The Privatization of Roads and Highways - Ludwig von Mises Institute

Public Goods and Externalities: The Case of Roads 129
government intervention in “public goods” production will
unambiguously lead to an increase in welfare.
MEASURING THE UNMEASURABLE
In order to avoid these difficulties, the neighborhood effects
economists have attempted to measure externalities. Large numbers
of impressive statistics have not been forthcoming however.
Rather, the work of these economists has been sort of a “metameasurement,”
a prolegomenon to any future measurement;
benefit measures have been developed and discussed, but no one
has, as yet, offered any definite findings which purport to gauge
external benefits received with any degree of exactitude.
Mohring, in a typical statement, writes: “the benefit measures
developed in this paper ignore externalities—plus or minus,
pecuniary or technological. My basic excuse for this shortcoming
is the conventional one: the data required to place dollar values
on externalities are lacking.” 43
There is indeed a lack of data placing dollar values on externalities.
The problem would appear to be, judging from the
above quote, a mere accident: economists have, for some (implicitly)
unimportant reason, not yet begun the actual measuring.
But in this age of statistics, this is indeed puzzling. Surely a few
economists should have taken time out to measure such important
data.
Actually, of course, the problem is far more intractable. What
is being proposed by those who would attempt to measure the
value of externalities is simply the measure of utility. But as we
have seen, such an undertaking is impossible and hence doomed
to failure. Utility is a subjective phenomenon, rooted in individual
preference. There are no units with which to measure utility,
a fact that appears to be no more than a slight annoyance to those
who would measure it.
43 Mohring, “Urban Highway Investments,” p. 231.