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Privatizing Highways

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"The main objective, after all, is to develop a truly free market in highway service, and that requires that only those projects that are seen by investors as promising a reasonable prospect of making a return on total investment be built ... So there is a case for radicalism -- for legislating that government will get out of highways and phase down the taxes that currently support them. Henceforth they will be funded by investors charging tolls and subject to competition."

One way in which urban areas have been said to subsidize rural areas - and "blue" states to subsidize "red" states - is by the funding of roads and highways. Thinkers as diverse as libertarians and distributists, from Milton Friedman to John Medaille [Correction: Medaille does not propose privatizing highways. Please see note at bottom of entry. - JC], have proposed the privatization of highways as a means of correcting the perceived inequity. Their shared belief is that those who use highways should be the ones who pay for them, and those who do not use them should not have to pay for them. Besides, don't highway subsidies result in too many highways? As Cato's Peter Samuel argues in "Highway Aggravation: The Case For Privatizing The Highways", and as every good conservative understands, "projects that would not fly without subsidy usually should not fly".

(By the way, the Cato article linked and quoted above is not without some valuable insights and is well worth a read. On the matter of traffic congestion, Samuel writes: "At least three-quarters of the increase in traffic has nothing at all to do with population. It has everything to do with women and young people getting their own cars. That explains why areas of the country with little population growth have not been spared the upsurge of traffic on the roads.")

It seems to me that a free highway system is a near-perfect metaphor for the interconnectedness of human society. It's true that our transportation infrastructure involves subsidies and the re-distribution of wealth. But to look at this as an "us" vs. "them" problem is, in my opinion, a mistake. They are us, and we are them, and a free highway system benefits everyone. Even if urban taxpayers don't personally travel on rural highways, the trucks which stock their shelves do travel on them, as do the farmers and ranchers who grow their food. City dwellers work for employers whose suppliers, vendors, contractors and and customers depend on rural highways. Most people have relatives and friends who live in other cities, at least, if not in small towns and rural areas, and maintaining those relationships requires travel on rural highways. At some point in their lives most urban and suburban dwellers utilize rural highways for work or recreation, or they depend upon others who do. Etc.

Furthermore, the highway "subsidy" makes rural and small-town living more economically viable. It's in everyone's interest to preserve this way of life, which has been in retreat for decades due to all kinds of pressures. A free highway system eases the economic hardship of rural living, making it a little less impossible to start a business or to commute to a job in town. Why should city dwellers care about this? Because rural/small town people are their countrymen, first and foremost, but also because it's important to make the social benefits of small town life available to as many as possible. These benefits are good in themselves, and for that reason alone they are deserving of a "subsidy".

But the most compelling argument for preserving a free, public highway system is that it's as American as apple pie. How different would our heritage be - our songs and stories and poems and lore - without the romantic freedom of the open road? Without the contrasts and tensions between the rambler and the settler? Granted, the kind of mobility that our highway system affords is partially responsible for the dissolution of community life that I often lament. But nevermind: rising fuel prices will soon cure this problem without the need for privatizing highways. In the meantime, I find there are few things more enjoyable than driving freely in the countryside, exploring the back roads, chasing ghost towns and landmarks, spying on the neighbors and their projects, and just drinking in the beauty of this delightfully obscure corner of the Golden West.

For me, the open road represents one of our last freedoms in an increasingly un-free world. Or maybe I just have a powerful streak of American wanderlust. Either way, a free highway system is more than just a subsidy: it's a symbol of our national character, and not one I'm inclined to barter away.

[Correction: Prof. John Medaille does not advocate privatizing highways. I misremembered what he had written in "Towards a Truly Free Market: A Distributist Perspective on the Role of Government, Taxes, Health Care, Deficits, and More". Medaille proposes converting freeways into state-operated toll systems with the use of RFID cards. Apologies to all.]

Comments (23)

Don't privatization plans come in flavors, though? For example, probably your county subsidizes some of your local roads. Your state subsidizes others. I suppose some privatization plans might apply only to the Interstate, which would, assuming that states and counties continued to maintain public roads, still leave a lot of "open road." Perhaps you would be more positively inclined toward some privatization plans than others.

