Wednesday, December 10, 2008

The Road to Freedom

One of the more interesting aspects of a truly free society is privatizing roads. It's a concept that most people have difficulty understanding and so they dismiss the idea as impractical. Market Urbanism recently linked to a post that says the state of Virginia is considering privatizing many cul-de-sacs.

Many of these roads within subdivisions are currently funded with a mixture of private and public monies. Typically, the developer pays for the initial construction and the state (in Virginia's case) covers the maintenance costs. However, VDOT is considering shifting the balance away from paying for semi-private roadways at all. In technical terms, they want to require a minimum link-to-node ratio in order to fund the maintenance of any road.

The link-to-node ratio is used to determine how "public" a street is. That is, a street with only one access point would be considered less public than one with many crossing streets. In other words, a street that is used exclusively for local transportation, such as getting to one's home, is less public than a major thoroughfare. And so the state of Virginia is considering a plan to shift the maintenance costs of such streets to the private sector.

This partial privatization raises other issues. First, unless the home owners receive some form of tax credit this will amount to a form of double-taxation. They are already paying maintenance fees through gasoline taxes, auto registration fees, etc.

Second, and more philosophically important, if privatizing cul-de-sacs is a good idea (which it is) then privatizing all roads is also a good idea. (It always strikes me as interesting that a government agency will tout the benefits of privatization or deregulation in some isolated instance, but cannot extrapolate that to the economy at large. They see privatization as a solution to an immediate, specific issue and remain clueless that the same principle applies to all issues. Another example of the impact of Pragmatism.)

The primary users of a cul-de-sac are easy to identify, and thus, it is easy to identify who should be responsible for maintenance. This becomes more difficult on a busier street which is used by citizens from all over the city. And that is where most people begin to oppose the idea of private streets--they view the idea as simply impractical.

While it is impossible to address all of issues related to private roads in a short post, I would like to indicate some of the means by which implementation would be made practical.

The most obvious aspect of privatizing the roads is toll roads. Most people understand this concept, and see little problem with it in regard to highways. But they envision that all roads would operate similarly, resulting in toll booths on every corner and massive gridlock. Admittedly this would be impractical, but it reveals several common misconceptions about the free market.

The owners of private property do not always charge the end user. The yellow pages is one example--advertisers pay for the cost of publication and distribution. The end user spay nothing for the book. A similar concept would likely be applied to many roads.

Cul-de-sacs are one example. While the primary users are the home owners, others--such as deliverymen, contractors, and visitors, also use the street. It would be imprudent and counterproductive for the owners--the residents of the street--to charge others for such negligible use. To do so would be to discourage deliverymen, contractors, and visitors, which would clearly not be in the best interest of the home owners.

Similarly with businesses, which need customers, vendors, employees, and others to reach their building. Businesses have a vested interest in providing access to their facility. Again, charging for that access would be a discouragement, and not in the business' best interest.

In both instances, and many others, use of a particular road would be free. Those who owned the road would have a vested interest in making use of that road available to others and charging for its use would not be in their best interest.

Some might argue that a company could purchase a major road and then charge outrageous rates to use that road. While this could happen, it is unlikely because it evades the very nature of business and the free market. First, businesses invest in assets in order to make a profit. Charging the highest rate "possible" is seldom the best route to maximizing profits, because consumers will seek alternatives. Second, in a truly free market high profit margins attract competitors, which ultimately puts downward pressure on prices.

This argument illustrates the perverted view of self-interest held by many, if not most, Americans. They view self-interest as "dog-eat-dog", "do unto others before they do unto you", or something similar. This perverted view holds that self-interest precludes cooperation with others and mandates an adversarial relationship between individuals.

Self-interest is nothing of the sort. Pursuing one's self-interest simply means that one does not sacrifice his values to others, not does he ask others to sacrifice to him. It means recognizing the mutual rights of all individuals to act according to their own judgment and pursue their own values.

As a simple example, consider "loss leaders"--a tactic often used by retailers. A particular item may be sold below cost--at a loss--in order to attract buyers. The retailer hopes to sell other, more profitable items, to the same customer. The retailer is pursuing his self-interest--a profit-- but he recognizes that maximizing the profit on each item may not be the best approach. And in the end, everyone benefits.

What works in retail works in all human relationships. Allowing each individual to pursue his values, free from the interference of others, so long as he respects the mutual rights of others, is the road to freedom.


APH said...

great points!

Burgess Laughlin said...

> " They see privatization as a solution to an immediate, specific issue and remain clueless that the same principle applies to all issues."

Your insightful point offers an opportunity for someone: To write a book collecting those isolated instances into one place and then abstracting a principle, thus providing concrete "ammunition" for activists and countering pragmatism at the same time.

I already have enough to keep me busy for the rest of my life. Besides, I vaguely recall, from 30 or 40 years ago, a book, whose title I can't recall, that did something similar. It collected examples of private enterprise doing the very things that statists say must be done by state. Perhaps private postal delivery was an example. (Remember that 40 years ago no one seriously considered even semi-privatizing the US post office in any of its functions.)

Brian Phillips said...

I agree that documenting these examples is a great opportunity. It's something I am considering, though not necessarily in book form.