This was a private venture and it was making plenty of money until the City prevented fare increases (1920/1930s), resulting in the subways going bankrupt in the 1950s and the city taking over.

Maybe I misunderstood the rest of your argument - I understood you to be claiming that the system should be free because fares are not that making much money anyway. If you are only talking about enforcement for those who don't pay their fare - I still disagree, but the data is not clear at all and I will admit that. (what we don't know is how many will stop paying when they know there is no enforcement) Fare enforcement is for sure something that needs to be weighed - there is a line where you are spending more on enforcement than it is worth, and so some people should get away with cheating. However you still need to have enough enforcement that most people feel it isn't worth risking (partially this is keep honest people honest)