|
Etica & Politica / Ethics & Politics, 2003, 2 http://www.units.it/etica/2003_2/BLOCK.htm
Overcoming difficulties in
privatizing roads
College of Business Administration
1.
Introduction For the purposes of this article, we will
take it as a matter of stipulation that it is desirable to privatize all
traffic arteries. That is, all extant streets, roads, avenues, highways,
etc., should forthwith be taken out of the control of governments, whether
federal, state or local, and placed into private hands. There is a wealth of
literature attesting to the benefits of market provision of goods and
services vis-à-vis governmental, in general, which is well known especially
since the demise of the Soviet economy, and also with specific reference to
roadways, (1) which is far less well known. Rather than reiterating the case for free
enterprise in this domain vis-à-vis socialism, (2) we will instead focus in section 2 on
several objections to implementation, in section 3 consider some difficulties
with the transition period. We conclude in section 4. 2.
Objections 2.1 Eminent
domain is cheap, efficient, and necessary One argument against private roads is that the
costs of amassing rights of way on which to build them would be enormous.
Suppose a private highway company is trying to build a facility stretching
from Boston to Los Angeles, or even from New Orleans to St. Louis. They have
purchased sufficient acreage in order to do so, when they approach Mr. Harry
Holdout, who refuses to sell at any but an astronomical price. This, alone,
would put paid to the entire enterprise. Not only would not coast-to-coast
highways be impossible under private enterprise, but this applies to intra
state roads as well. Nor would, even, city streets be free of such impediments;
after all, Harry Holdouts can be found anywhere there is money to be made by
obstructing progress. No. What is needed if roads are to be built
in the first place is the government, for this is the only institution in
society that can rely upon powers of eminent domain. (3) Here, the state simply
commandeers the property in question, paying what it determines is a fair
market price. This can save millions of dollars, rendering public provision
of highway building far more efficient than private. There are difficulties with this objection.
For one thing, it commits a very basic economic fallacy, a confusion of real
costs with out of pocket expenses. Of course, it government sets its own
price, based upon what it feels is
“fair market value” this is likely to be far below the level the property
owner might insist upon. But the true costs are the alternatives foregone,
and no one can know them apart from the owner in question. Even to characterize him as “Harry Holdout” is to
do violence to economic reality. For anyone, in any transaction, can use such
a derogation against anyone who will not sell his wares for what the buyer
deems an appropriate price. The point is, there is simply no objective way to
distinguish the so called holdout from any other property owner who will not
sell at a price favored by the would be purchaser. Then there is the fact that there are often
several if not numerous routes that a road from one city to another could
take. All one need do is purchase options
to buy contiguous land, at previously agreed upon prices, and if there is any
supposed “holdout” activity, e.g., high prices on the part of one or a few
sellers on any of them, merely utilize another. In this way, the property
owners along each of these routes are made in effect to compete with each
other. And this is to say nothing of the possibility of bridging over, or
tunneling under, the holdings of a recalcitrant seller. It will of course be
more expensive to do so, but this expense places an upper bound upon what the
road assembler need pay to any one property owner along his selected route. This analysis can also be used to refute the claim
that free market operation of roads will be paralyzed, given that one road
owner can always refuse to allow another to cross his own property with
another such facility. Suppose that there is a road running from east to
west; it does not matter whether this is a highway between two cities, or a
street within any one city. Another entrepreneur wishes to install a north
south road, which would have to cross the first one. He has assembled all the
land he needs for this purpose, except for one parcel: the land now occupied
by the east west thoroughfare. When he approaches the owner of the extant
road, he is met with a stony rebuff; he refuses to sell at any price! It is clear that without north south roads,
our transportation system will collapse, perhaps before it even gets started.
However, there are several difficulties with this scenario. First of all, it
is exceedingly unlikely that the would be builder of the north south artery
would have invested any money in his enterprise without first ensuring that
he had complete right of way. Perhaps this “up and down” route could avoid
the “sideways” one entirely, if the owner of the latter were adamant.
