Privatizing the roads. Here are some comments from Larry Ribstein at Iceblog on an article in WSJ (subscription required). Unfortunately, since I don't subscribe to WSJ, I'm having to work off other people's quotes, but this strikes me as incredibly blind:
[i]f the roads become too expensive or unpleasant to drive, their owners risk losing business that they are counting on to make their investments successful.If the roads become too expensive or unpleasant to drive, their owners risk losing business that they are counting on to make their investments successful.
Just think about that statement for a minute, especially those of you who drive to work or to the grocery store or anyplace else. Say your normal route is shoddily maintained -- potholes, crumbling verges, overgrown shoulders, etc., and the tolls are really high. (Of course there are going to be tolls.) So, you'll just take the competing road -- uh, what? No competition? You mean there's not another road a block over that gets you to the same place in the same amount of time? Who knew? (This actually starts to sound like one of the conservative principles that no one ever talks about: pave America.)
Ribstein doesn't quite rewrite history, but he edits it a little:
Corporations started as state monopolies providing big things the government couldn't handle – railroads, canals and the like. Now we seem to have come full circle. In fact, to complete the story, I've argued that "uncorporations" -- i.e., partnership-type firms -- are taking over a lot of the functions that corporations now have. At one time in the US we had relatively small governments, corporations building and running the infrastructure, and partnerships handling everything else. Maybe we’re headed back in that direction.
I seem to remember that corporations -- at least the ones that built the railroads and the like -- depended very heavily on government support, not to mention coolie labor. Of course, now that's become an entitlement, but the fact remains that, particularly in the case of roads, government is and always has been a key player. I think there's a little bit of ahistorical fantasy going on here. And frankly, thinking back on my own studies in medieval and early modern Europe, we're really talking about a new universe. Yes, there are examples of bridges and roads being privately maintained (although I'd suggest that if you go back far enough, you're going to find the "privately" really means "by the local community"). I realize there's always someone pining for the "good old days," but to suggest seriously that we return to them is a little naive.
Eric Kleefeld takes this one on at Andrew Sullivan, and, while he makes my point above, I'm not sure he's operating in a completely historical universe, either:
And if competition is to be introduced, offering a similar road nearby, the barriers to entry are enormous. Competition would have to come through a rival company building a whole separate road nearby, first buying up and developing land that could have provided housing, businesses, green space, etc. It would take years to raise the business capital, then take care of all that overhead and construct the separate road, and finally open for business. That sort of situation would hardly put much competitive pressure on a current monopoly holder.
On the other hand, if we were to experiment with road privatization, I know exactly where I'd try it. New Jersey has two separate toll roads that each run the length of the state from north to south, the Garden State Parkway and the New Jersey Turnpike. They're fairly close to each other, and would be redundant if not for the fact that the state's traffic needs are so severe.
It might not be a bad idea to quasi-privatize the two highways via indefinite leases, with the condition that the two roads can never come back under the same ownership — any attempt to do so would result in the forfeiture of ownership back to the state government. That way, two companies would have to maintain their roads and offer decent tolls in order to attract drivers to come to their highway as opposed to the other. And since these two separate roads already exist as it is, the barriers to entry don't apply.
But New Jersey is more of a special case, so specific that it practically disproves the general argument for private roads by demonstrating just what the necessary conditions would be.
In other words, what Ribstein is endorsing (which is offered, also at Sullivan, by Stephen Bainbridge without comment) is that the taxpayers, who have paid for the infrastructure -- roads, bridges, etc. -- now have the opportunity to pay again for a private corporation to manage it.
One aspect that no one seems to want to address: we know, based on too many examples from history, that privatizing government functions will lead to corruption, laxity, and an inferior product. I don't really know where this myth of corporate superiority and efficiency got started. Has anyone looked at Detroit lately? In spite of Ribstein's assertion, corporations began as a means of pooling private resources for major commercial ventures, and also as a means of spreading the risk of those ventures. They have evolved into a means of avoiding individual responsibility for corporate misdeeds, which is a large part of the basis for my mistrust of corporate involvement in roads and bridges. Think about the likely scenario in the I-35 bridge collapse, for example, if it had been privatized. Would the maintenance have been adequate. Would the bridge, which has been rated unsound for over a decade, have been replaced? Possibly -- if the state had come up with some nice subsidies for the company that controlled it. But, as it stands, the bridge has collapsed. Who's responsible? The CEO with the hundred-milliion-dollar escape clause in his/her contract? The board of directors? :You know some mid-level apparatchik is going to get the axe, and if the CEO is suddenly out of work, well, there's always that hundred million dollars.
If this is the substance of libertarian thinking, which is what the subtext seems to be, I'm glad I'm not one.
Footnote: I don't think it's by chance that in European folklore, bridges were often the abode of trolls, who charged a toll to passersby. Or ate them.
Think about that.
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