Posts Tagged ‘highways’


November 13, 2011 5 comments

“What about the roads??” they ask desperately. Statists seem to think that, because the government has always built the roads, at least most of the time in recent memory, that only the government could ever build roads. I find the assumption behind this question quite ironic. The roads are a striking example of a utility that should logically be privatised. What roads should the government pay to build and maintain? The roads to a residential neighbourhood? Why should people from the entire city or country pay for these roads? Let the residents pay. How about the road to an office, shopping district or mall? Let the business owners pay, perhaps through a local business association. Getting the government to do it means forcing everyone to subsidise the businesses who benefit.

So the problem is unresolvable? Think about it. How could we get roads built without the state? I bet you can come up with some ideas. There are all kinds of ways to make roads profitable, from electronic or cash tolls, GPS charges, roads maintained by the businesses they lead to, communal organisations that own the roads, and so on. “And if none of those work?” asks Stefan Molyneux. “Why, then personal flying machines will hit the market!”

Besides, it is already happening. Private contractors who build roads do so far more efficiently than governments (believe it or not). A private road in Paris saves commuters time and the company that built it clears the road quickly when there is an obstruction. A company added two lanes to a highway in California, making them toll roads, thus giving people the option to go faster for a fee. Companies have implemented electronic tolls, obviating the slow and inefficient toll booth. But surely, citizens could never be expected to just build and maintain their own roads, could they? Oh wait, that’s already happening too.

Economist Walter Block has written extensively on the privatisation of roads. To those who believe a competitive road system makes no sense, think again. There is nothing about roads that requires a monopoly. After all, the first roads in the US were private; and no, the government did not take them over because the public demanded it or they knew they could do so more efficiently. In fact, like many libertarians, Block has some very good ideas for how to make competition in formerly public services work. Governments rarely innovate, except in methods of killing. But private-sector solutions, such as airbags and snow chains, have saved lives. If there were competition among roads, people would be able to choose which one they drove on. They might have the choice to drive on the road with the heater underneath it to melt the ice, making it safer; the highway with the rubber dividers that are safer in a crash; and the routes with the lower death rate. We do not know what great life-saving innovations could come from people with an incentive to think of them. Release something into the private sphere and see what happens.

Is the logic of privatising all roads and highways becoming clearer? Zachary Slayback has more to say.

Privatization would ensure that the project would be finished in a timely manner, would remove the moral hazard of building a possibly unnecessary highway with public funds, and would not force every individual to fund the project, whether they wish to use it or not….

Should a company decide that any highway is a viable venture for their ownership and stockholders, then it would be on that company to build a product that consumers would wish to use. If several companies wished to build a highway, then whichever company offered the best product (i.e., the best-maintained, cheapest, fastest highway) would be chosen by consumers to deliver that product via the price system.…

In a free-market system, the signals sent via the price mechanism allow the market to adjust to any changes much more quickly and efficiently than the current centrally planned model under which we operate.

Knowledge is not something that can be aggregated and centrally planned by a Department of Transportation. Knowledge is something that must be acquired in small bits throughout the market. Risks must be taken to acquire knowledge; and no one man, nor any group of men for that matter, can possess the knowledge necessary to perfectly plan any specific endeavor.

So why leave this, what Friedrich Hayek, the Austrian economist and Nobel laureate, called the ‘knowledge problem’, to a group of individuals who are insulated from the signs and information of price signals? Major investments — especially those that require a large amount of information to properly operate, such as highways — should be left to the system that best responds to market signals and the price mechanism: the free market.

Moreover, there is a major moral issue at play when building any public-works project, but especially highways: Who pays for the highway and with what money? Under the current system, public-works projects are paid for by ‘the public.’ But what gives central planners the moral authority to determine that all taxpayers in a given population should be forced to pay for the planners’ project?…

[O]ne thing is for sure: the free market would not force consumers who do not wish to use the product to pay for it.

Roads could be owned by the people who live or work around them. Perhaps electronic tolls (which already exist) could charge people on roads one-tenth of a penny to pass by each person’s house or business (Walter Block’s idea again) without slowing them down. Highways can be profitable for their owners through tolls, billboards and other things clever businesspeople can think of that I have not. Free market highways would reflect the true costs of building them. Their being built by government tends to result in millions of dollars in waste. Roads could be owned by one man who charges you for driving on them, and you could build your own roads or go round if you did not want to pay. People always find alternatives when there is an incentive to do so. It is fatuous to say it is wrong that we should have to pay for roads when we already do through taxation. And it is unfair to argue that it could not work just because you have not thought of an alternative.

Why do we believe that, if there must be a monopoly (and that is probably never the case), it must be a government monopoly? Do we not know better than to trust the government with anything as important as a monopoly? Milton Friedman called a situation which seems like it needs to be a monopoly, such as of plumbing or power lines, a technical monopoly. There are three ways to deal with a monopoly: private monopoly, government monopoly and government regulation. Friedman argued that, in a world of rapid technological change, a private monopoly was preferable. If government has a monopoly, there is no chance for competition and its benefits (lower prices, greater efficiency, wealth creation, innovation). If one business has a monopoly, there may be some way around it, and another firm might be able to find a solution. Contrary to popular myth, free markets abhor monopolies.

But what if someone built a road around your property and said you could not get out unless you paid him a million dollars? Well, my initial impulse might be to shoot him, but there is almost always a peaceful, preventive solution. Perhaps when buying the house, along with fire insurance, one could also purchase access insurance, to insure against such possibilities. Or perhaps one would buy the stretch of road outside one’s own house. One would probably let other people in the neighbourhood through free of charge, in the name of maintaining friendly relations; otherwise, their property values would drop and the shaming and ostracism that could result would be devastating. The sovereign community will need no government roads when it saves money with better ones.