The Privatization of Roads and Highways - Ludwig von Mises Institute

110 The Privatization of Roads and Highways
is ludicrous. The traffic jams endemic to urban rush hours are
eloquent testimony to this fact.
Why does such antisocial behavior take place on our highways,
and not in other areas where it might be expected? The reason
is that our roadway network is in a state of chaotic nonownership
run by the government, while other settings in which such
behavior might be expected, but does not appear, are run by private
enterprise.
We can ask, for example, why it is that economists of the
Roth-Walters-Haveman stamp never spare a worry about movie
goers who impose crowding costs on others? Why do not the
“externality economists” wax eloquent in describing the individual
movie goer (or opera patron, punk rock devotee, supermarket
shopper, hotel patron, department store customer, airplane
traveler, or indeed any person who utilizes a resource which is
actively sought by many others at the same time) who shows callous
disregard for the costs he imposes on others?
One reason is that the institution of private property16 is
allowed to function in these other areas, so that the so-called
externalities can be internalized. Externalities are said to be internalized
when A, the source of the externality, and B, the recipient,
interact on privately owned property, and can be appropriately
penalized or compensated for the externalities through fees
imposed by C, the owner. In the case of nonownership of the
roads, which presently obtains, each additional driver, A,
imposes congestion costs on all other drivers, B, and there is little
or no reason for A to desist. But if the road were privately
owned, then it would be possible (and indeed profitable) for the
owner, C, to reduce negative externalities such as crowding, by
raising charges for rush hour use. C’s profit potentialities are in
16 If the government charged a price for highway use, such a user fee
might deter congestion and lead motorists, in effect, to take account of the
congestion costs they impose on others. For an analysis of why a privately
owned road system is preferable even to a government pricing mechanism,
see Block, “Free-Market Transportation: Denationalizing the Roads,” chapter
1 in this volume.