In the early 20th century, there was widespread skepticism of government subsidies for transit projects. But city planners found they couldn’t convince private firms to create subways without sweetening the pot. For example, when the government sought bids for private firms to construct a subway line without subsidies in 1892, they didn’t receive a single serious proposal. This despite the fact that the 1892 franchise would have offered the winning bidder favorable terms, with minimal regulatory oversight, and run for 999 years.
The public subsidies for the subway system turned out to be quite large: The city eventually chipped in $36.5 million in 1900 and then an additional $123 million in 1911 to extend the lines. Those two early spurts of spending alone equal roughly $3.8 billion in today’s dollars.
Lee goes on to ask whether these sorts of infrastructure projects pose a challenge to libertarianism. Were the critics of the vast subsidies used to build New York City’s subway wrong? After all, without the publicly funded system and its extensions, the “bucolic farmland in Harlem, the Bronx, Brooklyn and Queens” might never have been transformed into today’s dense urban neighborhoods. “A subway-less New York,” Lee adds, “would not only have a smaller population, it would likely be poorer per capita. ... Maybe over the long run, those subsidies paid for themselves through the expansion of the city’s tax base.”