I have to admit that learning that distributists support road privatization is definitely a negative for me. ;-)

That's certainly true. California is a big state. If the interstates were privatized I wouldn't miss them. Well, I'd miss them a little but not terribly. Our economy would survive with only minor adjustments. But I'd feel pretty sorry for the folks in Rhode Island.

Road-owners would still have to be competitive with their toll prices, upkeep, traffic, etc. With modern toll-systems like E-pass it needn't be too onerous. Hopefully it would be cheaper in the long run than the taxes and tolls one pays now.

And come to think of it, privatizing the interstates would create serious hardships for border cities in any state that depend heavily upon across-the-border commerce - places like Kansas City, Kansas, or Council Bluffs, Iowa.

Road-owners would still have to be competitive with their toll prices, upkeep, traffic, etc.

Right. And those who were not competitive due to insufficient traffic would fold. There's really no way to predict on this side of the experiment which highways would close and which would remain.

The one thing that I don't often see discussed in these debates is the question of where---and how---private roads will be built.

Roads are nearly impossible to build without the power of eminent domain. You have to tear up an inconveniently narrow, and inconveniently straight, strip of land running across countless parcels held by countless owners. Only some of these people will be willing to sell to you at market prices on your schedule; invariably, some of them will never be willing to sell at all, and may in fact be willing to take steps to ensure that their heirs cannot even sell to you.

Now, the state can give a private company engaged in a quasi-public undertaking the power of eminent domain. The railroads were given that power in the 19th century. Fortunately most of what they condemned was uninhabited pasture in the plains. But while I've never done a great study of the project, my impression has always been that it was not a wonderful experience for all involved. Besides, if we're going sufficiently far enough out on the libertarian branch to be privatizing roads, it seems like a pure cheat to say that we'll be buttressing our "private roads" with the power of eminent domain.

Finally, privatizing road building, if it is to have any meaning at all, means privatizing the process of selecting where to build roads. This is inane. Not only would the loss of central coordination render the construction of long roadways nearly impossible (or at least possible only at vastly increased transactional costs), but it creates the very real possibility of simply having too many roads. If A builds and operates a toll road from Montgomery to Atlanta, but B wants to profit from the same traffic, B's only way to do so is to build his own road. Because the road is more or less a permanent improvement, competition between A and B is not going to produce a "better road": it's just going to produce a lot more pavement.

So no private roads, please.

Privatizing roads has never been something I'm super-enthusiastic about despite my libertarian sympathies. To some extent, it's a matter of looking forward vs. looking back. I can think of a lot more reasons to oppose the building of the huge Interstate system, with the large-scale use of eminent domain, before it was done, but now that it's there, I'm not convinced that it's worth it to try to go back. And you can't give the people back their homes and farms anyway. We have had small government along with public roads in many countries and many ages, so public roads don't seem to me to be necessarily intertwined with large and busy-body-ish government in any serious sense. At least it isn't a vehicle (pun intended) for teaching ideology.

Titus, you're absolutely right, privatizing roads is a hornet's nest of practical impossibilities. If we want to enjoy modern transportation at all, there is no avoiding the involvement of public authority. This is one of those ideas that would just never, ever occur to a normal person who didn't have an absolute, overriding commitment to some economic theory or other.

I have to admit that learning that distributists support road privatization is definitely a negative for me. ;-)

I used "distributists" in the plural when I shouldn't have. I expect there are others, but Medaille is the only distributist writer I have seen propose the idea. It's definitely not a distributist platform issue.

OK, so many urban dwellers have rural-dwelling family and/or friends, and rural-dwelling offers various rewards and fosters certain virtues (a spirit of independence not, apparently, among them, alas).

Therefore urban dwellers ought to be forced to subsidize rural dwellers.

But many rural dwellers have urban-dwelling family and/or friends, and urban-dwelling offers various rewards and fosters certain virtues.

Therefore - uh, oh!

There may be good reasons to oppose road privatization, but I don't see them here. Couldn't care less about the issue, myself. Too wonkish.

