Flat fares are much better for customers who need to understand what they will pay. The ability to automatically change me an extra fare where I go on is nice only when I know and have budgeted for that fare. Flat fare, pay $x and go it easy to understand. Every time I need to pay I need to decide if the transit system is really worth it for the trip.

Now in a system the size of NYC you probably should do something, the person only riding a couple miles shouldn't pay as much as the person riding many miles (I'm not sure how you can get in NYC). However a simple easy to understand system of fares is important and very hard to design. Part of that needs to be a guaranteed maximum you will pay in a month - with the idea that a significant portion of users will hit that maximum - when you know you will hit the maximum you are more likely to take transit in off-peak times even though you have a perfectly good car.