The Privatization of Roads and Highways - Ludwig von Mises Institute

108 The Privatization of Roads and Highways
The unique power of the reductio ad absurdum is that it casts
doubts on the externalities argument, as used by Baumol, Roth,
and Peterson. If a nationalized industry can be justified on the
basis of externalities, but this phenomenon applies as well to
areas where no one wants to see the spread of government enterprise,
then one may question just how seriously its advocates
take their own argument. They cannot have it both ways. Either
externalities justify state enterprise on roads and in practically
every other industry as well, or they justify it in no case. It is completely
illogical to apply an argument in one case and to fail to
apply it in all other cases in which it is just as relevant. 13
EXTERNAL DISECONOMIES
One phenomenon that particularly infuriates those who see
externalities as a justification for intervention is the fact that,
under congested road conditions, each additional motorist
imposes extra costs on all others, costs which he does not take
fully into account, resulting in uneconomic use of resources. Roth
states the problem as follows:
the level of traffic flow will depend on decisions taken by individuals
taking account of the costs and benefits to them associated
with road use. But from the point of view of the traffic as
Assuming, however, operation of merry-go-rounds to reflect the general
interests of the public, and assuming also, as is the case, that these mechanisms,
too, are replete with external benefits, does it follow that merry-goround
output therefore seems most justifiably geared to public rather than
private enterprise? If so, then it would seem that there is nothing that cannot
be claimed for government operation.
13It would be consistent, although nonsensical, to accept the externality
argument in favor of government road monopoly—and nationalization of
all other industries wherein externalities obtain as well. For opposing positions,
however, the reader might consult F.A. Hayek’s The Road to Serfdom
(Chicago: University Chicago Press, 1944) and Collectivist Economic Planning
(Clifton, N.J.: Augustus M. Kelley, 1975), and three books by Ludwig von
Mises, Bureaucracy (New Rochelle, N.Y.: Arlington House, 1969), Planning
for Freedom (South Holland, Ill.: Libertarian Press, 1974), and Human Action,
3rd ed. (Chicago: Henry Regnery, 1966).