While I agree with Titus that there are some really severe issues with the concept of ALL roads being purely private, (need for eminent domain being a truly difficult one), I don't think that these problems constitute an argument against there being ANY private roads. We have all seen certain jurisdictions (or combinations thereof) who have known the need for a road for years and years, and never seem to accomplish fronting the capital required to get started. If a private company can tell the county or state: "we'll build that road that you already know you want, but of course we get the profits from it", that seems a fair deal. But the implicit constraints go both ways: the state uses the power of eminent domain to get the land, but the state also sets upper limits on pricing or profit margins. SO it becomes a public/private operation. That is, I think, one of the waves of the future for certain types of activities.

Is it really true that the cost of a rural roadway is much more expensive than a city one? If you count the cost per resident, then yes it is obvious. But if you count the cost per passenger mile traveled, it's not so obvious. After you factor in repair costs for 50 years as well as initial building costs, (after 50 years you will have probably done at least 8 or 10 cycles of repairs), it seems to me that they MUST even out: whichever one carries the most traffic is the one that requires the most repair. So, if the cost per passenger mile (or, maybe cost per passenger mile, divided by speed) is factored in, seems to me that rural and city roads should be comparable. Which means that paying tolls on either per passenger mile would be equitable, and there isn't necessarily a subsidy going on.

Tony, the biggest problem is probably not building new roads, but converting present roads to for-profit private enterprises.

Just thinking out loud here, briefly ... it seems to me that roads and highways would need to be broken up in order to be sold, and that would likely happen along jurisdictional lines in most cases. So instead of one highway we'd end up with multiple privately-owned highway segments. Some of these would be profitable and would pay for their own maintenance and upkeep, others would not. You would have an uneven quality between various segments, and some segments would close altogether, forcing drivers to use unsuitable detours and causing major congestion problems. (And what is to be done with unprofitable highways that close?) Opportunities to "market" a highway segment to attract more "customers" would be limited to non-existent: a road is just a road. Tolls and such would discourage a lot of traffic, which isn't necessarily a bad thing unless someone depends on that traffic to maintain the business. Setting the price point would be a huge guessing game, as this would be an industry without any reliable "comps" - roads are by nature monopolistic - and there is no guarantee that the "market" price would keep the highway open. Drivers in unfamiliar territory would have to plan ahead for toll-paying: there would need to be a place where one could gather up all the tolls at various locations and plan the cheapest route. There would be no more "just get in the car and go find it" trips without running into unexpected toll houses. Getting lost could be very expensive.

I'm out of time but could go on and on. Private roads here and there are fine, but the article in the OP calls for a totally privatized system. What a nightmare!

Having written this post rather hastily, I sat down this evening to re-read the brief section on transportation in John Medaille's "Towards a Truly Free Market: A Distributist Perspective on the Role of Government, Taxes, Health Care, Deficits, and More". And much to my chagrin, it turns out that I had misremembered his argument pretty badly.

Medaille advocates converting the freeway system into a state-run system of toll highways, with the use of RFID cards to expedite traffic. He doesn't advocate privatization and he doesn't go beyond freeways. This is a pretty egregious mistake on my part: distributism is a little crazy at times, but not as crazy as libertarianism and I regret lumping them together.

Medaille's proposal comes under the rubric of eliminating the "subsidy" in the federal transportation budget by making freeways financially self-supporting. He also hopes it will discourage suburban sprawl. The libertarians agree with the self-supporting argument, but also have a commitment to privatization - not only of freeways but of our entire transportation infrastructure.

Anyway, I apologize to all for my carelessness, and especially to Prof. Medaille. I will keep this correction up for a time and after a few days will re-write the entry. It's one thing to get a school of ideas wrong, quite another to misrepresent the specific proposals of a specific person. Mea culpa!

... and rural-dwelling offers various rewards and fosters certain virtues (a spirit of independence not, apparently, among them, alas).

Nice.