Secondly, it is unlikely in the extreme that the east west corridor owner
would take any such stand. After all, if no roads cross his own, then the
capital value of his own possessions will be greatly attenuated. Motorists
will be able to use it, only, to traverse in and east or west direction, as
opposed to using virtually all 360 degrees. If he did, it is exceedingly
probable that his board of directors would toss him out on his ear. Third, if
all else, somehow, fails, the north south would be builder still has the same
option available to him as did the land assembler we were considering above
who was faced with Harry Holdout (which is precisely the role now played by
the east west owner): he can build a bridge over the latter’s land, or tunnel
under it. (4)
2.2 Roads are not perfectly
competitive A private roadway industry would not be
perfectly competitive. Therefore, there would be dead weight inefficiency
losses in its operation. Thus, it should not be privatized. There are several flaws in this objection and
they are serious ones. First, a perfectly competitive industry is an utter
impossibility in the real world. The requirements for this status are
numerous and ridiculously otherworldly: completely homogeneous products; an
indefinitely large, not to say infinite, number of both buyers (to stave off
monopsony) (5)
and sellers (to preclude monopoly); full and complete information about
everything relevant on the part of all market participants; zero profits and
equilibrium. The reductio ad absurdum of this objection is that not only
could roads not be privatized under such impossible criteria, but neither
could anything else be, either. That is, this is a recipe for a complete
takeover by the government of the entire
economy, whether by nationalization (communism) or regulation (fascism) it
matters little. Second, even if, arguendo, it were somehow
possible for such a state of affairs to come into being, it would not be
advantageous to mankind for it to do so. This is because perfect competition
speaks only in terms of structure of industry; it is totally silent on the
issue of behavior. Specifically, there is simply no room in this concept for rivalrous action, the fountainhead of
true competition and progress. 2.3. Roads
are different then everything else; people impose waiting costs on others
without taking them into account Consider the thinking processes of the man ready
to commute to his downtown job, during the morning rush hour. He can be
counted upon to take into account the degree to which the congestion he
expects to find will slow him down. He would not embark upon this trip did he
not regard its benefits greater than its costs, and the slowness of traffic
is one of the costs he will most certainly incorporate into his decision
making process. However, in traveling on the highway at this
time, he also, albeit to a very small degree, adds to the traffic congestion that would exist without his
participation in it. To wit, by making this decision, he imposes waiting
costs on other drivers. Does he take this second, very different cost into
account? He does not! But in refraining from doing so, he acts as an external
diseconomy on every other driver. Of course, he is not the only motorist to
be guilty of this oversight. Our analysis is perfectly general at this point:
what we have said about this one road user is true of every other one as
well. Thus, all drivers in this
situation impose such waiting costs on every other one of them, with not a
one of them taking them into account. Such is the objection we are now considering to
road privatization. It is a very poor one, insofar as it
operates, if it does so at all, no only with regard to roads, but far more
widely. This objection applies, at least in principle, to every good or service for which there
are queues, or waiting lists, or uneven demand. For example, seats at popular
movies or plays, demand for pretty much most
goods right before Christmas, Super Bowl or World Series tickets, etc. In each of these cases, the same could be
said of people on the demand side as of motorists during rush hour: they take
into account their own waiting time, but not that they impose on others by
their own participation in the queue. If this objection were with merit,
therefore, and it barred road privatization, then all of these other goods
and services would have to fall to government provision as well. But in this direction
lies communism However, while it is indubitably true that
this is indeed a problem of epic proportions on our nation’s roadways, it is
far less so in any of these other situations. Why? Because in the market
place, when there is a peak load demand, prices tend to rise. And when they do, this tends to mitigate the original
problem. For example, tickets for the NBA or NHL playoffs are far higher than for ordinary games; prices
are greater right before Christmas than right after, during January and Boxing
Day sales. Movies and plays typically charge more for weekend evening shows
than for matinees, or Tuesday nights. Thus, the uneven or peak load demand
gets flattened out. In other words, deep within the bowels of the free
enterprise system is the cure for
this so called “market failure.” In other words, it is not a “market failure”
at all, but one of government
mismanagement. The contrast with the public sector is a
stark one indeed. Compare and contrast the reactions of public and private
sellers during the Christmas rush. For-profit firms roll up their sleeves,
hire extra workers, stock their shelves almost to the bursting point, and
proudly announce they are open for business, ready and willing to help the
consumers satisfy their demands. And what of statist counterparts? Take the
post office as an example. They urge that people mail early, to avoid the
Christmas rush! The customer is not “always right,” it would appear, in
government “service.” It is the same with roadway use. Do the
street and highway managers charge more for use of these facilities during
peak load times, which would have the result of ironing out the peaks and
reducing congestion? To ask this question is to answer it: they do not.
Rather, the same prices exist all throughout the week, namely, zero. Things
are worse, far worse, with regard to bridges and tunnels also under the
control of our road socialists. (6) Here, anti peak load pricing is engaged
in? In other words, lower prices
are charged during the hours of heaviest demand, thus exacerbating the problem. How does this come about? Bridge and tunnel authorities commonly sell
monthly passes at lower prices per trip than otherwise obtain. But precisely
what kind of driver is likely to travel to the central business district
20-24 times per month? A suburban shopper? An out of towner? A rare visitor
to the city? None of the above. Rather, obviously, the lion’s share of these
tickets will be taken up by regular
commuters, precisely the ones most likely to use them during morning rush
hours into the city and afternoon ones out of it. 2.4. Road
privatization is unfair to abutting property owners It is impossible to predict precisely how a
competitive market would function with regard to roads. If shoes were always
and everywhere the province of government, and some rash individual were to
advocate the end of footwear socialism and the implementation of private
profit making firms in this industry, it might strain credulity. The
objections would come thick and fast: how many shoe stores would be located
on each block? Who would determine the color of the shoes? How would
resources be allocated between boots, sneakers, runners, bedroom slippers,
shower-thongs? What would be done to ensure a sufficient supply of shoelaces?
Or, would there be loafers? Or would they be fastened with Velcro? Would the
market provide high-heeled shoes for women? What about changing styles?
