Free market roads
Encyclopedia
Free-market roads is the theory that a society should have entirely privately owned roads.

Free-market roads are advocated by many classic anarcho-capitalist works, including Murray Rothbard
Murray Rothbard
Murray Newton Rothbard was an American author and economist of the Austrian School who helped define capitalist libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism." Rothbard wrote over twenty books and is considered a centrally important figure in the...

's For a New Liberty
For a New Liberty
For a New Liberty: The Libertarian Manifesto is a book by American economist and historian Murray N. Rothbard, first published in 1973, that helped launch the modern libertarian movement in the United States, and was the first modern free market anarchist manifesto For a New Liberty: The...

, Morris and Linda Tannehill's The Market for Liberty
The Market for Liberty
The Market for Liberty is an anarcho-capitalist book written by Linda and Morris Tannehill, which according to Karl Hess has become "something of a classic." It was preceded by the self-published Liberty via the Market in 1969. Mary Ruwart credits the Tannehills and their book with winning her over...

, David D. Friedman
David D. Friedman
David Director Friedman is an American economist, author, and Right-libertarian theorist. He is known as a leader in anarcho-capitalist political theory, which is the subject of his most popular book, The Machinery of Freedom...

's The Machinery of Freedom
The Machinery of Freedom
The Machinery of Freedom is a 1973 nonfiction book by libertarian economist David D. Friedman outlining the means by which an anarcho-capitalist society could operate...

, and David T. Beito
David T. Beito
David T. Beito is a historian and professor of history at the University of Alabama. He is the author of Taxpayers in Revolt: Tax Resistance during the Great Depression ; From Mutual Aid to the Welfare State: Fraternal Societies and Social Services, 1890-1967 ; The Voluntary City: Choice,...

's The Voluntary City
The Voluntary City
The Voluntary City: Choice, Community, and Civil Society is an Independent Institute-published book, edited by David T. Beito, about communities with private provision of municipal services. Contributors include Stephen Davies, Daniel Klein, Robert C. Arne, Bruce L. Benson, David G. Green, James...

.

Property rights

Some political theorists, such as Ayn Rand
Ayn Rand
Ayn Rand was a Russian-American novelist, philosopher, playwright, and screenwriter. She is known for her two best-selling novels The Fountainhead and Atlas Shrugged and for developing a philosophical system she called Objectivism....

, have argued that any public property is immoral.

Private roads will have no free riders and reduce congestion

Proponents often cite the free rider problem
Free rider problem
In economics, collective bargaining, psychology, and political science, a free rider is someone who consumes a resource without paying for it, or pays less than the full cost. The free rider problem is the question of how to limit free riding...

 as a reason for privatizing roads. Since traffic congestion
Traffic congestion
Traffic congestion is a condition on road networks that occurs as use increases, and is characterized by slower speeds, longer trip times, and increased vehicular queueing. The most common example is the physical use of roads by vehicles. When traffic demand is great enough that the interaction...

 is caused by there being more traffic than the highway can handle, one way to look at congestion is simply a shortage
Economic shortage
Economic shortage is a term describing a disparity between the amount demanded for a product or service and the amount supplied in a market. Specifically, a shortage occurs when there is excess demand; therefore, it is the opposite of a surplus....

 of roads, lanes, exits, or other infrastructure. Libertarian economists frequently cite the free market's pricing mechanism as a superior means of avoiding shortages than government planning (See Economic calculation problem
Economic calculation problem
The economic calculation problem is a criticism of central economic planning. It was first proposed by Ludwig von Mises in 1920 and later expounded by Friedrich Hayek. The problem referred to is that of how to distribute resources rationally in an economy...

). Peter Samuel's Highway Aggravation: The Case For Privatizing The Highways compares American traffic jams and Soviet grocery store lines:
"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".

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.

