Privatize the Roads?

[Zmapper]

I happened to find an online book by this man, Walter Block, that I found especially interesting. In "The Privatization of Roads and Highways", Block advocates a selling off of the public roads, no strings attached, with the new owner free to do whatever he wishes with his new land.

I have only read the first 1/3 in detail, then skimmed the rest, but it is certainly a well researched alternative perspective. Traditionally, public streets are thought of as a public good. But in order to be a public good, they must be non-rival and non-excludable. Your use of a congested road with space for one more car prohibits someone else from using that road. If you don't pay the toll, your use of a toll-road would be considered theft. Therefore, roads should be considered as a private good, or a common pool resource for the non-tolled roads.

Now before someone jumps in and calls me nuts, I am not saying we need to privatize all of the roads. Wikipedia defines social goods as:

"Social goods are defined as public goods that could be delivered as private goods, but are usually delivered by the government for various reasons, including social policy, and funded via public funds like taxes."

Certainly, the local collector and arterial streets should remain public, only because of the variety of users and high numbers of them. I don't have much faith for private road companies to ensure safe crosswalks and bike lanes are provided, because outside of a few areas, pedestrians and bicyclists don't make up most of their customer base. Local streets and cul-de-sacs could be maintained by an HOA-like setup, if they really need much maintaining at all. Freeways could be sold off, mostly because there are only private cars and buses to deal with and successful private freeways exist elsewhere.

The civil rights and free speech issue would remain a problem for arterial streets. Traditionally, sidewalks were always considered a "safe haven" of free speech. You could say whatever you want, whenever you want, and as long as you weren't breaking any laws the police couldn't stop you. Under private ownership, public roads would be considered more like shopping malls. The issue is avoided with local streets, because of community ownership, and freeways, because nobody could hear you or see your tiny sign.

In conclusion, Block puts forth a possible plan, though such plan would have too many flaws in certain situations. His position in economics is a great plus, allowing him to see from a different perspective than us. While I may not agree with everything he says, it is certainly a valid stance, one that allows you to see an in-depth examination of the other side.

[Brandon]

IMHO, privatising roads is a very, very, extremely bad idea.  Examples of why it should never be done abound from the Chicago Skyway to the Chicago parking meters.  If anything for freeways, they should be run by a state toll authority that does not need to answer to stockholders.

[vdeane]

Whether use of something would be considered theft is irrelevant to whether something is a public good (if it was, there would be no such things as public goods because government could pass a law on property rights for anything).  Enforceablity is the key.  And for non-freeways, it can't be enforced.  Plus, his assertion that one's use of the road prevents someone else from using the road is incorrect unless you're dealing with bumper-to-bumper traffic, and the criteria for a public good do not consider fringe cases such as this.

Freeways are a different matter because property rights on them can be enforced via toll booths.  Thus, they are a near-public good.  Other near-public goods include cable TV and the Internet.  It's a shame when you have to pay for a near-public good.

What Walter Block fails to understand is that by privatizing things, you are forcing someone to participate in a monopolistic market.  He probably opposes the health insurance mandate, yet it's the exact same idea, just without the monopoly.  I guess making someone participate in a market they are 100% guaranteed to enter in their life anyways is bad, but forcing them to buy goods from one particular company is OK.  Hypocrite. 

[kphoger]

The Camino Colombia toll road was built by a private enterprise as part of a bypass around the twin cities of Laredo & Nuevo Laredo.  They banked on the promise that México would complete its portion at the same time, and that all commercial traffic would be required to use that crossing.  Unfortunately for the enterprise, the Mexican portion wasn't opened until later, and Texas changed its mind to construct a new commercial-only crossing with full freeway connection to I-35 (also connecting directly to the Mexican side of the bypass).  As a result, traffic volume has been far less than expected, and the highway was auctioned back to the state of Texas on the courthouse steps.  It is now Texas state highway 255.  It still provides a great bypass of the city (as long as you're not a trucker), but was a failure as a privately owned highway.

[J N Winkler]

Traditionally, public streets are thought of as a public good.

This overstates the position--I am not aware of any respectable economist who has argued that roads are, in fact, public goods.

But in order to be a public good, they must be non-rival and non-excludable. Your use of a congested road with space for one more car prohibits someone else from using that road.

This is one of the reasons economists don't treat roads as public goods.  In fact, roads become poorer and poorer approximations of true public goods the more they are specialized for the transit function.

Certainly, the local collector and arterial streets should remain public, only because of the variety of users and high numbers of them.

More to the point, they are specialized for the access function.  In order for them to be privatized, there would have to be either a balloon payment to property holders in respect of their access rights or some sort of pass-through for access.  The problem is somewhat comparable to that involved in nationalization of the right to develop land, which was attempted in Britain with the Town and Country Planning Act 1947.  Ralph Turvey wrote some interesting articles in the late 1940's and early 1950's on the compensation-betterment problem, which are a useful corrective for the naïve view that rights of access to property can be reliably and consistently valued.

The civil rights and free speech issue would remain a problem for arterial streets. Traditionally, sidewalks were always considered a "safe haven" of free speech. You could say whatever you want, whenever you want, and as long as you weren't breaking any laws the police couldn't stop you. Under private ownership, public roads would be considered more like shopping malls. The issue is avoided with local streets, because of community ownership, and freeways, because nobody could hear you or see your tiny sign.