Without government control, would profit seekers be able to accommodate
alterations in taste, or, more ominously, would they impose their own
aesthetic sensibilities on consumers? How, oh how, would the poor get shoes? These difficulties present no particular
problem. There is no movement afoot to nationalize the shoe industry. Were we
to find ourselves in any such predicament, we would readily de nationalize,
secure in the knowledge brought to us by years of reasonably satisfactory
service from this quarter. Roads are different. Although at one time in
our history turnpike companies provided these services to travelers, no one
now alive has had any experience with them. (7) That alone goes some way toward
explaining why, despite a large literature supporting roads (see footnote 2),
regardless of the failure of the Soviet system that should awaken society to
the benefits of privatization, we still suffer under government control of
streets and highways. Moreover, difficult as are the problems of envisioning
a fully free enterprise road system in operation, even more challenging are
those of the transition period. Take the problem of access as an example. One
of the criticisms of free market roadways is that the homeowner or business
firm will be “trapped” on its premises, if it is completely surrounded by
four privately owned roads, as in the nature of things, it inevitably would
be. In making the case for markets in this industry, it is easy to show that
this “problem” is a straw man. For one thing, just as we now have title
search when property changes hands, so under a system of free enterprise for
streets, there would be “access search,” to ensure access and egress. For
another, it would be in the financial interest of the road owner building a
new facility to attract customers.
Surely, he would fail dismally in this regard did he not ensure them of such
basic amenities. (8) But matters are far different when we
contemplate not a private enterprise street and highway system de novo, but
rather the transition period from our present road socialist institutions to
one of pure laissez faire capitalism. For in this process, those in charge of
the conversion will have to attempt to mimic the market, and, as we have
established above with the shoe example, this cannot be done on the basis of
economic theory alone. Rather, it is essentially an entrepreneurial task to establish how the shoe, the road, or,
indeed, any other industry would function under a regime of economic freedom.
But mimic the market they must, otherwise how else can the access and egress
problem be addressed? If the roads are given to private firms, and no
provision whatsoever is made for this phenomenon, this would be equivalent to
giving these companies not only the streets themselves, but also everything
abutting them. For, if they were given the roads with no strings attached,
and could charge whatever they wished, they might set the tolls at a rate
that the internal home and factory owners would be indifferent between
keeping their property and relinquishing it. That is, the road owners, with
the means at their disposal of blocking the internal property holders from
access and egress, (9) would be able to capture, at least theoretically, the
entire capital value of all these holdings. In order to obviate this
possibility, those responsible for privatizing roads will have to mimic the
street use charges that would have been
imposed by a non existent private industry, in this contrary to fact
conditional scenario. Suppose, now, that somehow, this was
accomplished. Still, our difficulties are not over. For a property owner
abutting one of these avenues might say something along the following lines:
“I don’t care a fig for the price you are allowing the road owner to charge
me. I reject it, utterly. These tolls might seem fair to you, but not to me.
Had I been confronted with them when I purchased my land, I never would have
bought it.” (10)
It cannot be denied that this is a powerful
objection to the process of road privatization. We have not, after all, been
able to offer a purely market
process of transfer from the public to the private realm. Rather, we have
been forced to use a bureaucratic process, wherein we non entrepreneurs have
attempted to mimic the (non existent) market. And yet, and yet…. This
objection seems too harsh by half. After all, it is not our fault that we
cannot fully anticipate the market prices that would have eventuated, had the
state never entered into this realm with its cloven feet. And even if we
could, arguendo, any particular economic actor, such as the objector, could
have legitimately rejected it. From one perspective, what we are trying to do
is to unscramble the egg, and it cannot be done. Rather than answering this particular
objection, we will take refuge in the claim that all or at least virtually all privatization efforts are subject
to it. Thus, there is nothing here in particular aimed at road privatization; it rather
constitutes an objection to all
such efforts. In order to see this point, consider the
privatization of a Russian nobleman’s castle. It might have been nationalized
in 1917, and is given back sometime during the period 1989-2003. Is it the
identical castle as existed in 1917? Of course, it is not. Is it even, to
continue our analogy, the same castle as an imaginary one that would have existed, on the assumption
that it was never nationalized in the first place? (11) It is difficult to
answer this, to say the least. And, any answer we could give to the Russian
nobleman (or his heirs) could be rejected by him (them) on similar grounds as
those offered by our objector to road privatization. Namely, “well, this is
the way you might have treated this
castle in the intervening years, but it certainly isn’t the way I (we) would
have managed it.” But we need not resort to an example as
esoteric as a castle. Any bit of farmland (or indeed, any other kind of land)
will do. For it, too, will have or might
have been treated differently
than the manner that might have ensued had there been no initial land
seizure. The person to whom we are now returning it will always be in a
position to quibble with us; to assert that what he is being given back is
not precisely what was taken away
from him. He can say, no matter what additional amount is given him to
compensate for this phenomenon, that it is unfair, that he would never have
agreed to it. Merely the passage of time will always render this true. Therefore, we road privatizers need not
worry about this objection any more than any other privatizer, of anything
else other than roads. Here is a second reply to the objection:
(virtually) (12)
any conversion to the market is better than allowing the status quo of road
socialism. If we were to accept this objection as definitive, not only would
there not be any road privatization, there would not be a return of any property from the public to the
private sector. Ostensibly, the person making the objection is on the side of
the angels. He can be, and we have so far, interpreted him as making this
objection in behalf of the property owner abutting the road. However, this is
also a more ominous interpretation that can be placed upon this objection.
