The Privatization of Roads and Highways - Ludwig von Mises Institute

368 The Privatization of Roads and Highways
land for $50,000, or $10,000, or any other such figure, and is only
“jacking up” his price to “unrealistic” levels in order to “take
advantage” of the desperation on the demand side.
PERFECT COMPETITION
The next difficulty in which Mohring enmeshes himself is
that he maintains that roads cannot be privatized because they
do not meet the very stringent and irrelevant conditions of so
called “perfect” competition: “Expressways are so large and have
so much capacity that, in selling their services, private owners
would not be subject to the sorts of market pressures that firms
experience in the competitive markets of economic texts.” 27
And again:
In the markets that populate economics texts, Adam Smith’s
invisible hand maximizes social benefits without government
intervention. Would the many virtues of emulating textbookcompetitive
markets in pricing and developing roads make it
desirable to turn over the duties of the Federal Highway
Administration and state departments of transportation to free
enterprise? Sadly [sic] to say, before such a step becomes optimal,
problems must be solved that result from differences
between the technology of roads and that which justifies laissez
faire in dealing with the firms that populate textbook competitive
markets. 28
There is so much wrong with this contention it is difficult to
know where to start in refuting it. Beginning with a reductio ad
absurdum might not be a bad way to address this claim. “Perfect
competition” requires, among other things, completely homogeneous
goods or services, thousands (or millions, depending upon
which neoclassical economist is holding forth) of buyers and sellers,
total complete and full information about every aspect of the
27 Mohring, “Congested Roads,“ p. 147.
28 Ibid., p. 158.