Free-market roads

From Wikipedia, the free encyclopedia
Jump to: navigation, search

Free-market roads is the theory that a society should have entirely private and/or community owned roads.

Free-market roads and infrastructure are generally advocated by anarcho-capitalist works, including Murray Rothbard's For a New Liberty, Morris and Linda Tannehill's The Market for Liberty, David D. Friedman's The Machinery of Freedom, and David T. Beito's The Voluntary City.

Arguments for free market roads[edit]

Private roads can have no free riders, reducing congestion[edit]

The free rider problem has been cited by some proponents[who?] as a reason for privatizing roads: since traffic congestion is the result of excess demand for transportation infrastructure, it may be treated as any other economic shortage - in this case, a shortage of roads, lanes, exits, or other infrastructure. Seeing the pricing mechanism of a free market as a more efficient means of meeting demand than government planning (see Economic calculation problem), Peter Samuel, in his book Highway Aggravation: The Case For Privatizing The Highways, compares American traffic jams and Soviet grocery store lines:[1]

"In Russia communism's failure was epitomized by constant shortages in stores. Empty shelves in supermarkets and department stores and customers in line, wasting hours each week, became the face of the system's failure, as well as a source of huge personal frustration, even rage. Communism failed because prices were not flexible to match supply and demand; because stores were bureaucracies, not businesses; and because revenues went into a central treasury and did not fuel increased capacity and improved service. We in supposedly capitalistic America suffer communism--an unpriced service provided by an unresponsive monopolistic bureaucracy--on most of our highways. Our manifestation of shortage, our equivalent of Russian lines at stores, is daily highway backups. There is no price on rush-hour travel to clear the market. There is no revenue stream directly from road users to road managers to provide incentives either to manage existing capacity to maximum consumer advantage or to adjust capacity to demand."

Ronald F. Kirby, transportation director for the Metropolitan Washington Council of Governments, opined that private companies have more of an incentive to invest in infrastructure early, before a public outcry prompts construction. He noted, "Too often in the public sector, the easiest thing to do is let things sit unresolved. The private sector is motivated by self-interest to resolve things quickly".[2]

Furthermore, if roads are privatized, only those who pay for roads will directly benefit from them. Otherwise, those who pay for roads must deal with traffic congestion caused by those who have not paid.[citation needed]

Competition will motivate better service than is provided by regional monopolies[edit]

Proponents[who?] often cite competition among road providers as an advantage, as road companies would have an incentive to develop innovative ways of lowering prices and improving service to gain a competitive edge. For this reason, arterials (major highways) are often viewed as prime candidates for privatization, since there are typically[citation needed] many possible routes one could take to get to a particular destination, which could allow for competition among multiple road companies. However, local neighbourhood streets could also be provided by private road associations, in much the same way that common stairs, hallways, etc. are provided in a cooperative living arrangement, condominium, or gated community. The association might allow members to drive these streets for free and charge fees to motorists using them as cut-throughs to get to other places. Contractors would compete to provide good road service in much the same way as elevator companies compete for the business of office buildings, despite the fact that a typical building may only contract with one elevator provider at a time.

Privatization will encourage infrastructure construction[edit]

A company that owns a private road will typically want to at least recoup its earlier investment to construct the road. Furthermore, when construction is complete, the company wants to keep investing in the road to keep up its initial value, because roads deteriorate over time. Road maintenance needs to be quick and of high quality, to keep the road from becoming idle again in the future resulting in a capital loss for the company; road traffic needs to be maximized, because that will result in the most revenues to the company. A government does not seek to maximize traffic or reduce road maintenance, because it has no incentive to do so, claim supporters of private roads. These supporters also claim that road safety is increased by companies that own private roads. Those companies do not want to see people getting injured on their roads, as it will tarnish a company's reputation. The companies will seek active removal of unfit, drunk and other reckless drivers, if allowed to discriminate so by the state, and will want to see increased mechanical standards of vehicles, because a stalled vehicle means an idle road. The company itself needs to pay for its removal, or passes this cost on to the owner of the stalled vehicle, inciting the owner to upkeep the quality of one's property.

B. H. Meyer stated, "It is evident that the turnpike movement resulted in a very general betterment of roads."[3] The book Street Smart claims that Brazil has saved 20 percent and Columbia 50 percent through efforts to outsource road maintenance to the private sector.[4]

Free market roads facilitate internalization of external costs[edit]

A private company can more easily be held accountable for negative effects of the highway than that if it is publicly owned. For example, residents living next to urban highways will benefit from noise barriers. However, campaigning for the city council to erect the walls is often ineffective and the process can take years, since the council needs to divert funding from other more pressing projects. A private highway will try to avoid court action and feel more obliged to cater for residents. The cost of erecting the walls will be passed on directly to the drivers (who are causing the noise), rather than the general public.

