Santiago, Chile, is a city of more than 5 million people, with one of the highest standards of living in Latin America. In the latest episode of EconTalk, host Russ Roberts of George Mason University talks to Mike Munger of Duke about the city’s mass transportation system. In the middle part of the last decade, Santiago featured a flourishing system of private buses, with more than 3,000 companies offering quick and inexpensive transportation all over the city and mostly managing to turn a profit. The system was not without its flaws, however. The buses emitted a great deal of pollution, and overzealous bus drivers often caused accidents or hit pedestrians in efforts to pick up passengers before their competition.

Such problems led the government to scrap the private system in favor of a public one in 2007, and Munger explains how this led to far worse outcomes on pretty much every measure. The average commute for a mass transit rider immediately skyrocketed from 40 minutes to an hour and 40 minutes. This encouraged more people to drive or use small taxi services, feeding a vicious cycle. Furthermore, because bus drivers are paid based on how often they are on time, they have no incentive to stop for passengers at bus stops if they are running late. The extremely lengthy lines for buses routinely lead to pushing and shoving to board and fights often break out. Although the public system was specifically designed to solve safety problems in the private system, the number of wrecks actually increased because the city purchased extra long bendy buses, which require two lanes to turn, so cars frequently crash into them. Finally, the system as a whole went from running a profit of $60 million to requiring a government subsidy of $600 million — more than $100 for every resident of Santiago.

Munger argues that the problems with the private buses could have been solved relatively easily without resorting to socializing the system. A very minimal licensing requirement could ensure that the buses do not emit excess levels of pollutants, and the enforcement of property rights in private bus stops has been shown to prevent buses from driving recklessly to swipe passengers out from under the competition. Although Saint Louis and Kansas City do not have the same level of demand for bus services as Santiago, the city has shown that government ownership is not necessary for a decent mass transportation system.