The Privatization of Roads and Highways - Ludwig von Mises Institute

114 The Privatization of Roads and Highways
THE “EVIL” FREE RIDER
The indictment against private ownership of roads is sometimes
reversed. Instead of the highway owner being accused of not
building enough, the nonhighway-user who benefits without cost
is castigated as a “free rider” who “refuses” to pay for the benefits
he receives. But certainly he has not asked for these benefits, and
in no case can it be alleged that he has contracted for them.
Let us now consider the gains imparted to the consumers of
final goods who benefit because goods can now be more easily
shipped. If too large a proportion of the benefits created by the
highway are provided free of charge, consumers will gain from
lower-priced goods, but a private concern may be unable to
cover its costs. But through the advent of externality internalization,
the road owner will receive payment for the benefits he is
providing. The process is simple. All that the road owner need do
is charge a price for highway usage roughly conformable to the
savings in transport fees created by the facility. The road will still
benefit its users (the shippers) and their customers (the final consumers),
but there will be no benefits seeping out, or spilling
over, as it were, for “free.” Such benefits will be paid for, given a
price that makes it still profitable for a trucker to use the road.
This point is made by Brownlee and Heller as follows:
That highways may cut transportation costs undoubtedly is
true; but this truth does not warrant special taxes for highways
purpose [sic] levied against persons who do not use the highways.
Insofar as truckers pay for using the highways, those persons
not directly using the highways can help pay highway
costs indirectly through the price system. If appropriate charges
for highway use were levied against the military, nonusers
would also pay indirectly for the highways from general tax
funds spent by them for highway services. The alleged benefits
of highways to those who do not use them directly are primarily
illusions arising from failure to charge highway users appropriately
for the services provided by the highway system. 20
20 O.H. Brownlee and Walter W. Heller, “Highway Development and
Financing,” American Economic Review (May 1956): 236.