Private roads couldn't use eminent domain[edit]

In 2006, eminent domain authority was stripped from private highway developers in Colorado due to concerns over abuses.[5] Cato rebutted the potential for eminent domain abuse, noting that "In California the state highway agency approved private development of the Mid-State Tollway on the eastern fringe of the San Francisco-Oakland area. Bay area residents, however, strongly opposed the tollway and favored of a Bay Area Rapid Transit line built nearby to serve the area. As a result, the highway developer abandoned the northern leg of the project. Had a public agency been building the highway, it could have invoked eminent domain authority to build the road in spite of political opposition."[6]

Toll Road Investors Partnership II CEO E. Thomas, in testimony before the State Corporation Commission, said that the lack of eminent domain power required developers to "acquire necessary property through private means, which was a costly and time consuming exercise for the private investors in the Greenway."[7]

Free market roads will have less crime[edit]

Bruce L. Benson argues that when roads are privately owned, local residents will be better able to prevent crime by exercising their right to ask miscreants to leave.[8] He observes that avenues in the private places of St. Louis have been shown to have lower crime rates than adjacent public streets.[9] The Market for Liberty further argues that private roads will be better policed as the owners focus on serious crime rather than on victimless offenses:[10]

Free market roads will encourage small business[edit]

Mutualist Kevin Carson argues that transportation is a natural diseconomy of scale.[11] The cost of transportation increases disproportionately with the size of a firm; in a free market, there would be strict upper limits to the size and power of corporations, and small businesses would have natural advantages. Government subsidies to transportation, however, make large, centralized corporations artificially profitable, contributing to corporate dominance of the economy.[12] Carson points out that in many cases, centralized industry did not develop until after the advent of taxpayer-funded roads and other transportation projects.[13]

Arguments against free market roads[edit]

Highways are natural monopolies[edit]

In many parts of the world land use patterns mean that building two or more highways in parallel isn't practicable, thus making highways a natural monopoly. Kroeger claims, "This would result in an incredibly inefficient use of land resources."[citation needed] When there is only one highway connecting points A and B, the main advantage of privatization, competition, disappears. In the absence of regulation, a private highway operator is likely to charge an exorbitant monopoly price, resulting in huge profit margins and few benefits for drivers. An initial franchise fee (in the case of franchised publicly owned roads) and/or savings of public capital costs, can offset the resulting monopoly profits in terms of societal costs, but there are distributional issues in that the income is spread over an entire region while the burden falls on a small subset of that region's population who actually need to use the road. Also, it is difficult to predict the long term present value of a road. For example, the 407 ETR (an express toll highway near Toronto originally built with public funds) was leased for three billion CDN and was subsequently valued at nearly ten billion CDN. [14] While alternate local roads and other forms of transportation may provide some competition, it is often impractical, especially for goods.

A counter-argument is that while a lone highway connecting A to B may not have any other competition from other highways, it would still have to compete with trains, planes, and other roads.[15]

See also[edit]


  1. ^ Samuel, Peter: Highway Aggravation: The Case For Privatizing The Highways, Cato Policy Analysis No. 231, June 27, 1995.
  2. ^ Fehr, Stephen C.: Highway Links Loudoun to Region's Growing Pains, The Washington Post, Sep. 24, 1995.
  3. ^ Klein, David (January 1998). Libertarian Solutions: Private highways: A solution whose time has come (again)?.[dead link]
  4. ^ STREET SMART | National Center for Policy Analysis
  5. ^ Colorado Hwys: Major Non-State
  6. ^ How Government Highway Policy Encourages Sprawl
  7. ^ Direct Testimony Of E. Thomas Sines On Behalf Of Toll Road Investors Partnership II, L.P. State Corporation Commission Of Virginia Before The Case No. Pue-2006-00081
  8. ^ Benson, Bruce L. To Serve and Protect: Privatization and Community in Criminal Justice. p. 159. 
  9. ^ Benson, Bruce L. To Serve and Protect: Privatization and Community in Criminal Justice. p. 85. 
  10. ^ Tannehill, Linda and Morris. The Market for Liberty. p. 61. 
  11. ^[self-published source][full citation needed]
  12. ^
  13. ^[self-published source][full citation needed]
  14. ^ Alexander, Doug. "CPP Investment Board to Buy 10% of 407 Toll Road for About $878 Million". Bloomberg. Retrieved 26 April 2013. 
  15. ^ Block, Walter (2009). The Privatization of Roads and Highways: Human and Economic Factors. Ludwig von Mises Institute.