The Privatization of Roads and Highways - Ludwig von Mises Institute

Road Privatization: Rejoinder to Mohring 367
Second, this bespeaks a level of economic unsophistication
that is rather surprising, emanating as it does from a professor in
that field. For, surely the true costs are higher, far higher, when
government seizes property than when it purchases it; the costs
are only hidden in the former case. Let us suppose that a given
man would sell his land only for $100,000. The government
comes along and expropriates it, giving him $10,000 for him, the
figure that the bureaucrats compute as “fair market value.” For
Mohring, the “cost” of this land is only the $10,000 in out of
pocket expenses for the state. But the true cost, the alternative
cost, is the much higher figure of $100,000.
But what of the possible objection that this property owner
“really” values his holdings at, say, $50,000, and is “jacking up”
his price since someone wants to buy it for a road, and he can act
the part of the “holdout?” Even if this is true, Mohring’s calculations
are still amiss, albeit by not as much. In this scenario,
Mohring still counts the costs of this part of the road assemblage
at $10,000, whereas, by stipulation, the true figure is five times
that (not tenfold, as it was in the previous scenario). This is still a
whopping underestimate. But there is a more serious rejoinder to
this objection: such figures are necessarily hidden from outside
observers. The only person privy to these costs is the property
owner himself. The government, Mohring, the present author,
none of us knows the alternative or opportunity cost of this land
apart from its owner. All of these numbers are made up, suitable
for illustration purposes only. There is no warrant for saying that
the property owner is acting the part of the “holdout.” All we
outside observers know, all we can ever know, is that he
demands, say, $100,000 for his land at the present point in time.
We cannot know any such thing as that he would really sell his
trade, or eminent domain. (In Canada, this act is more accurately called
“expropriation.”) Yet, is there any real difference as far as I am concerned in
the two scenarios, one where he steals my wallet, outright, and the other
where he gives me something worth less to me than my possession? There
is not.