The Privatization of Roads and Highways - Ludwig von Mises Institute

Road Privatization: Rejoinder to Mohring 359
author writes, there is no such thing as market failure, and
“externalities” 11 of the sort mentioned by Mohring are but an
example of illogical analysis.
The main reason, in this case, that Mohring’s charge against
free enterprise fails is that there simply is no “externality.”
Rather, there is an “internality,” which he does not recognize as
such. Road users, under present, socialistic, 12 institutional
arrangements, need not take into account the extra waiting time
they impose on other motorists because they are not charged a
price that incorporates this imposition. Rather, the price they face
is precisely the same whether at peak-load highway use times
(e.g., rush hours) or at any other time of the day. Typically, this
price is zero. In the case of positive prices, as for some limitedaccess
highways, tunnels and bridges, it still does not vary at all
in response to congestion. 13
(Cheltenham, U.K.: Edward Elgar Publishing, 1997), pp. 111–72; reprinted
in Journal des Economistes et des Etudes Humaines 6, no. 1 (March 1995): 43–89;
idem, “Toward a Reconstruction of Utility and Welfare Economics,” in The
Logic of Action: Method, Money and the Austrian School I; Ludwig von Mises,
Human Action, 3rd ed. (Chicago: Regnery, 1966).
11Technically speaking, “externalities” are costs (or benefits, which we
herein ignore) to third parties based on trades in the market. These fall into
two categories: physical, on the one hand, and nonphysical or pecuniary, on
the other. For the Austrian, a physical negative externality such as smoke
pollution is no such thing; rather, it is a trespass of wayward smoke particles
onto the lungs, lawns and other property of third parties. The reason
this occurs has nothing to do with “market failure.” Rather, it is the failure
of government to uphold private property rights. As to the nonphysical or
pecuniary, such as where A opens up a store across the street from B and
competes away from him some of the latter’s customers, this, too, is not a
market “failure” but rather a paradigm case of the workings of free market
and competition.
12Walter Block, “Road Socialism.” International Journal of Value-Based
Management 9 (1996): 195–207.
13Indeed, as we have seen (text accompanying footnote 2, above), there
is a pricing perversity, insofar as people who utilize roadways during
high demand times actually pay less; thus, they are encouraged by the