Railroads and streetcars were hugely profitable in the US, until the government subsidized cars by:
- giving everyone high-quality roads
- setting road tolls to zero or almost nothing
- making dense housing illegal to build with zoning laws
- requiring businesses to provide free parking
- requiring home builders to provide free parking
- all the crap US does internationally to secure oil supply lines
- not taxing pollution, noise, or other car externalities
- enacting crazy regulations on railroads; for example, American railroads can't buy European trains, they must build their own custom-designed trains at enormous expense
and on and on and on it goes, all at taxpayer (or business owner) expense. An American on a road trip thinks cars are cheap because everyone else is forced to absorb the cost.
In happy news, they actually broke ground within the last week in downtown Detroit to begin infrastructure upgrades required for the M1 (Woodward Avenue) rail project.
Public transit offers a large externality: it provides transportation to employees and shoppers, which means a benefit to employers and merchants. There's also a massive benefit to those who can't (or won't) use transit and benefit by reduced congestion.
Early transit systems were highly subsidized by just those same parties. Concentrating on farebox recovery is a false premise, ignores these benefits, and results in underprovisioning of transit systems.
For the record, providing transportation to employees and shoppers isn't an externality. Imagine if I said that providing a subsidy for buying milk was an externality, because it benefited milk sellers?
Carbon emissions would be an externality if it were proven that public transport really did reduce carbon emissions.
The externality isn't the transportation, it's the benefit that those transported offer to employers, merchants, entertainment venues, etc. Few transaction capture systems properly ascribe all value and/or costs, the more so in the case of public goods.
It's the same reason why there are (in addition to specific taxes for gas or vehicle registration) general taxes for roads / streets / highways, or schools or other infrastructure. Even those who don't use them directly benefit indirectly.
Not all goods and services have such externalities, though in your specific case of milk it's interesting to note that agricultural marketing boards (the milk advisory board in the US, also commodity boards for raisins, cotton, beef, pork, and poultry) exist which pool marketing power among individual farmers / producers. Vaccination and public health is another case where there are very strong positive externalities which argue strongly for subsidized (or even mandatory) vaccinations to provide herd immunity. Another interesting case is the situation of totally drug resistant tuberculosis. I'd submitted an HN item on this a few weeks ago, the dynamics of treatment are such that it's very contrary to the principles of individual discretion / freedom and privatization:
In particular: there is no treatment. Once you've got the baccillus, you've got it for life. Some people are asymptomatic carriers, some exhibit symptoms and typically die, though over the course of several years (4-5 typically). Total isolation and quarantine is required to prevent spread. Which means that if you you want to encourage people to cooperate with quarantine, you'd better make it an appealing option. Which means: you're paying to put these people up in an isolated, shadow community, for the rest of their natural lives.
Gas taxes and tolls don't make up for the amount of spending we do on road repairs, police, rights of way, land for free parking, and the like to build the road network, but somehow public transit is expected to have a farebox recovery ratio greater than 1 when automotive transit is not expected to?
Accomplished mostly by fuel taxes of $0.38/liter, or approx $1.5/gallon. This is not far off 10x higher than the (ridiculously low) US rate of $0.18/gallon.
Does that include all indirect costs as well? For example, does it cover the taxpayer cost of buying and maintaining fleets such as police cars and heavy equipment?
http://en.wikipedia.org/wiki/Farebox_recovery_ratio
There isn't a public transport system outside of Asia with a farebox recovery ratio > 1 .
This is not to say you shouldn't spend on public transport, just that saying it will save money is not true.
It is great to see more people riding bikes. That saves everyone money and makes people healthier.