Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts

of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org

where you can subscribe, find other episodes, comment on this podcast, and find links to

other information related to today's conversation. Our email address is mailadicontalk.org. We'd

love to hear from you. Today is August 16, 2010 and my guest is Mike Munger of Duke University.

Mike, welcome back to Econ Talk. It's always great to be on the show. Mike, you spent part of the

summer in the land of Chile, a country had visited before, and we did an earlier podcast on the

Chilean bus system. So I thought we would start this podcast revisiting that with some observations

that you have now that you've been back and some time has passed after the system had been changed

by some government policy changes recently. And I wanted to get your impression. So why don't you

start by telling us, reprise summarizing the earlier podcast, what you would see happen there

in an attempt to improve the system? What was the system like before that? I was there nearly three

weeks this time and wrote the bus a whole lot and had quite a bit of a chance to think about how things

have changed. In the mid-2000s, this is well after the Bachelet presidency in La Cunta Tacion

as a center left coalition that was ruling the government, they were worried that the bus system

in Santiago, which is a city of about 5 million people, wasn't serving the needs of those people.

And they had three main objections. One is that the drivers of buses were too greedy. In a way,

we would recognize it now as a common pool resource problem or call it overfishing. So a driver might

see two or three blocks ahead, 50 people waiting at a bus stop and then another bus pulls up beside

them, they rev their engines. And what happens after the light turns green looks a lot like the Roman

Terrier race scene in Ben Hurr, where they try to run each other off the road because the first

one to get there, it gets all the 50 people. And this was a private system run by private entrepreneurs,

...