Objectively, at least, if it is taken seriously, it will spell the death
knell of privatization efforts. Quo bono, from such an objection? Obviously,
socialists. (13) A third rejoinder is as follows.
Privatization, at least for our present purposes, may be likened to the just
response to a crime. Someone (the government in our case) in effect stole
something from the rightful owners (private roads, here, by either
nationalizing private property and/or refusing to allow this industry to come
into being in the first place). Naturally, in the case of crime, the emphasis
should be on compensating the victim. (14) However, it is
impossible to peer into the victim’s mind, to discern the contrary to fact
conditional regarding how much he would have voluntarily accepted for what
was in reality stolen from him had this nefarious deed not taken place. Given
no interpersonal comparisons of utility, stipulate that there are no
objective criteria for such losses, it is necessarily impossible that this problem be solved to the extent that the
victim can never complain about the level of compensation given him. 3.
Transitional problems 3.1. “Non-Compete” clauses to protect private investors Under contract
with the government, private express toll lanes were built in the median of
California's State Route 91. The firm in question was guaranteed that this
State would not later add to its capacity in competition with its own new
facility. In other words, there was a “non compete” clause in the agreement,
similar to that which exists in many private labor contracts. However,
traffic increased in this area. As a result, Orange County exercised an
option in this contract and bought out the SR-91 investors. This, in effect,
renationalized the initially private Express Lanes, and allowed the State to
build as more road capacity as it wished. At the
other end of the country, a similar initiative was dealt with in a very
different way. Consider the private firm that built the “Dulles Greenway”
toll road near Washington D.C. With no such stipulation in their contract the
State of Virginia was not estopped (15) from building as much new capacity,
in competition with this private roadway, as it wished. As a result, they
added to their parallel Route 7, and economically undermined the private
builder. One
obvious comment is that private and public road capacity, serving side by
side, is like trying to mix oil and water; it is unstable at best. It is
rather difficult for an entrepreneur to continue to exist, let alone to
prosper, when the government is giving away a very similar service for free.
(16) So,
should the government sign contracts with private builders, offering
“non-compete” clauses? To ask this is to answer it, at least from a
libertarian (17)
perspective. The government should absent itself from this industry, root and
branch, immediately if not sooner. All roads should be commercialized at
once; then, this problem would cease to exist. Nor is
this problem by any means confined to roads and streets. It exists, too, with
regard to private bookstores being forced to compete against public
libraries; for private gymnasiums faced with the competition from
governmental playgrounds, parks, municipal swimming pools, etc. The state,
here, plays the role of the ghoul, or the “undead,” in horror movies; short
of killing it with a silver bullet, or with garlic, or whatever, the latter
pair have an unfair advantage over humans, or entrepreneurs. They can be
bankrupted, but their governmental sector counterparts cannot be. (18) Suppose,
now, that this happy scenario is not in the cards. That is, like it or not,
governmental road systems will not disappear, at least not right away.
Suppose we are confronted not with the question of whether the state should
play any role whatsoever in highway management, with rather with the issue of
given that it will for the
foreseeable future continue to play a gigantic role in this regard, should it
or should it not offer non compete clauses to the private establishments who
add to roadway capacity? This is
by far a more difficult question to answer. We propose to do so under two very
different headings: utilitarian and deontological. The
latter is easy. As a pure matter of justice, anything that supports private
initiatives in this field is good. Non-compete clauses do so. QED. The
former is far more difficult. On the one hand, the worse shape statist roads
are in, the higher the probability there is that they will be replaced by
capitalist institutions. If so, then the last
thing we want are non compete clauses, because this will strengthen the very
few private road companies now allowed by the powers that be; this, in turn,
will render the present situation more stable. Thus, paradoxically,
supporting limited private enterprise in this manner will undermine placing
roads totally under capitalism in the future. Worse is better, in this view
of the world. On the
other hand, people now living need
every bit of help they can get to rescue them from public road management.
Non compete clauses will encourage private companies to take on some small
percentage of the nation’s roadways, and this, at least, will help some few
people who patronize them. The
difficulty is that we literally have no way of weighting these two
considerations, so that an overall determination can be made. Suppose, for example,
that non-compete clauses increased private road management so that it now
made up 1% of the total (this is a vast overestimate, in terms of present
mileage totals). Posit, further, that this would save x number of lives per
year, and y amount of motorist’s time, but that it would put off, from 100 to
101 years, the date on which all
roads would be privatized. Where is the interest rate, on the basis of which
we could discount future time and lives saved, compared to present ones in
this regard? There simply is no such thing. Therefore, it is impossible to
definitively answer this question in any rational or objective manner. 3.2. Pricing How much should road users pay for roads, and
how should they be charged? As we have seen with our shoe example, it is
difficult to anticipate the market. Nevertheless, it is possible to discern
some patterns in the midst of the fog, and to make predictions on the basis
of them. There is little doubt that at least in the
long run a private highway and street industry would utilize electronic road
pricing (ERP). After all, universal product codes are now relied upon for a
myriad of private goods; there is
no reason to think that automobiles and trucks could not be similarly
outfitted as is now done for bread and cough drops. However, the free
enterprise philosophy would maintain that roadways should be privatized at whatever level of technology is
presently available to a society; certainly, this quest should not have to
wait until the development of ERP. Nor did
it, historically. The earliest roads, we must never forget, were private
turnpikes. Tollgates collected on the basis of the weight of the wagon, the
number of axels, the number of horses and the width of the wheels.
