The Privatization of Roads and Highways - Ludwig von Mises Institute

Homesteading City Streets:
An Exercise in Managerial Theory 245
third to Harlem, etc. (the two-dimensional format.) In terms of
road management, each has advantages and disadvantages.
The main drawback of the one-dimensional model is the dispute
over green light time on traffic signals. If one firm owns 3rd
Avenue, and another 23rd Street, and they cross at right angles,
each will naturally wish to have the green light for as much time
as possible, and the red for as little. In that way, traffic can flow
more easily on its own property, and its revenues be enhanced. 10
How, then, to settle this potential dispute? Simple. Each will bid
against the other for the proportion of red and green light time.
It is akin to the situation in which two ex-partners find themselves
upon dissolution of the company: who keeps the firm?
And the answer is, whichever of them is willing to pay more for
the other’s half. Presumably, the north-south artery, which in
Manhattan usually serves more customers, will be able to outbid
the east-west thoroughfare for the lion’s share of the green light
time, based upon the derived demand for these services emanating
from the final consumer.
Another difficulty in this scenario will be the arrangement of
staggered traffic lights: those timed in such a manner so that
motorists can move at a steady pace (e.g., 25 mph) without being
forced to stop and wait for a red light. This will call for no mean
talent of negotiation if each and every street and avenue comes
under the management of a different firm.
These problems will be as nothing under two-dimensional
ownership. Staggered lights and allocation of green light time are
all arranged under the aegis of one firm, so that by definition no
negotiation or transaction costs need be undertaken. Instead, the
practical difficulties arise when the streets of one neighborhood
connect with those of another. What to do, for example, when Turtle
Bay gives over to the East Village? Here, similar negotiating
10 We also eschew discussion of the monopoly problem: where the road
owner jacks up the price so far as to in effect capture the property values of
all adjacent property. For a discussion of this issue, see Block, “Free Market
Transportation: Denationalizing the Roads.”