The Privatization of Roads and Highways - Ludwig von Mises Institute

Road Privatization: Rejoinder to Mohring 373
pegged below equilibrium levels. In the case of roadways, the
prices are set by government exceedingly below that which
would prevail in the evenly rotating economy of free enterprise;
in fact, they are zero! It is no wonder at all that at such low, nay,
non-existent prices, demand should upon more than one occasion
outstrip supply.
Again Mohring repeats his misleading notion that “travelers
usually take into account the congestion they will encounter but
not the congestion they will cause.” 39 This is true, but only in the
absence of market prices, which, in the words of Adam Smith,
lead motorists “as if by an invisible hand” to take the latter phenomenon
into account.
What are the specific difficulties that Mohring sees with road
privatization? They are as follows:
1. Indivisibilities and economies of scale.
It cannot be denied that there are indeed indivisibilities and
economies of scale with regard to road provision. But the same
applies to the manufacture and supply of virtually all other
goods and services, apart, of course, from those that satisfy the
very strict requirements of perfect competition, a null set. In
other words, indivisibilities and economies of scale serve not
only as an insuperable barrier, for Mohring, for road privatization,
but, also, if he is logically consistent, which he is not, for
everything else under the sun as well.
States our author: “Unregulated road entrepreneurs could
not generally be relied on to set marginal cost prices.” 40 The obvious
rejoinder to this is that neither could anyone else be relied
upon to do this either (apart from imaginary firms in the nevernever
land of perfect competition).
39Ibid. 40Ibid., p. 159