the there is a curtailment of activities on
which costs outweigh consumer benefits, or where direct subsidy is substituted for cross-subsidy.
There are, however, potential gains from competitive stimuli in the form of lower cost operation,
either by the removal of previous inefficiencies or by the replacement of high cost operators by lower
cost ones. The institutional problem is how to obtain the long run benefits without the short run costs
of unfettered competition "on the road."
The book recommends that in the bus industry competition for the market rather than competition
in it is required. The book concludes that for effective potential competition in the bus industry, a
regulated system with low entry barriers such as franchising or contracting of services should result.
I would be pleased to answer any detailed questions that you may have on these
papers, and welcome the opportunity to add what I can to informed formed public
debate of this issue. Please
send an e-mail including your name and postal service address to request a
package of the complete papers. I would also be interested in knowing your professional
connection with transit deregulation issues.
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