The Privatization of Roads and Highways - Ludwig von Mises Institute

246 The Privatization of Roads and Highways
efforts must be undertaken in terms of coordinating staggered
lights and green light time.
Historical precedents can be found on each side of this debate
as well. Ancient stock companies typically owned long, thin thoroughfares;
this, too, was the practice of private inter-city railroads.
But equally free-enterprise ventures such as Disneyland,
Knott’s Berry Farm, Universal Studios, etc., and hundreds of
smaller shopping malls have organized themselves into the
neighborhood, or two-dimensional format.
Given that there is in effect a “draw” 11 between these two
models, I opt for the neighborhood format, if only because it is
more modern. This indicates that the technology of private development
has migrated from one to two dimensions. Since we are
privatizing in the modern era, the latter is more appropriate. If
this exercise were being carried out a century or two ago, the
alternative option might well have been picked.
But why choose between having your cake and eating it?
Why not have both? That is, were all the roadways in Manhattan
owned by a single firm, all transactions costs vanish in one fell
swoop. Well, not exactly. This is somewhat of an exaggeration, as
negotiations would still be necessary vis à vis all the tunnels and
bridges connecting this borough with its three neighbors, as well
as New Jersey.
TRANSACTIONS COSTS
It is impossible to reduce such negotiation problems to zero,
for wherever automobiles may travel, there will always be connections
between one road owner and another under any system,
free enterprise or socialistic. 12 This certainly applies under
11Not of the sort that characterized the heavyweight title fight between
Evander Holyfield and Lennox Lewis.
12The classical statement of the relationship between transactions costs
and the nature of the firm is Ronald Coase, “The Nature of the Firm,”
Economica 4 (November 1937): 386–406; see also Ronald Coase, “The