Competition will motivate better service than is provided by the government road monopoly

Proponents often cite competition among road providers as an advantage, as road companies would have an incentive to seek innovative ways of lowering prices and improving service to gain a competitive edge. For this reason, arterials (major highways) are often viewed as a prime candidate for privatization, since there are typically many possible routes one could take to get to a particular destination, which could facilitate competition among road companies. However, local neighborhood streets could also be provided by private road association
Private road association
A private road association is an organization, typically nonprofit, specializing in private roads.-Sweden:Two-thirds of the Swedish road system is run by these organizations, which range in size from a few households to tens of thousands of households. Dues to the associations are assessed based on...

s, 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

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." 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.

Free market roads facilitate internalization of external costs

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 barrier
Noise barrier
A noise barrier is an exterior structure designed to protect sensitive land uses from noise pollution...

s. 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 wouldn't use eminent domain

In 2006, eminent domain authority was stripped from private highway developers in Colorado due to concerns over abuses. Cato rebuts the potential for eminent domain abuse by noting, "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
Eminent domain
Eminent domain , compulsory purchase , resumption/compulsory acquisition , or expropriation is an action of the state to seize a citizen's private property, expropriate property, or seize a citizen's rights in property with due monetary compensation, but without the owner's consent...

 authority to build the road in spite of political opposition."

Toll Road Investors Partnership II CEO E. Thomas, in testimony before the State Corporation Commission
State Corporation Commission
The State Corporation Commission, or SCC, is a Virginia regulatory agency whose authority encompasses utilities, insurance, state-chartered financial institutions, securities, retail franchising, and railroads...

, 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."

Free market roads will have less crime

Bruce L. Benson
Bruce L. Benson
Dr. Bruce L. Benson is an American academic economist who is widely recognized as an authority on law and economics and a major exponent of anarcho-capitalism legal theory. He is DeVoe L. Moore Professor and Distinguished Research Professor at Florida State University, where he serves as Chairman...

 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. He observes that avenues in the private place
Private place
A private place is a self-governing enclave whose common areas are owned by the residents, and whose services are provided by the private sector....

s of St. Louis have been shown to have lower crime rates than adjacent public streets. The Market for Liberty
The Market for Liberty
The Market for Liberty is an anarcho-capitalist book written by Linda and Morris Tannehill, which according to Karl Hess has become "something of a classic." It was preceded by the self-published Liberty via the Market in 1969. Mary Ruwart credits the Tannehills and their book with winning her over...

further argues that private roads will be better policed as the owners focus on serious crime rather than on victimless offenses:

Free market roads will encourage small business

Mutualist Kevin Carson argues that transportation is a natural diseconomy of scale. 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. Carson points out that in many cases, centralized industry did not develop until after the advent of taxpayer-funded roads and other transportation projects.

Highways are natural monopolies

In many parts of the world land use patterns mean that building two or more highways in parallel isn't practicable. Kroeger claims, "This would result in an incredibly inefficient use of land resources." When there is only one highway connecting A to B, the main advantage of privatization, competition, disappears. In 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. The initial franchise fee and/or savings public capital costs can offset the resulting monopoly profits in terms of societal costs, however there are distribution 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
Present value
Present value, also known as present discounted value, is the value on a given date of a future payment or series of future payments, discounted to reflect the time value of money and other factors such as investment risk...

 of a road, for example for 407 ETR was leased for 3 billion CDN and was subsequently valued at nearly 10 billion CDN. While alternate local roads
Shunpiking
The term shunpiking comes from the word shun, meaning "to avoid", and pike, a term referring to turnpikes, which are roads that require payment of a toll to travel on them...

 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.

Free market roads divert needed funds from the government

A Mother Jones
Mother Jones (magazine)
Mother Jones is an American independent news organization, featuring investigative and breaking news reporting on politics, the environment, human rights, and culture. Mother Jones has been nominated for 23 National Magazine Awards and has won six times, including for General Excellence in 2001,...

article notes that toll revenues from privatized highways go to private corporate profits and shareholders, rather than the government.

External links

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