Thin-wheeled vehicles could go faster, but would create ruts in the road, and
were therefore charged more. Thick-wheeled ones would serve something of the
function of a steam-roller, flattening out the road and making it more
passable for others, and were thus charged less. In more recent history,
places like Singapore used another low technology collection method. A bull’s
eye would be superimposed on the city map, and a different color assigned to
each of the areas thus created. The highest fees would be charged for use of
those areas of the city in the center of the bull’s eye, with lower prices as
the motorist was restricted, successively, to the more outlying areas. Strict
penalties, needless to say, would be imposed on travelers found in areas not
permitted by their color-coded permits. (19) 3.3. Should
public roads be commercialized before being privatized? That is, should the government be encouraged
to institute electronic road pricing before the privatization process, or
should we merely sit back and wait for private firms to do so once these
facilities are under their control? One argument for immediate ERP is that the
sooner it is done, the sooner we shall have economic rationality on the
nation’s highways, and an end (or at least a vast diminution) of traffic congestion.
Another is offered by Gabriel Roth: “One could keep the system of dedicated
road funds and pay private owners out of such funds, in the same way that
state roads are now financed. But there would have to be a mechanism for
adjusting the road-use charges in accordance with the wishes of road users.
All this would be easier if roads were commercialized before being
privatized.” (20)
But the arguments on the other side seem more
powerful. For one thing, government roadway pricing (on bridges and tunnels)
has already been tried, and it has been a dismal failure. Instead of engaging
in peak load pricing, they have used anti
peak load pricing, and have actually worsened the situation that would have
otherwise obtained, not improved it. True, only some of this pricing has been
electronic, more and more as the years go on, but this does not seem to be
definitive. An institution that would misprice before the advent of ERP could
be expected to do the same afterwards. For another, let us suppose that, mirable
dictu, the state actually priced correctly; i.e., charged more for rush hour
than other traffic. We make the heroic assumption, here, that not only would
they engage in some peak load
pricing, but would actually be able to anticipate the market in this regard,
all of this without benefit of any of capitalism’s weeding out process of
profit and loss for business failures. Then, the problem would arise that in
so doing, we will have functioned as efficiency experts for the state; we
would have, counterproductively, managed to improve state operation. Why is this “counterproductive”?
Deontologically, because roadway management is simply not a legitimate role
for the state, which should be, at least according to the philosophy of
libertarianism, be confined to protection of persons and property through the
provision of armies to keep foreign invaders from our shores, policies to
quell local criminals, and courts to determine innocence or guilt. (21) But even on utilitarian grounds there are
powerful arguments for not marginally improving state operation of roads. For
if this is done, then the glorious day is put off even the more when
government control ceases, and market forces once again take over this
industry. For, make no mistake about it: public sector operation is
responsible for an inordinate number of the tens of thousands of road
fatalities which occur every year, and the sooner this can be stopped, the
sooner this carnage will cease (or, at least be radically reduced.) (22) So, which is better, purely on utilitarian
grounds: a quick marginal improvement in roadway operation (23) coupled with putting off the glorious day of fully
private control for an indefinitely long period of time, or, not attempting
to be efficiency experts for the state, allowing them to wallow in their
misbegotten management, and achieving full privatization earlier.
