The concept of the public good is widely discussed in economics. Some goods, like road maintenance, are best managed by the government- while we all want good roads, it’s also something that most of us aren’t willing to pay for individually. When the government allocates this type of good, we tend to see it as more fairly and efficiently distributed than if the private sector had dealt with it. Public transit is another good example. Countries like Japan have incredibly efficient transit mostly due to the fact that the government has created infrastructure that is able to transport huge numbers of people quickly and at a low cost. But, sometimes public transit is actually best delegated to the private sector.

The caveat with delegating public transit to the private sector is that (I’d argue) it works better in less developed countries. I was in the Philippines a few weeks ago and their predominant form of public transit is the Jeepney, an old customised jeep with an extended cab. The Jeepneys are essentially small busses where drivers purchase the right to drive a route. While there are still larger public busses, Jeepneys tend to be more popular among locals.

The basis for Jeepney success in Philippines is twofold. Firstly, Jeepneys offer an alternative to outdated infrastructure. The current public transit in the Philippines is a combination of busses and subways. Busses are very large and are limited to specific routes, and have slightly higher fares than Jeepneys. The subway rails are limited in reach and only run every 15-20 minutes, which isn’t nearly enough for a metro area of 24 million.

The second factor in Jeepney success is its ability to quickly adapt to route needs. In a country where it can take four-plus years just to get the license plates for a car, changes to any pubic system take a huge amount of time and are often beyond the capacity of the government. While Jeepney drivers do need to pay for the license to drive a route, it’s a much faster process than the city acquiring a new bus, training the driver, etc. If a Jeepney is overcrowded, other drivers see that there is a profit to be made by driving that route as well, and acquire a license. Likewise, if a route isn’t making any money and doesn’t have any passengers, drivers will stop driving the route. Of course, this does come with the consequence of less popular areas not getting service.

The Jeepney system has been criticised as having negative environmental impacts and being unregulated in comparison to other forms of public transit. But, in a developing country where the government has neither the time nor the money to build more modern infrastructure, the Jeepney has filled the public transit hole. While the environmental impacts of the Jeepney need to be taken seriously, the proposals to replace current Jeepneys with electric Jeepneys is wildly expensive and would drive most drivers out of business, given that they only make around $5-10 USD per day. However, developing countries tend to leapfrog with technology more than developed countries, and when electric alternatives become sufficiently cost- competitive, I suspect that drivers will start swapping over at a fairly fast rate.

Although the free market often is inefficient at allocating some resources, in the Philippines it’s done a remarkably good job at managing public transit. In a sense, Jeepney drivers work as contractors for the government, and by allowing drivers to purchase a license for whichever route they want to drive, transit is provided to the areas that need it most. The Jeepney system certainly isn’t perfect, but in the wake of the government’s inability to provide mass transit, I’d say they’ve filled the gap quite nicely.