Full text: Expansion, Stagnation und Demokratie - 1982 Heft 2 (2)

incremental decisions. But this tends to be treated as an exception to
the general rule. But is this so? Is not a transport network also a
network, a system?
This is relevant to the much-misunderstood issue of cross-subsidiza-
tion, which many consider to be uneconomic. It is surely essential to
distinguish two situations. In one, a separate lossmaking activity
(factory, mine, Service) is subsidized by another one which is profitable.
It is a reasonable supposition that this is economically irrational, unless
strong arguments to the contrary exist. However, where there is
indivisibility, complementarity, system, the Situation is much more
complex. In my earlier work I have cited the following illustrative
instance. Suppose an airline beneflts from a feeder service (a bus link to
town, or an air link to another airport), and would suffer loss if it were
withdrawn. It would pay the airline to subsidize the Company which
provided the feeder service, so long as the subsidy was less than the loss
that would be suffered if the service were withdrawn. This is a simple
instance of the marketing of externalities. However, suppose that the
link is owned and operated by the airline. What was an externality now
becomes an internality, and the purist will qualify it as "cross-subsidiza-
tion", and so as irrational!
A different example is as follows. Imagine a suburban railway line,
which originates at the central Station A. There are then stops at B, C, D,
E, F and G. Most passengers get on at A. By the time the train reaches F
three quarters have alighted. Clearly the cost per passenger-mile is now
much higher. Should one, in the interests of economic rationality and
marginal cost pricing, Charge a higher fare per mile between F and G, or
close that section of the line? It is such considerations as these which
have led almost every country in the world to Charge a flat-rate fare (or a
Standard fare by distance). Every country, that is, except Britain, where
the prejudice against subsidization has also led to a Situation in which
public transport fares are by far the highest in the world.
What is a margin? Some textbooks do mention that the concept is
unclear and ambiguous, but is this sufficiently stressed? Thus if one
advocates marginal cost pricing in public transport, say in London, is
one speaking of:
The No. 13 bus which leaves at 11.05 p. m. on a Sunday.
The No. 13 bus between Swiss Cottage and Golders' Green,
Buses (all routes) which leave after 11 p. m.
Buses at weekends,
What, in this context, is the distinction between short-term and long-
term? What of other "external" (internal?) effects on other public
transport in London? Is it sufficiently appreciated that margins are not,
as a rule, one-dimensional?
This last point brings together many of the arguments already
advanced, about bundles, purpose, strategy, goodwill, system, com¬
plementarity, and is a criticism ofmyopic marginalism, which, I submit,

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