Road privatization

Could it work? 10

Biopolitical anticipated this post with his comment -- in fact, my post on the gas tax started off on the topic of road privatization but then, well, veered off course.

I like the idea of road privatization on the surface. The road system is similar to the mail system in that when it was instituted, there wasn't really a private company that had the necessary capital to take on such a project themselves. Now, however, we have FedEx and other shipping companies that do have that capital for shipping, and which would undoubtedly have branched into mail delivery were it not for the government monopoly. Why not the same for roads?

There are a few considerations here:One is that a well-oiled transportation system confers a large positive externality on everyone, like it or not. As long as the economy depends heavily on the transport of goods and people (which is becoming less true, but still), any company that invests in building and maintaining the road system would not be getting all the benefits that resulted. This quality makes the road system one that lends itself (again, like it or not) to being a government enterprise, since the government has the power to extract taxes in exchange for this benefit. However, everyone benefits from a well-oiled FedEx system as well, and while the two systems are no doubt related, FedEx doesn't seem to need to exact additional taxes (hmmmm).

Let's say I run a private company whose business is the building and maintenance of roads. Since, as I said, the government doesn't tax gasoline to discourage its use, let's also say that there is no longer a tax on gasoline. It is now my job to collect some sort of user fee as a revenue stream. Some considerations for Andy the CEO:

I set up a toll system for all of my roads, a la EZ Pass in the Northeast U.S. Rumor has it that the technology used here is getting better so that it's no longer necessary to make cars to slow down that much (or to use satellites). Essentially the same thing as a gas tax, a user fee, but if I invest the technology, it's no longer such a blunt object, so to speak.

As a side result, roads that cost more to maintain cost more to drive on. Makes sense. If the gas tax is like attacking the problem of user fees with a sledgehammer, this technique is more like a single jack. Much less blunt.

My revenue stream is directly correlated to the number of cars I attract. More cars, more revenue. As an environmentally conscious CEO, this makes me a little worried. My incentive is to just pave as much as I can and slap lane lines down, right? But I don't have unlimited resources. Since this is a private enterprise, my company now has to pay the full costs of acquiring the land we want to pave. If it's not worth the extra revenue it's going to bring in, it doesn't get done. In addition, many people, probaby a lot the same people who read Gristmill, are going to make sure that it is hard for me to just grab up all the land I can, especially if it's ecologically important land, and also make sure that there is at least some kind of disincentive to account for the negative externalities that more and more cars bring.

This makes me study very carefully the effects of adding a road or a lane on the system as a whole, and more specifically, the effects on the profits of the company. If, and this is admittedly a big if, the negative effects of the road take the tangible form of a disincentive for me to build more, then the profits of the company will translate into the benefit of the system. Even if the negative effects aren't completely accounted for, there will still be the incentive to grapple with the very difficult issues of whether adding another lane or road is really "worth it," rather than just adding a few lanes, watching the traffic fill them, and then saying, "See, I told you there was demand there."

I am still hopeful that privatization of roads would lead to, as biopolitical puts it, "less pollution, less asphalt, and less taxes," though. The tough issues that would result would be smoothed out if the jump, which is a big one, is made, especially with the market incentives that would result.

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  1. alevin Posted 2:23 pm
    19 Jul 2005

    or, the worst of both worldsThe road companies are very cozy with the legislature.  The government uses its power of eminent domain to get the land to build the roads. Then, the private company gets to build the roads, as well as franchise out the gas stations, convenience stores, hotels, retail, etc on land that used to belong to private citizens.  Local governments in the area are not allowed to build competing free roads. See, the TransTexas corridor before its terms were mitigated a little bit this last legislative session.

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  2. biopolitical Posted 6:08 am
    20 Jul 2005

    Positive externalitiesI think that using positive externalities as an argument for government intervention only leads to trouble. Once you open this door, all sorts of people start begging for subsidies. Instead of doing productive things people waste their time finding and promoting arguments about the positive externalities of their activities. In the end governments subsidize those who beg better, and not those who have larger positive externalities.