I don't think too much of this--free speech could be protected by pass-through clauses, similar to the laws in some states which restrict what homeowners' associations can stipulate in their contracts with property owners.  But a requirement to provide pass-through clauses of course amounts to regulation, which Block is against because of his libertarian stance.  I suspect he devotes a considerable amount of time in his book to dancing around this issue (as libertarians in general do when confronted with the problem of unequal contracts).

In conclusion, Block puts forth a possible plan, though such plan would have too many flaws in certain situations. His position in economics is a great plus, allowing him to see from a different perspective than us.

Before investing Block's recommendations with any special authority because he is an economics professor, it would be prudent to read what other well-respected economists have had to say on the question of private ownership of roads and other presumptively public assets, as well as the general problem of defining a guiding criterion for economic management of the transport network as a whole.  Christopher Foster's Transport Problem (1963) in particular spells out a consumer's surplus criterion for transport which is unfriendly to toll roads.  Gomez-Ibañez and Mayer did a major 1994 study of private and public-authority toll roads which underscores the point that the profit private toll road operators make is generally more than offset by the loss of consumer's surplus to the community as a whole.

[Scott5114]

If a road is privatized, with the new owner given full rights to do whatever they wished with their new property, what if they decided to close the road, perhaps in favor of building a retail store or a house for himself or something? It is hard to see how such a development would be in the public interest.

[Zmapper]

Scott, no road company would be so stupid as to close down a cash cow so they can build themselves a house. If having the structure right on the highway was so important, they could build over or under the highway. Nobody would tear down the <s>Sears</> Willis Tower to build a single house, would they?

If they really were so stupid to do so, then traffic would shift to another unobstructed route and they would go out of business.

If I haven't made this clear enough, I don't necessarily agree with Walter Block. What I really wanted to do was just share the other, rarer side.

[NE2]

Scott, no road company would be so stupid as to close down a cash cow so they can build themselves a house.

But they would close it down to build a bigger cash cow (e.g. a casino). The problem with private roads is that there's no real competition, especially in a constrained area. You're not going to have two parallel roads down a narrow peninsula, or two bridges to a small island.

[Scott5114]

Scott, no road company would be so stupid as to close down a cash cow so they can build themselves a house. If having the structure right on the highway was so important, they could build over or under the highway. Nobody would tear down the <s>Sears</> Willis Tower to build a single house, would they?

If they really were so stupid to do so, then traffic would shift to another unobstructed route and they would go out of business.

If I haven't made this clear enough, I don't necessarily agree with Walter Block. What I really wanted to do was just share the other, rarer side.

Maybe not, but that presupposes that they are interested in owning the road for the purposes of tolling it. There could be other reasons someone wanted to buy the road. Suppose Walmart bought the only road that leads to Target...

Yeah, such a scenario is far fetched (and probably some form of illegal). But I think that illustrates that there are several conceivable reasons someone might want a particular road other than tolling, many of which are not even close to the public interest.

[J N Winkler]

But they would close it down to build a bigger cash cow (e.g. a casino). The problem with private roads is that there's no real competition, especially in a constrained area. You're not going to have two parallel roads down a narrow peninsula, or two bridges to a small island.

Gordon Tullock (in comparison to Block, a more well-known and more highly regarded disciple of Ludwig von Mises who is one of the founders of public choice theory) posed precisely this objection in a paper which is reprinted in full in Block's book.  Specifically, as Tullock puts it, there are no known examples of multiple road nets which are perfectly competitive with each other in that they provide the same services to the same body of customers.

The objection Scott poses is one of the consequences of the ad coelum doctrines of property ownership.  Block tries to get around this by specifying that private ownership of the roads would be limited in nature and would amount to a right to exploit without a general right to withdraw the facility altogether.  Block tries to dismiss the ad coelum objection as a strawman, which it is to a certain extent.

Returning to the problem of unequal contracts (e.g. that between the homeowner and a HOA-type society charged with maintaining the roads), Block and Tullock raise the possibility of democratic governance similar to that prevailing in HOAs where the residents can elect the management board.  Tullock's objection to this is that this is a form of collective ownership which becomes more and more indistinguishable from government the more provisions are made for democratic accountability.  So how is privatization any different?

If I haven't made this clear enough, I don't necessarily agree with Walter Block. What I really wanted to do was just share the other, rarer side.

Other?  Rarer?  The US and western Europe have been in a rightward tilt since 1980.  The Heritage Foundation and the Reason Foundation have dominated the public-policy debate on what to do with the roads to such an extent that free-marketeer ideas, such as PPP and infrastructure banks, have widespread endorsement on the political left.  These privatization ideas are actually receiving more attention, interest, and public praise than the traditionally "socialist" methods such as government provision financed by a motor fuel tax.

[NE2]

Tullock's objection to this is that this is a form of collective ownership which becomes more and more indistinguishable from government the more provisions are made for democratic accountability.  So how is privatization any different?

This is more or less one of my big objections to libertarianism - any government can be treated as a large landowner (taxes are rent, etc.). So how is our current situation not purely libertarian, with one "company" in control of each country?