The Privatization of Roads and Highways - Ludwig von Mises Institute

Free-Market Transportation: Denationalizing the Roads 31
ways could not very well be supplied on a competitive basis,
hence they are provided by the various levels of government.” 19
Economists, however, are willing to expound, at great length,
upon the need for the conditions of perfect competition, if efficiency
is to prevail in the private sector. One of the main reasons
the idea of private enterprise for roads has not been accepted is
the claim that perfect competition cannot exist in this sphere.
A typical example of this kind of thinking is that of Haveman.
Says he:
A number of conditions must be met if the private sector of the
economy—the market system—is to function efficiently.
Indeed, these conditions are essential if the private sector is to
perform in the public interest. . . . [I]t is the absence of these
conditions which often gives rise to demands for public sector
[government] action. 20
These conditions of perfect competition are widely known:
numerous buyers and sellers, so that no one of them is big
enough to “affect price”; a homogeneous good; and perfect information.
One problem with the strict requirement that an industry
meets these conditions, or else be consigned to government operation,
is that there is virtually no industry in a real-life economy
that would remain in the private sector! Almost every industry
would have to be nationalized, were the implicit program of
Haveman followed. This is easy to see once we realize how truly
restrictive are these conditions. The homogeneity requirement,
by itself, would be enough to bar most goods and services in a
modern, complex economy. Except for thumb tacks, rubber
bands, paper clips, and several others of this kind, there are
19George M. Smerk, Urban Transportation: The Federal Role (Bloomington:
Indiana University Press, 1965), p. 228.
20Robert Haveman, The Economics of the Public Sector (New York: John
Wiley and Sons, 1970), p. 23. For a telling criticism of the “control over
price” confusion, see Murray N. Rothbard, Power and Market (Menlo Park,
Calif.: Institute for Humane Studies, 1970), pp. 87–90.