Unfortunately, there is no discount rate, social or otherwise, on the basis
of which a definitive judgment of this question can be made. Thus, the
implications of a purely utilitarian analysis are unclear. Hence, we resort
to deontology. Then, too, there is the argument that if
government charges tolls on the road, even if it engages in peak load
pricing, inevitably more money will flow into its coffers. However, contrary
to Galbraith, (24) at least from a libertarian perspective,
the state already has far too much money at its disposal, and the people far
too little. Therefore, this would constitute an argument against peak load pricing on the part of the public sector.(25) True, the government could disburse these new
funds back to the long-suffering tax paying public, whether directly or in
the form of tax reductions. But this is as unlikely as Dave Barry becoming
the next president of the United States by acclamation. 3.4. Public
relations Right now, people are accustomed to street
and highway use for “free.” How oh how will they ever be weaned away from
this “entitlement” to which they have become accustomed? It will be
appreciated that in a democracy, unless they are convinced to give up this
privilege, there is little hope for ultimate privatization. One
approach is to reject this question as improper, even impertinent. After all,
we are after the truth, here, with a capital “T” and if the masses are too
moronic to see the benefits of privatization, well, they deserve to be killed
like flies on the public highways, and to suffer the “slings and arrows of
outrageous” traffic congestion. But let
us take a more sober tack. There is, after all, specialization and a division
of labor in all things, and our present concerns are no exception to this
rule. The average motorist can be forgiven for not reflecting carefully on
something which, in the very nature of things, is out of his purview. One
tack in our public relations efforts might be to support such private road
initiatives as California's State Route 91 and the “Dulles Greenway,” at
either ends of our country. The advantage, here, is that there was no history
of free access in either case; so it is not likely, or at least it is less
so, that resentment will build up at having to pay for that which was
hitherto enjoyed “for free.” If enough of these roadways are built, then,
perhaps, eventually, the motoring public will come to see the benefits of
this institution. A better approach might be to convey to the
public that even if it could enjoy
public provision of highways and streets “for free” and had to pay for
private counterparts, it might still be worth it to do so, given that the
latter option would be vastly preferable in terms of safety and congestion
concerns. Better yet might be to point out to the
typical motorist that he by no means enjoys public roadway services “for
free.” Rather, that he pays for
them, in the form of a myriad of taxes, both direct and indirect. Somehow,
the term “freeways” indicates to him that he pays nothing for them. Although
originally conceived as a characterization of the fact that highways were of
limited access, without traffic lights, and thus that travelers could move
“freely,” this phrase now functions to indicate to people that they pay
nothing for them. Nothing could be further from the truth. And, given the
general rule of thumb that private services come at a fraction of the cost of
their public counterparts, it would be a shock to learn that this would not
apply to the present situation. Thus, it is almost a given that the explicit
costs of highway provision likely to be passed on to the consumer by a
private industry would be a small part of those now imposed upon him,
implicitly, in the form of hidden and not so hidden taxes. Notes(1) Beito, David T., “From Privies
to Boulevards: The Private Supply of Infrastructure in the United States
during the Ninteenth Century,” in Jerry Jenkins and David E. Sisk, eds., Development
by Consent: The Voluntary Supply of Public Goods and Services (San
Francisco, 1993): 23-48; Beito, David T. and Linda Royster Beito, “Rival Road
Builders: Private Toll Roads in Nevada, 1852-1880,” Nevada Historical
Society Quarterly 41 (Summer 1998), 71-91; Beito, David T. “Voluntary
Association and the Life of the City,” Humane Studies Review, Fall
1988; Beito, David T. “Owning the Commanding Heights,” Essays in Public
Works History, vol. 16, 1989; Block, Walter, “Free Market Transportation:
Denationalizing the Roads,” Journal of Libertarian Studies: An
Interdisciplinary Review, Vol. III, No. 2, Summer 1979, pp. 209-238;
Block, Walter, “Congestion and Road Pricing,” The Journal of Libertarian
Studies: An Interdisciplinary Review, Vol. IV, No. 3, Fall 1980, pp.
299-330; Block, Walter, “Public Goods and Externalities: The Case of Roads,” The
Journal of Libertarian Studies: An Interdisciplinary Review, Vol. VII,
No. 1, Spring 1983, pp. 1-34; Block, Walter, “Theories of Highway Safety,” Transportation
Research Record, #912, 1983, pp. 7-10; Block, Walter “Road Socialism,” International
Journal of Value-Based Management, 1996, Vol. 9, pp. 195-207; Block,
Walter and Block, Matthew, “Roads, Bridges, Sunlight and Private Property
Rights,” Journal Des Economistes Et Des Etudes Humanes, Vol. VII, No.
2/3, June-September 1996, pp. 351-362; Block, Walter, “Roads, Bridges,
Sunlight and Private Property: Reply to Gordon Tullock,” Journal des
Economistes et des Etudes Humaines, Vol. 8, No. 2/3, June-September 1998,
pp. 315-326; Block, Walter, “Private
Roads, Competition, Automobile Insurance and Price Controls,” Competitiveness
Review, Vol. 8, No. 1, 1998, pp. 55-64; Block, Walter, “Transition to
private roads,” unpublished ms.; Block, Walter, “Road Privatization: Rejoinder
to Mohring,” unpublished ms.; Foldvary, Fred, Public
Goods and Private Communities: The Market Provision of Social Services
(Edward Elgar, 1994); Cadin, Michelle, and Block, Walter, (1997), “Privatize
the Public Highway System,” The Freeman, February, Vol. 47, No. 2.,
pp. 96-97; Caplan, Bryan. 1996. A Practical Proposal for Privatizing
the Highways and Other “Natural” Monopolies. Economic Notes 72. Libertarian
Alliance, London; Cobin, John, M. (1999), Market
Provisions of Highways: Lessons from Costanera Norte. Planning and Markets,
Volume 2, Number 1; De Palma, Andre and Robin Lindsey, “Private toll roads:
Competition under various ownership regimes,” The Annals of Regional
Science, 2000, Vol. 34, pp. 13-35; De Palma, Andre and Robin Lindsey, “A
Model of Curb Rights In Private Urban Transit Markets,” Canadian
Transportation Research Forum, Proceedings of the 36th Annual
Conference, 2001, pp. 581-596; Klein, Dan, “The Voluntary Provision of Public
Goods? The Turnpike Companies of Early America,” Economic Inquiry,
October 1990, pp. 788-812; Klein, Dan, Majewski, J., and Baer, C., “Economy,
Community and the Law: The Turnpike Movement in New York, 1797-1845, The
Journal of Economic History, March 1993, pp. 106-122; Klein, Dan,
Majewski, J., and Baer, C., “From Trunk to Branch: Toll Roads in New York,
1800-1860,” Essays in Economic and Business History, 1993, pp.
