(FORTUNE Magazine) – We open this item with a distant memory, vintage 1940 or thereabouts. In that ancient epoch, your servant spent a fair amount of time navigating to and from Townsend Harris High School on various New York City subway systems, on all of which the fare was a nickel and the cars were clean. The city then had three separate systems. The two oldest, designated the BMT and IRT, were run by ''traction magnates,'' as businessmen in the local-transit game were quaintly labeled in print. (Literature's most famous traction magnate is the protagonist of Theodore Dreiser's The Titan.) Our memory, however, fastens on a classmate who would ride only on the third system: the so-called IND, then run by the city itself. One day we asked him why he rode the IND even when it might have been more convenient to take the IRT. Unforgettable answer: because only the IND ''is run by the people.'' The lad was of course a Communist. How times have changed. Communists now are scarcer in America than tomatoes in Russia, and the BMT and IRT have long since fallen into the people's clutches. The subway fare in Gotham is now $1.15 and in the process of rising again -- perhaps to $1.50 -- while service continues to be cut. Under the impression that we might be onto something quite original, we reacted to the latest fare-increase news by inquiring whether any serious economists favored privatization of local transit. Alas, or is it hurray, the idea turns out to be less original than postulated. Numerous economic heavyweights, many associated with the ''public choice'' mode of analysis, have been arguing for years that local transit should be privatized. From their arguments, we glean the following: (1) The past quarter-century has witnessed a tremendous swing from capitalism to Communism in the local-transit sector. In the mid-Sixties, few transit systems in large cities were publicly owned. Most were franchises run by private companies that had considerable latitude in setting fares and the level of service. The companies were generally profitable, with fare revenues covering operating costs. Today virtually all big-city transit systems are publicly run, and, since fares no longer cover costs, they require taxpayer subsidies. (2) The major reason for this retrograde sequence was the infamous UMTA -- the Urban Mass Transit Act of 1964. UMTA offered local politicians a deal they could not refuse: The federal government would pay up to 80% of the capital costs of any transit systems the pols built or acquired, and also pay some of the operating costs. The offer set off a pig race for federal money to buy, build, and run public systems. (3) The public systems are less efficient than the private operations they replaced. Stephen Moore of the Cato Institute has data showing that in cities where public and private operators still compete, operating costs on similar systems are typically 20% to 50% lower in the private sector. (4) The reasons for the private-sector cost advantage are well understood. As explained in a paper recently presented to the U.S. Department of Transportation by public-choice economists William F. Shughart II and Mwangi S. Kimenyi of the University of Mississippi, public enterprises in general offer minimal incentives for profitable operation, while those bearing the ultimate cost of inefficiencies (mainly local taxpayers) generally lack the incentives to monitor operations effectively. The paper identifies the big winners under public systems as the overpaid employees and the subsidized riders. The big losers are not only the taxpayers but also the owners, employees, and patrons of competing transportation -- e.g., taxis. (5) Transit systems all over the country would benefit from a swing back to capitalism. Wendell Cox, a highly regarded transit consultant, says that privatized systems based on competitive contract awards would be economic in virtually all big cities, including New York. But he doubts that any such transformation is imminent, even though a fair number of cities have contracted out a few routes. Let us know if you hear of any emerging traction magnates.