The Privatization of Roads and Highways - Ludwig von Mises Institute

144 The Privatization of Roads and Highways
Another problem with Olson’s hypothesis is that it ignores
the role of the entrepreneur. 61 To be sure, it is difficult to rouse
large numbers of individuals for collective action. And it is difficult
to convince people to contribute to the production of any
good whose benefits they will receive whether they contribute or
not. The entrepreneur is not faced with this problem, however. If
the entrepreneur sees an opportunity for profit, he seizes it, presenting
a fait accompli to the consumers. In the case of a “public
good,” of course, the businessman will first have to take steps to
ensure that there will be sufficient funds forthcoming to defray
expenses and leave a profit. Olson argues that, in the case of public
goods, if one person in a group consumes the service, then it
cannot feasibly be withheld from others. The entrepreneur will
strive to deal with this challenge by lowering the costs of exclusion
of nonpayers to the point at which potential revenues warrant
investment. The feasibility or unfeasibility of exclusion is not
predetermined, but rather a function of market operation. If hitherto
government-monopolized markets were suddenly opened
to the domain of the entrepreneur, the number of goods and services
to which Olson’s definition applies would be sharply
reduced.
Indeed, the key to excludability may be as cheap as it is obvious.
We have seen how a simple announcement of discontinuance
of protection for noncontributors might work in the case of
defense. Fire protection would probably fall into the same mold.
Let just one house burn down, with the private fire department
and its apparatus on the scene but refusing to quench the
flames—all because the owner not only did not keep the company
on retainer, but also refused to meet a “special, emergency
price”—and let this event be widely reported by the media, and
fire protection would probably cease, from that moment on, to be
an example of Olson’s public goods.
61 For an excellent exegesis of the importance of the entrepreneur, see
Israel Kirzner, Competition and Entrepreneurship (Chicago: University of
Chicago Press, 1973).