191-209; Klein, Dan and Fielding, G.J., “Private Toll Roads: Learning from
the Nineteenth Century,” Transportation Quarterly, July 1992, pp.
321-341; Klein, Dan and Fielding, G.J., “How to Franchise Highways,” Journal
of Transport Economics and Policy, May 1993, pp. 113-130; Klein, Dan and
Fielding, G.J., “High Occupancy/Toll Lanes: Phasing in Congestion Pricing a
Lane at a Time,” Policy Study, No. 170, Reason Foundation, November
1993; Lemennicier, Bertrand, “La Privatisation des rues,” Journal Des
Economistes Et Des Etudes Humaines, Vol. VII, No. 2/3, June-September
1996, pp 363-376; Roth, Gabriel, Paying for Roads: The Economics of
Traffic Congestion, Middlesex, England: Penguin, 1967; Roth, Gabriel, The
Private Provision of Public Services in Developing Countries, Oxford:
Oxford University Press, 1987; Roth, Gabriel, A Self-financing Road System,
London, England, The Insitute of Economic Affairs, 1966; Semmens, John, “Road to Ruin,” The Freeman
(December, 1981); Semmens, John, “The Privatization of Highway Facilities,” Transportation
Research Forum, (November, 1983); Semmens, John, “Highways: Public
Problems and Private Solutions,” The Freeman (March, 1985); Semmens,
John, “Intraurban Road Privatization,” Transportation Research Record
1107 (1987); Semmens, John, “Using Competition to Break the U.S. Road
Monopoly,” Heritage Foundation (December 14, 1987); Semmens, John,
“Privatization: Saving While Serving the Public,” Goldwater Institute (April
25, 1988); Semmens, John, “Taking Over the Roads,” Liberty (November
1988); Semmens, John, “Why We Need Highway Privatization,” Laissez Faire
Institute (March 1991); Semmens, John, “Private Highways? They're Cheaper,
Better, Fairer,” Phoenix Gazette (April 3, 1991); Semmens, John, “The
Rationale for Toll Roads: You Get What You Pay For” Phoenix Gazette
(December 16, 1992); Semmens, John, “Highway Privatization: What Are the
Benefits for Arizona?,” Goldwater Institute (December 1992); Semmens, John,
“From Highways to Buy-Ways,” Spectrum (Fall 1993); Semmens, John, “How
to Solve Mandatory Auto Insurance,” Goldwater Institute (July 1995); Semmens,
John, “Highway Investment Analysis,” Arizona Department of Transportation
(December 1994); Semmens, John, “Privatize Driver's License, Registration
System,” Tribune (December 25, 1994); Semmens, John, “Privatizing
Vehicle Registrations, Driver's Licenses and Auto Insurance,” Transportation
Quarterly (Fall 1995); Semmens, John, “Selling the Roads: Privatizing
Transportation Systems,” Liberty (1996); Semmens, John, “Goodbye,
DMV,” Liberty (January 1996). (2) Block, Walter, “Road Socialism,” International
Journal of Value-Based Management, 1996, Vol. 9, pp.
195-207. (3) This process is called “expropriation”
in Canada. (4) For a debate concerning these
phenomena, see Block, Walter and Block, Matthew,
“Roads, Bridges, Sunlight and Private Property Rights,” Journal Des
Economistes Et Des Etudes Humaines, Vol. VII, No. 2/3, June-September
1996, pp. 351-362; Tullock, Gordon, “Comment on Roads, Bridges,
Sunlight and Private Property, by Walter Block and Matthew Block, Journal
des Economistes et des Etudes Humaines, Vol. , No. , 1998, pp. zx. Block, Walter, “Roads, Bridges, Sunlight and Private
Property: Reply to Gordon Tullock,” Journal des Economistes et des Etudes
Humaines, Vol. 8, No. 2/3, June-September 1998, pp. 315-326. The first and
third of these articles make the point that in bridging over, or tunneling
under, someone’s property, the latter’s land ownership rights need not be abridged. (5) For the argument that monopsony is not
a market failure, see Block, Walter and William Barnett, “An Austrian
Critique of Neo-Classical Monopoly and Monopsony Theory,” unpublished ms; For
the argument that monopoly does not constitute a market failure, see
Armentano, Dominick T., Antitrust and Monopoly: Anatomy of a Policy
Failure, New York: Wiley, 1982; Armentano, Dominick T., The Myths of
Antitrust, New Rochelle, N.Y.: Arlington House, 1972; Armstrong, Don, Competition
vs. Monopoly, Vancouver: The Fraser Institute, 1982; Rothbard, Murray N.,
Man, Economy, and State: A Treatise on
Economic Principles. (2 volumes.) Princeton, NJ: D. Van Nostrand Co.,
1962. (6) Block, Walter, “Road Socialism,” International
Journal of Value-Based Management, 1996, Vol. 9, pp. 195-207. (7) Recently, there have been several
quasi-private road firms in operation. But these are all under the control of
the public authorities, and thus do not constitute a pure form of private
enterprise street and highway firms. (8) For more on this see Block, Walter, “Free Market Transportation:
Denationalizing the Roads,” Journal of Libertarian Studies: An
