The Privatization of Roads and Highways - Ludwig von Mises Institute

Public Goods and Externalities: The Case of Roads 105
Shorey Peterson is another economist who seems to understand
this point, though he is reluctant to accept its full implications:
Actually it is easy to endow much of private industry with
great collective significance, if one is so inclined. There is no
greater social interest than in having the population well fed
and housed. The steel industry is vital to national defense. Railroads
perform the specific social functions credited to highways.
The point is that, in a society such as ours in which an
individualistic economic organization is generally approved, it
is usually deemed sufficient that an industry should develop in
response to the demands of specific beneficiaries, and that the
social benefits should be accepted as a sort of by-product. If the
steel industry, spurred by ordinary demand, expands sufficiently
for defense purposes, further development because of
the defense aspect would be wasteful . . .
Thus if highways, when developed simply in response to traffic
needs, serve adequately the several general interests mentioned
above, no additional outlay because of these interests is
warranted. 10
On one hand this is a very welcome statement, for it clearly
sets forth the thesis that the externalities argument for government
intervention into the highway industry must be opposed. If
we were to allow state takeovers in all areas with “great collective
significance,” there would scarcely be any private enterprise
left in our “individualistic economic” system.
10 Shorey Peterson, “The Highway from the Point of View of the Economist,”
in Jean Labatut and Wheaton J. Lane, eds., Highways in Our National
Life: A Symposium (Princeton, N.J.: Princeton University Press, 1950), p. 196.
See also Herbert Mohring, “Urban Highway Investments,” in Robert Dorfman,
ed., Measuring Benefits of Government Investments (Washington, D.C.:
Brookings Institution, 1965). Mohring states that “the aesthetic, humanitarian,
and other ‘non-market benefit’ arguments that are often used to justify
subsidies to such areas as education, research, and the arts seem to apply
little to transportation” (pp. 231–32).