The Privatization of Roads and Highways - Ludwig von Mises Institute

Who is Responsible for Traffic Deaths? 333
cannot be predicted by non-market participants, such as economists.
Despite the foregoing considerations, however, even if no
exact answers can be gainsaid, it might be possible to pierce the
fog to some small degree and attain some measure of information,
some ballpark estimates.
For one thing, it is exceedingly probable that roads markets
will outperform bureaucrats; they do so, after all, in every area of
endeavor for which there are comparable statistics. 3 In fact, there
is even a “two to one” rule that emanates from this literature: 4 for
every dollar spent by private enterprise to shift a ton of garbage,
pave a given distance of road, or offer a given amount of fire protection,
doing such a job through the public sector will cost two
3Says William L. Megginson and Jeffrey M. Netter, “From State to Market:
A Survey of Empirical Studies on Privatization,” Journal of Economic Literature
39 (June 2001): 380: “Research now supports the proposition that privately
owned firms are more efficient and more profitable than otherwise
comparable state-owned firms.”
4According to E.S. Savas, How to Shrink Government: Privatizing the Public
Sector (Chatham, N.J.: Chatham House Publishers, 1982), p. 93: “the cost of
municipal (solid waste collection) service (is from) 61 to 71 percent greater
than the cost . . . of contract collection.” Stated Steve H. Hanke, “Money and
the Rule of Law in Ecuador,” Speech given in Quito, Ecuador (October
2003): “The public cost incurred in providing a given quantity and quality
of output is about twice as great as private provision. This result occurs
with such frequency that it has given rise to a rule-of-thumb: ‘the bureaucratic
rule of two’.” For more on this, see Steve H. Hanke, “Privatization,”
in James Eatwell, Murray Milgate and Peter Newman, eds., The New Palgrave:
A Dictionary of Economics (London: Macmillan Press, 1987), pp.
976–77. For further cost comparisons, all to the denigration of the public
sector, see James T. Bennett, Better Government at Half the Price (Boston: Gree
Hill Publishing, 1980); Thomas erding, ed., Budgets vs. Bureaucrats: The
Sources of Government Growth (Durham, N.C.: Duke University Press, 1977);
James T. Bennett and Thomas DiLorenzo, “On Weather Forecasting,” Journal
of Labor Research (1983); idem, Unfair Competition: The Profits of Non-Profits
(New York: Hamilton Press, 1989); Robert Poole, Cutting Back City Hall
(New York: Reason Press, 1976); E.S. Savas, “Refuse Collection,” Journal of
Urban Analysis (1979).