The Privatization of Roads and Highways - Ludwig von Mises Institute

Public Goods and Externalities: The Case of Roads 131
As a statement of the measurement task, Smerk’s is par for
the course. It is really no more than an exhortation that measurement
be undertaken, and a specification of some of the facets to
be measured. But it does not help us to overcome any of the problems
involved. Indeed, it underscores them. How, for example,
would we approach a calculation of the value of increasing
“overall freedom of movement”? Even if we choose to ignore the
lack of a unit of pleasure and the problem of interpersonal comparisons
of utility, the task is insurmountable. Nor is his specific
suggestion for measuring the benefits of a belt highway in terms
of “the resulting increase in sales” 46 of much use. Smerk seems to
be saying that we can measure the external benefits of a belt highway
by noting the sales of the relevant stores before and after its
construction and simply attribute the difference to the road. But
there is no constancy in human affairs, and other factors may
well have intervened between the first measurement and the second.
Tastes and fashions, consumer knowledge concerning alternatives,
the prices of substitutes and complements, zoning laws,
the alacrity with which laws are enforced—all of these might
have changed in the interim. Thus, to ascribe all measured
change to the belt highway would be illegitimate. Moreover, the
use of econometric techniques, which are commonly employed
for purposes of this sort, are unsuitable. 47 Perhaps their most
important drawback is that they rely on the facile assumption
that discrete, unique, nonrepeatable events (e.g., a presidential
election, or the economic effects of opening a road at a particular
time and place) can be abstracted from to produce a series of random
events (i.e., all presidential elections, all road openings).
This assumption is necessary for econometric equations; but if
46Ibid., p. 241.
47See Bruno Leoni and Eugenio Frola, “On Mathematical Thinking in
Economics,” Journal of Libertarian Studies 1, no. 2 (Spring, 1977): 101–10;
Mises, Human Action, pp. 107–15, 350–52; and Rothbard, Man, Economy,
and State, pp. 277–80.