David R. Henderson  

Murphy on Private Production of Roads

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Most Americans recognize the efficiency of private enterprise in providing goods such as computers and cars. Yet for various reasons, when it comes to roads, most people recoil from the idea of private production. Indeed, many people think that one of the essential functions of government, in addition to other tasks such as coining money and providing military defense, is to provide roads.
So begins frequent Econlib Feature Article writer Robert P. Murphy in his July article, "Private Production of Roads," July 3, 2017.

One of the standard questions skeptics of economic freedom raise is "With limited government or no government, who would provide the roads?" It is usually asked as if it's a rhetorical question. It shouldn't be. Murphy shows that in U.S. history roads were provided privately. He also lays out how private production is highly likely to solve some of the biggest problems that exist with government ownership of roads.




COMMENTS (15 to date)
Mark Bahner writes:

Hi,

The future of transportation is autonomous vehicles, mostly electric, mostly providing transportation-as-a-service.

The future of transportation...many others have written this

Because the future is autonomous vehicles mostly providing transportation-as-a-service, it will be possible to know exactly what vehicles used what roads at what times. Therefore, it will be a lot easier to charge appropriate fees (tolls) that cover road construction and maintenance. Every single mile of every single road can have appropriate tolls.

mellochord writes:

It is not just roads. It's regulation of banks (which I think could be audited by unaffiliated financial firms - and with much less conflict of interest.)
The FDA. Social Security, etc; could all be administered by private companies. The cost and savings in bureaucratic bloat is a staggering notion.
It all comes back to the concept, which most people accept without question: Who decided we would do it this way, and why? The great unanswered question - followed by the great orthodox reply (not an answer).
A: Just because.
And, I don't think it displays some underlying devoted trust in government. More, I believe it shows a deep confusion in whom to trust. The usual suspects would have us believe that only the government can build a road, approve a drug, and so on.

Antischiff writes:

Dr. Henderson,

While I think there are many potential advantages to having private ownership of roads, many of which are pointed out in that article, I see serious potential problems too.

If I were contemplating bidding to buy/build roads in a given town, I'd do so from the perspective of wanting to build a monopoly to maximize profit. How would this danger be addressed? I realize government has a current monopoly, but at least there's more citizen input from voters.

I'm thinking if we grant private monopolies on certain road travel routes in a city, perhaps it should only be to public corporations with local shareholders and board members.

Or, perhaps we should just create a separate public taxing authority to build and maintain roads.

Or, we privatize roads, but try to take steps to legally ensure some minimum level of competition.

Are you aware of many business interests chomping at the bit to buy/build many public roads? I'm concerned that if there were good business models thought possible, there'd be more obvious efforts by business interests to privatize roads.

I can think of some reasons I wouldn't want to get into the road owning business, and they're political. Imminent domain issues could become a nightmare with profit interests trying to push grandma out of the home where she helped raise two generations of her family, after just having lost her husband two years ago. There's way too much NIMBYism in America, but it's as strong as it is for a reason, even if not a good one.

Matthias Goergens writes:

Funny enough, our free banking friends also want coinage and notes to be produced entirely privately.

paul writes:

muh roads!

Andrew_FL writes:

@Mark Bahner-

it will be possible to know exactly what vehicles used what roads at what times.

So the government will literally track our every move. Fun.

Jerry Brown writes:

I thought this was almost too silly to bother with until I realized that we did (and still do) have at a lot of private roads called railroads. Maybe a look at how private railroads were built and what advantages and disadvantages they have over publically funded regular vehicle roads might be useful. Or even between publically funded subways and commuter rail.

Tuure Laurinolli writes:

Murphy's article concentrates on individual opposition points without presenting a coherent picture of the whole, and more importantly without paying much attention at all on the transition from government-owned to privately owned roads.

I would very much like to see a complete proposal on how to get from the current system to privately owned roads, and what, if any, regulation privately owned roads should have.

It seems that private ownership works fairly well in e.g. Internet communications, which is analogous to roads in that the good being sold is transit from one place to another, albeit for bits. Except perhaps for the last mile where monopolies seem to be the norm and prices high (compared to some other countries, at least).

