The Privatization of Roads and Highways - Ludwig von Mises Institute

106 The Privatization of Roads and Highways
On the other hand, Peterson seems unable to carry through
his own logic. In the sentence omitted from the above quote, he
states: “But if, as in the case of the American merchant marine,
the ordinary demand is not believed to bring forth what some
collective purpose requires, additional investment on the latter
account is indicated.” He thus denies practically everything he
stated before, for there will always be some “collective purpose”
which “requires” additional investment on the part of the state
because of externalities. If additional state investments in the
American merchant marine are indeed indicated for “collective
purposes,” even though it is now as large as voluntary payments
from satisfied customers would make it, then why is not a governmental
takeover of the food and housing industries warranted?
After all, there is no question, as Peterson himself has
pointed out, that food and housing are imbued with the public,
collective interest.
William Baumol is one who does not seem to be aware of this
problem. In fact, he carries the externality argument to almost ludicrous
lengths in contending that population growth, of and by
itself, is a justification for increasing the scope of government operations
because of the neighborhood effects it brings in its wake.
Thus, increasing population adds to the significance and degree
of diffusion of the external effects of the actions of all inhabitants
of the metropolis, and thereby requires increasing intervention
by the public sector to assure that social wants are supplied
and that externalities do not lead to extremely adverse
effects on the community’s welfare.
Indeed, the very growth of population itself involves external
effects. New residents usually require the provision of additional
services and facilities—water, sewage, disposal, road
paving, etc., and this is likely to be paid for in part out of the
general municipal budget. 11
11 William J. Baumol, “Urban Services: Interactions of Public and Private
Decisions,” in Howard G. Schaller, ed., Public Expenditure Decisions in the
Urban Community (Baltimore, Md.: Johns Hopkins Press, 1963), p. 8.