I don't know you well, Steve, but I'm willing to bet that you, too, benefit more from subsidies than you pay in taxes. So do I, and so do most people, even city dwellers. The top 10% of income earners pay 70% of income taxes in this country. Most of us couldn't possibly pay for our "fair share" of the cost of roads, infrastructure, services, and defense. So much for "independence".

Of course, we would all be better off without a lot of things the government spends money on these days, but a system in which a minority of wealthy people pay the majority of taxes is inevitable so long as wealth is distributed the way wealth is distributed today.

"... and rural-dwelling offers various rewards and fosters certain virtues (a spirit of independence not, apparently, among them, alas)."

Rural dependence was fostered by a combination of commercialism and federal farm policy. It is a state of created dependence not unlike that brought about by the various 'Great Society' programs. And an interesting fact is that the Agrarians of I'll Take My Stand fame, writing in the late 1920s, accurately predicted just such an outcome.


Í think the public/private distinction is simplistic. Better to think of it as a trichotomy or perhaps a spectrum: public/corporate/private.

If roads are "privatized" that won't usually mean entrepreneurs will build and maintain roads. it means, as has been pointed out, governments will exercise eminent domain to procure the land and contract with a corporation to build and maintain the road for corporate profits at limited liability. The corporation would be acting as a sort of agent of the state. That's what corporations are supposed to be anyway so I guess I would say that if the accountants and wonks can honestly prove that it would save money I have no problem with it.

Setting the price point would be a huge guessing game, as this would be an industry without any reliable "comps" - roads are by nature monopolistic - and there is no guarantee that the "market" price would keep the highway open.

If we are lucky, there will be personal, household air cars worthy of the name within 10 years, 15 at the outside. There are already one or two models in just-short-of-production stage, and there are probably at least 3 more companies working on them. Although they would not eradicate the need for roads altogether, they WOULD change the meaning and importance of roads to such a great extent that it would be impossible to predict fully. Certainly, they would undercut the "monopolistic" aspect of roadways.

Just as the computer / internet is making it possible for millions of people to work at home, changing commuting patterns, personal air transport will re-arrange the landscape both figuratively and literally.

Jeff C. - most people in America today do, indeed, benefit more from gummint subsidies then they pay in taxes.

I probably fall into that category, myself. I got the Earned Income Tax Credit this year, and I travel I-35 into my classes in Kansas City four days a week.

So?

You play the hand you're dealt.

Doesn't mean you have to like the rules of the game.

I probably fall into that category, myself. I got the Earned Income Tax Credit this year, and I travel I-35 into my classes in Kansas City four days a week.

So?

You play the hand you're dealt.

Doesn't mean you have to like the rules of the game.

The wealthy subsidize things for lots of reasons, not the least being the support of a system that keeps them wealthy. Without a free highway system, large employers would be hiring from a smaller pool of employees, and would have to pay them more to compensate for their travel costs. Distribution would be more complicated and time consuming. Other facets of business would be similarly affected. The "subisidy" creates a situation in which the subsidizers benefit in other ways.

But you're missing something even more important: economics is not the measure of everything. For example: a free highway system makes it easier for emergency vehicles to get to where they are going. How do you put a dollar value on that? A free highway system gives farm products easier access to certain markets, resulting in more choices on supermarket shelves. Where does that fit on a P&L? The benefits of many subsidized goods are materially intangible and can be measured only in terms of the common good.

They say that Puritanism is the haunting fear that someone, somewhere may be having a good time.

It might also be said that Libertarianism is the haunting fear that someone, somewhere may be enjoying something he hasn't earned or paid money for.

Jeff C - what a strange dialogue this is.

So the subsidization of rural highways by urbanites helps keep the wealthy wealthy?

Could be, I suppose. Is that a strike for, or against such subsidization, in your view?

"...economics is not the measure of everything..."

Really? No kidding?

;^)

"The benefits of many subsidized goods are materially intangible and can be measured only in terms of the common good."

So there are "benefits" which, though "materially intangible," can nevertheless "be measured," but "only in terms of the common good?"

Wow! Tell me more! Your position is, as some philosophers like to say, suggestive, but under-described.

Steve, we are so not on the same page. I can't figure out what you think about anything. I'm bowing out.

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