Over the last few weeks, we saw several interesting announcements related to the gig economy and the future of transportation.

First, from Dallas: "Uber Receives Three-Year Contract to Supplement DART Microtransit Service," and similar arrangements emerged in Miami-Dade County:

"Their continued partnership also reflects a trend of transit agencies turning to rideshare services to fill transportation gaps. Although Uber (UBER) has seen a major loss in demand due to the COVID-19 pandemic, places such as Miami-Dade County have turned to Uber and Lyft's services to subsidize rides along its bus routes that have been suspended at night."

Of course, this is part of a broader trend: "Some U.S. city transit agencies turn to Uber as ridership drops during coronavirus crisis."

"An Uber spokesman said the latter initiative was not a major revenue stream compared to Uber's pre-coronavirus business, according to Reuters, but that it underscores the company's hopes to further expand into the public transportation sector."

So, if Uber does not see this as a significant revenue stream, why does the firm do that?

Revenues are meager for Uber these days (91% fewer rides), so it's clear that any way to keep drivers occupied, while not losing money is a good idea. But I think this goes deeper. As part of its S-1 filing, Uber identifies a "massive market opportunity" in the estimated 4.4 trillion miles traveled by people on public transit in 175 countries in 2017.

Is Uber using these private-public partnerships to get deeper into this "massive market opportunity"?

This is an excellent example of one of the gig economy's main benefits: the ability to match supply and demand in almost every possible time scale. But it also potentially exposes the main issue. These are market solutions, which may be different than the ones that benefit society. Everything can be subsidized, but it is easier to reverse these decisions than the long-term investment in infrastructure, making them much more dependent on the political climate of the moment. In that sense, it is essential to note that Uber has a dark past when it comes to these private-public partnerships.

For example, Pittsburgh has been less than happy before with its relationship with Uber.

"They currently operate as if they have been given carte blanche access to our city," Pittsburgh City Controller Michael Lamb wrote, per a transcript of the letter published at WPXI.com. "At Uber's request, the city of Pittsburgh has opened its streets to a fleet of data-collecting robotic vehicles. This is much more than ride sharing. These vehicles are capable of collecting endless amounts of data about our city. Who owns that data?"

In some areas (Denver is one example), people view it as a way to reduce investment in public transportation. It is clear that once you give firms the ability to do that, the outcomes will be governed by market considerations. The NY Times had a longer op-ed about that last year, "How Uber Hopes to Profit From Public Transit."

"But by reducing the cost of individual rides, Uber and Lyft also draw a privileged subset of passengers away from public transit systems. That, in turn, undermines support for public transportation… Researchers have also found that ride-hailing tends to make cities more congested and polluted, not less. Alejandro Henao of the National Renewable Energy Laboratory, who drove for Uber and Lyft as part of his research, showed that in Denver, ride-hailing was responsible for an 83 percent increase in the miles that would otherwise have been traveled by car. Much of that increase came from ‘deadheading,’ or driving in search of the next fare. As Mr. Henao puts it, Uber may be reducing the public-transit base without providing enough services ‘to make up for that negative effect.’"

There are many questions, such as, how do we make the market competitive enough so one firm cannot win and take the city hostage? I am also not sure that public transportation is the solution to every area (particularly areas that are not very dense), but how do we make sure that we optimize for the long term and not only the short term? Finally, there is an issue of equity here. How do you ensure that these firms continue to serve low-income neighborhoods or cater to the elderly, non-English speakers, or people with disabilities? Of course, the regulator can do that, but it's harder and harder to find active regulators.

This brings up a much broader debate on private and public entities' role in the provision of collective goods (or their substitutes).

Burton Weisbrod, in one of the most seminal papers on this topic , shows that the higher the heterogeneity among customers (both in terms of preferences for quality of service and income), the lower the support for government provision of these goods, and the higher likelihood of an emergence of the private sector substitutes. Given the increased inequality and the significantly more heterogeneous nature of American society, it is not surprising to see these private transportation solutions supplanting the public sector. As researchers predict  (pre-Corona) that car ownership will decline by 80% by 2030, it is not all that surprising that the replacement comes from ride-sharing firms replacing public transportation.