Clearing Up the Free-Bus Debate

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In New York City, one of the 2025 mayoral candidates proposed fare-free bus service. This stirred up discussion with a lot of commenters pointing that people prefer more bus service to free buses. But this framing of the issue – the provision of additional bus service vs the funding of the bus service – is not correct. These are completely separate problems and should not be presented as a trade-off. 

Government Services

Governments provide various services. These can be as simple as public transit to more complex items like retirement programs and research grants. Some services are easy to financially value – for example, extending a subway line can be shown to generate significant income for the government and workers. Some services are harder to value like parks or art museums. The decision to provide a service is ultimately made by voters. Economists can help with ascertaining the value of these services.

In the context of buses, the question we ought to pose is whether creating the bus line service will generate sufficient value (both financial and from a welfare perspective) to cover its costs (both direct financial and indirect effects such as pollution). How many buses to run is a similar question. Thus, the opening of a bus-line is a value/welfare question.

Funding Services

A separate question is the funding of these services. Theoretically, all government revenue is fungible. The dollar of revenue collected via income taxes, tariff taxes, fees or fares, is ultimately just a dollar – where it came from should not matter. Politically (not economically), we do create regulations around what a dollar collected can be used for (for example, in New York City, the money collected from congestion fees is allocated to transit projects). But even such regulations aren’t really binding – given the same cost of providing the service, a dollar that’s earmarked for a particular spending category simply replaces a dollar from another revenue source. 

To bring