The Privatization of Roads and Highways - Ludwig von Mises Institute

Public Goods and Externalities: The Case of Roads 113
The logic of this argument is not lost upon mainstream economists.
For example, Cooper perceptively states:
In the immediate vicinity of a transportation corridor, urban
land values tend to increase at a much higher rate from the
beginning of facility construction until some time after the facility
is in operation. Increases that are more than double or even
triple the prevailing growth rate are common. A strong rationale
exists for public rather than private realization of this
increase in land value. It is argued that, because the taxpayers’
money earned the increment, the taxpayers should receive the
return. This rationale could justify the purchase of a right of
way somewhat wider than needed for actual facility construction,
thereby achieving greater flexibility with respect to mode
choice and design. 19
The only problem with this statement, from our point of view,
is that Cooper ignores the possibility that the capitalist, too, could
purchase “a right of way somewhat wider than needed for actual
facility construction.” If there is any question about which institution,
private enterprise or government, would be better able to
predict which land would benefit, and to keep plans in secret
until the actual purchase was made, etc., there seems little doubt
that the market would win hands down. The profit and loss test
alone should ensure this.
However, the problem goes deeper. It is widely claimed that
the market cannot function, given external economies. It is then
argued that the government could act so as to dispel the positive
externalities. A fortiori, we must conclude that the market can also
internalize these externalities, and more effectively to boot.
viability of private roads anymore than will the advent of helicopters, able
to see over even the highest of fences, ruin the possibility of a private market
in outdoor movies.
19Norman L. Cooper, Urban Transportation: An Answer (Bloomington:
Bureau of Business Research, Indiana University, 1971), p. 23.