Interdisciplinary Review, Vol. III, No. 2, Summer 1979, pp. 209-238. (9) In making this statement, we implicitly
assume away the possibility of using helicopters, and long pole-vaulting
sticks, building bridges over, or tunnels under, these streets, in order to
overcome the roadblocks. See also ft. 4, supra. (10) I am indebted to my Loyola University
New Orleans colleague Professor William Barnett II for posing this objection
to me. (11) We are now entering, with a
vengeance, the arena of contrary to fact alternative science fiction history. (12) Rothbard, Murray N., The Ethics of
Liberty, New York: New York University Press, 1998 (1982), p. 54 mentions
one such: a king, right before dissolving his unjust government “arbitrarily
parcels out the entire land areas of his kingdom to the ‘ownership’ of
himself and his relatives.” I owe this cite to Laurent Carnis and Andre
Andrade. (13) Strictly speaking, there are two
kinds of socialists; those who advocate this position on a voluntary basis
(the nunnery, the monastery, the kibbutz that receives no levies based on
coercion; even the typical family is organized on the basis of “from each to
his ability, to each according to his need.”) or coercively, e.g., state
socialism. Needless to say, we are now alluding to the latter of these two
meanings. (14) This, at least, is the
libertarian take on the issue. For more on this see Rothbard, The Ethics
of Liberty, Evers, Williamson, Victim’s Rights, Restitution and
Retribution, Oakland, CA: Independent Institute, 1996, p. 25; Kinsella, Stephan N., “Punishment and
Proportionality: The Estoppel Approach,” 12:1 J. Libertarian Studies 51
(Spring 1996). (15) See Kinsella, “Punishment and
Proportionality”. (16) Obviously, the government does not
provide highways and streets for free. They are, rather, financed through
various and sundry tax levies. But the point is that at the time of decision
as to which roadway to patronize, the motorist faces an additional fee for the private alternative, that does not exist
for the public one. (17) Block, Walter, Defending the
Undefendable, New York: Fox and Wilkes, 1985; Block, Walter,
“Libertarianism vs. Libertinism,” The Journal of Libertarian Studies: An
Interdisciplinary Review, Vol. 11, No. 1, 1994, pp. 117-128; Cuzán,
Alfred G., “Do We Ever Really Get Out of Anarchy?,” Journal of Libertarian
Studies, Vol. 3, No. 2, pp. 151-158 (Summer, 1979); De Jasay, Anthony, The
State, Oxford: Basil Blackwell, 1985; Hoppe, Hans-Hermann, A Theory of
Socialism and Capitalism: Economics, Politics and Ethics, Boston: Kluwer,
1989; Hoppe, Hans-Hermann, The Economics and Ethics of Private Property:
Studies in Political Economy and Philosophy, Boston: Kluwer, 1993; Hoppe,
Hans-Hermann, “The Private Production of Defense,” Journal of
Libertarian Studies, Vol. 14, No. 1, Winter 1998-1999, pp. 27-52;
Kinsella, Stephan, “New Rationalist Directions in Libertarian Rights Theory,”
12:2 Journal of Libertarian Studies
313-26 (Fall 1996); Oppenheimer, Franz, The State, New York: Free Life
Editions, (1914), 1975; Rothbard, Murray N., For a New Liberty,
Macmillan, New York, 1978; Rothbard, Murray N., The Ethics of Liberty,
Stringham, Edward, “Justice Without Government,” Journal of Libertarian
Studies, Vol. 14, No. 1, Winter 1998-1999, pp. 53-77; Tinsley, Patrick,
“With Liberty and Justice for All: A Case for Private Police,” Journal of
Libertarian Studies, Vol. 14, No. 1, Winter 1998-1999, pp. 95-100. (18)In the short run, in any case. In the
long run, there is of course for public enterprise in otherwise capitalist
nations the fate that overtook the Soviet economy. (19) See on this Block, Walter, “Free
Market Transportation: Denationalizing the Roads,” Journal of Libertarian
Studies: An Interdisciplinary Review, Vol. III, No. 2, summer 1979, pp.
209-238. (20) Unpublished letter to the present author, dated
12/20/02. (21) The anarcho capitalist version of
libertarianism, of course, would restrict the government to a far greater,
indeed, total, extent. (22) See on this Block, Walter, “Road Privatization:
Rejoinder to Mohring,” unpublished ms.; Block, Walter, “Theories of Highway
Safety,” Transportation Research Record, #912, 1983, pp. 7-10. (23) Remember, we are still implicitly making
the heroic assumption that government will get things right, road pricing
wise, something neither they, nor their soviet planning counterparts, ever
succeeded in doing. (24) Galbraith, John Kenneth, The
Affluent Society, Boston: Houghton-Mifflin, 1958. (25) It is sometimes argued that one of the
benefits of legalizing addictive drugs is that they could then be taxed, and
the government revenues enhanced. From this perspective, this would be the
only valid case against
legalization. |