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  3. Andy Brett's avatar

    Andy Brett Posted 6:47 am
    20 Jul 2005

    AbsolutelyI absolutely agree, biopolitical. That's why I included "like it or not" :)

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  4. amazingdrx Posted 10:56 pm
    20 Jul 2005

    Hehehey.Yep andy, the government does everything wrong, so hire contractors to run it all!
    But sell the roads to private industry?  the amount of pure brain damage behind that idea boggles the mind.
    Pay your toll on the Cheney expressway, brought to you by Halliburton?  Maybe in your version of america, not in mine!!  No, never!
    At least you have come out of the closet as a dedicated reagan revolutionary!!  Kudos for your honesty at least.

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  5. accel2 Posted 12:10 am
    21 Jul 2005

    A debate of ideas or emotion?Amazingdrex, notice that your post didn't actually address any of the points Andy made.  In fact, the only reference you made to the original point was that you find the idea distasteful.  The rest of your post was mostly undirected sarcasm and name-calling.  Thanks for elevating the conversation.
    What if privatization of some roads (like, highways) actually led to better service, fair pricing, and denser states not subsidizing rural states (heaven forbid people who choose to live in exurbs have to pay for the benefit of having more space by having to pay for their proportionally more expensive infrastructure).  In fact, it's not unreasonable to think that it could lead to less driving by internalizing all costs associated with creating road infrastructure (most of which are currently subsidized by the government).  As long as roads as a free (or discounted) good that don't reflect their true cost, the environment will suffer.
    And folks who are resistant to new ideas based purely on historical intertia (is it a lack of imagination or a fear of confronting one's own beliefs?) are not helping situation, that's for sure.

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  6. amazingdrx Posted 12:57 am
    21 Jul 2005

    Well well accel.A former fan from forum land?  Hehey.
    Love it or leave it.  You want toll highways owned by corporate banditos, move!  Not here in the good old USA.  
    The public air waves, highways, and skyways.  And national parks and wildlife preserves.  Are not for sale to the bushco inc "elite", Saudi uncles of duuuhbya and Halliburton type global corporate "citizens".

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  7. amazingdrx Posted 1:10 am
    21 Jul 2005

    Would privatization have won WW 2?Remember Milo Minderbender from "Catch 22" contracting with the enemy to use US planes to bomb our owm bases?
    Remember Halliburton working for Saddam during the 90s?  Remeber Honeywell selling fuel/air bomb technology to Saddam in the 80s?
    Meanwhile the bushco crew is privatizing the US military with over 20,000 contract soldiers through Halliburton.
    Remember the guys who were burned to death in that vehicle in a rocket attack outside fallujah and the mob then paraded the bodies  around?  They were contract soldiers.
    The shadowy interogators who ordered Grainer and Lynndie to perform the abu ghraib sideshow freakery?  Yep contractors.
    Privatization folks, learn to love it!
    Next time an 8 dollar an hour (bushco union busting privatization)airport screener "searches" you...  but lets over 50% of gun, knife, and bomb like objects in blind testing go.

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  8. amazingdrx Posted 1:12 am
    21 Jul 2005

    Halliburton highway patrol.Look forward to getting pulled over by these guys after highways are "contracted" out to private industry.

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  9. jdhlax Posted 4:29 am
    24 Jul 2005

    Is Our Priority The Environment ...or money?  If it's the environment, then the issue of the economics of privatization should be secondary to that of whether privatization would cause people to drive less.  While I'm almost always opposed to privatization of anything, because it is nothing short of theft of the commons by the wealthy, in this case I might be willing to make an exception.  The potential outcomes of privatization that Amazing considers bad would be great for the Earth if they caused people to drive less.

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  10. gtransit Posted 4:46 am
    25 Jul 2005

    we need more grid spaceThis can only be done by building an elevated, superthin, electric cart grid, fitting under highway overpasses, to unburden highways.

    See california anti-congestion initiative, hallitubes, http://www.generaltransit.com (should really be .org)
    Mike

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