The Privatization of Roads and Highways - Ludwig von Mises Institute

286 The Privatization of Roads and Highways
Externalities. At present, the city government manages all
roads within its jurisdiction. As such, it can be presumed, at least
at the outset, that the quality of the job it does would be homogeneous
throughout. If so, then no geographical areas would be
privileged by spillover effects on property values vis-à-vis any
other. That is, it would not be the case that property values in one
neighborhood would rise more than those in others, due to the
efforts of the street czar.
All would be different, it might be contended, under private
ownership of streets, particularly if there were dozens, not to say
hundreds, of separate road firms in a given city, with the resultant
heterogeneity of management skills thereby implied. Now,
property values would depend upon the varying, possibly very
much so, skills of abutting road owners.
It cannot be denied that this is a transition problem in that
once the firms were set up and operating, the values of real estate
holding adjacent to the specific roads would tend to be capitalized
by the quality of the given management. If road A were
managed well, for example, then the property surrounding it
would rise in value. Thus, a new buyer would no longer be
impacted, as to land values, by the management skills of other
firms.
The objection then, to the transition period, but not to the
underlying idea of privatized roads, is that during this interim
land values would be haphazardly impacted, raising some here,
reducing others there, and leaving them untouched in yet other
places, with no rhyme or reason. This would play havoc with
rational economic planning, as there would be no way for entrepreneurs
to act in a coherent manner in the face of this hyperuncertainty.
6 I refuse to employ the more commonly used expression “rent seeking.”
Why use a perfectly good concept, rent, to describe something that is at bottom
evil and vicious? Why not call a spade a spade? See on this
http://www.mises.org/fullarticle.asp?control=385&month=17&title=Watc
h+ Your+Language&id=19.