The Privatization of Roads and Highways - Ludwig von Mises Institute

Public Goods and Externalities: The Case of Roads 127
Can we, as strictly value-free economists, conclude that the
government will maximize utility by so acting? I submit that we
cannot. We cannot, unless, in addition to all the facts heretofore
presented, we assume that none of the one-hundred people will
resent being forced to contribute to the scheme via compulsory
taxes. And this we have no reason to do. In other words, even
while maintaining the assumption that each person values his
benefits from the project at $10, and that each realizes that the
government’s plan will cost him as well as everyone else) only
$.50, it is still conceivable that a person will so resent being forced
to do something, even “for his own good,” that the costs to him
will vastly exceed the $9.50 gain he stands to capture.
To deny this possibility is to make an implicit assumption of
the validity of interpersonal comparisons of utility. In order to
justify government action on utility grounds in this case, one has
to assume either that all one-hundred people are identical, as far
as utility is concerned, or, at the very least, that the benefits
derived by the ninety-nine outweigh the psychic income losses of
the one malcontent. In fact, the assumption of interpersonal utility
comparison is not merely implicit in the thinking of mainstream
economists. Samuelson, for example, speaks of a “social
welfare function that renders interpersonal judgements,” 40 and
then proceeds to draw an indifference-curve map encompassing
the utilities of two or more different people. 41
This procedure is scientifically invalid, however, as there are
no units with which to measure or compare happiness or utility.
We may, in ordinary discourse, say that one child likes pickles
more than another and that therefore, should any temporary
household shortage arise, the “pickle lover” should get first
crack. But in so speaking we do not have in mind any units of
happiness. We do not imagine that one child loves pickles to a
degree of, let us say, 48.2 happiness units, the other child only
40Samuelson, “Diagrammatic Exposition of a Theory of Public Expenditure,”
p. 351.
41Ibid., p. 352.