The Privatization of Roads and Highways - Ludwig von Mises Institute

Free-Market Transportation: Denationalizing the Roads 23
competitors, he underwrites and supports Glumph’s original
decisions. If Glumph loses too many customers, he will be forced
to change his rules (or other practices) or face bankruptcy. In this
way the forces of the market will be unleashed to do their share
in aiding the discovery process. We may never reach the all-perfect
set of rules that maximizes the attainment of all conceivable
goals, but the tendency toward this end will always operate.
2. If a Free Market in Roads is Allowed and Bankruptcies Occur,
What will be Done about the Havoc Created for the People Dependent
upon Them?
Bankrupt road companies may well result from the operations
of the market. There are insolvencies in every area of the
economy, and it would be unlikely for this curse to pass by the
road sector. Far from a calamity, however, bankruptcies are paradoxically
a sign of a healthy economy.
Bankruptcies have a function. Stemming from managerial
error in the face of changing circumstances, bankruptcies have
several beneficial effects. They may be a signal that consumers
can no longer achieve maximum benefit from a stretch of land
used as a highway; there may be an alternative use that is ranked
higher. Although the subject might never arise under public
stewardship, surely sometime in the past ten centuries there were
roads constructed which (from the vantage point of the present)
should not have been built; or, even if they were worth building
originally, have long since outlasted their usefulness. We want a
capacity in our system to acknowledge mistakes, and then act so
as to correct them. The system of public ownership is deficient, in
comparison, precisely because bankruptcy and conversion to a
more valuable use never exists as a serious alternative. The mistakes
are, rather, “frozen in concrete,” never to be changed.
Would we really want to apply the present, nonbankruptcy
system now prevailing in government road management to any
other industry? Would it be more efficient to maintain every single
grocery store, once built, forevermore? Of course not. It is part
of the health of the grocery industry that stores no longer needed
are allowed to pass on, making room for those in greater