Anonymous writes:

First idea on creating competition on roadway usage would still involve extensive government control. Somewhat like airport fees, a number of companies lease percentage rights and sell individual passes.

First thought only, shred at will as I have thick skin and curiosity.

Mark Bahner writes:
@Mark Bahner-

it will be possible to know exactly what vehicles used what roads at what times.

So the government will literally track our every move. Fun.

Well, unless the people providing the transportation as a service won't be compelled to tell the government where their vehicles go. Then only the people providing the service will know.

P.S.

These days, it's all secrecy and no privacy. And there's some little jerk in the FBI, keepin' papers on me, six feet high. It gets me dowwwwnnnn!
Thomas Sewell writes:

Quick plan to privatize roads off the top of my head, which happens to be somewhat based on the setting of a novel I wrote (and plan to rewrite) once:
1. Sell all non-exclusive path roads to the highest bidder(s). Condition the sale on the same effective entity not controlling all the alternate paths. This will end up being most of the high capacity roads.
2. Give all exclusive-path roads to a trust/company/nonprofit (let them choose) owned by the landowners who it currently serves and bundle a contract for free access to that road into the property rights, much as HOA rules are currently bundled. Allow them to consent to change their contract and sell their fraction of ownership in the future if they choose to. You may need to do an analysis of the minimum effective road size for this.

I'd expect that truly local roads would continue to be run by the local landowners for their own benefit (i.e. they and their friends can use them to visit them, but perhaps solicitors won't be allowed without advance vetting?) and the non-local-termination roads would become a competitive market.

Would this be effective to remove the monopoly problem? Ask yourself this, who would buy a piece of land without also insisting on having the right to create some sort of road access to it? Not many, until perhaps those flying commuter cars are more common, at which point the market can adapt far easier than the government. :)

Antischiff asks:

If I were contemplating bidding to buy/build roads in a given town, I'd do so from the perspective of wanting to build a monopoly to maximize profit. How would this danger be addressed? I realize government has a current monopoly, but at least there's more citizen input from voters.
As I have come to understand organizations (including both states and business firms), every organization is subject to redirection by its owners away from the interests of consumers of its product(s). Consumers are protected by choice. Producing organizations will experience some discipline as long as consumers remain free to switch their purchases.

Insurance is another topic which should come up in discussions such as this. Suppose insurance were completely deregulated. Then insurers may offer policies to protect from eminent domain seizures. People buying houses may commonly buy eminent-domain insurance, just as they now commonly buy title insurance. Banks offering mortgages may require such insurance protection. Generally, any problem, which a statist may advance as justification for state action, can also be seen as an opportunity for a free-market entrepreneur, perhaps an insurance entrepreneur. Honest (not regulated) insurance is a mechanism in which the powerful (insurance-company owners) gain an interest in protecting the interests of relatively powerless customers.

Littering is the last topic I will mention. Whenever I see trash on the roadside in front of my house, I think: Well, who built this road? Who purports to police it? A private road owning company could clean litter as part of its service and would experience incentive to police littering on the part of its customers who traveled on the road.

Travelers on a private road may feel as patrons in a private restaurant feel. The owner can kick you out if you misbehave, but you and most other customers accept — or even welcome — this discipline. Generally the lawfulness within the restaurant adequately serves both the customers and owners. I wrote several times about such things in Formulations. Here is one example paper: Hit 'Em, But Not Too Hard: Institutions for Giving Negative Feedback in Small and Manageable Increments.

Bob Murphy writes:

Antischiff,

I don't think there needs to be government measures to prevent road monopolies. Let me put it this way: If you were in the grocery business, would you look to monopolize the provision of groceries in a town, so you could charge outrageous amounts for tomatoes?

If you can see why that wouldn't really work, it's not that much different with roads.

Bob Murphy writes:

Matthias,

Funny enough, our Rothbardian friends even want military defense to be privately provided.

I realize it may have been misleading, but when I wrote that phrase about traditional "functions of government," I wasn't endorsing the claim.

Thaomas writes:

@ Bhaner

And city streets which are mis-priced much worse than intercity roads.

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