The Privatization of Roads and Highways - Ludwig von Mises Institute

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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.
32 The Privatization of Roads and Highways hardly any commodities which do not differ, even slightly, in the eyes of most consumers. Perfect information bars even the farm staples from inclusion in the rubric of perfect competition. This can be seen in a healthy, functioning, Chicago mercantile exchange. If there were full information available to all and sundry, there could be no such commodities market. Not “affecting price” also presents difficulties. No matter how small a part of the total market a single individual may be, he can always hold out for a price slightly higher than that commonly prevailing. Given a lack of perfect information, there will usually (but not always) be someone willing to purchase at the higher price. Therefore, the objection to private roads on the ground that they are inconsistent with perfect competition cannot be sustained. It is true that this industry could not maintain the rigid standards required for perfect competition, but neither can most. In pointing out that perfect competition cannot apply to roads, we have by no means conceded that competition between the various road owners would not be a vigorous, rivalrous process. On the contrary, were we to allow that perfect competition could apply to roads, we would then have to retract our claim that vigorous competition could also ensue. For perfect competition and competition in the ordinary sense of that word (implying rivalry, attempts to entice customers away from one another) are opposites, and inconsistent with each other. 21 In the perfectly competitive model, each seller can sell all he wants at the given market price. (This is the assumption that each perfect competitor faces a perfectly elastic demand curve.) A typical rendition of this point of view is furnished by Stonier and Hague: The shape of the average revenue curve [demand curve] of the individual firm will depend on conditions in the market in which the firm sells its product. Broadly speaking, the keener 21 Cf. Israel Kirzner, Competition and Entrepreneurship (Chicago: University of Chicago Press, 1973).
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3 Public Goods and Externalities: T
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Public Goods and Externalities: The
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154 The Privatization of Roads and
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Part II Applications
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6 Road Socialism * What are the bes
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Road Socialism 185 of the state app
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Road Socialism 187 It is in order t
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Road Socialism 189 indicates that v
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Road Socialism 191 vehicle inspecti
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Road Socialism 193 that “The domi
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Road Socialism 195 imaginative and
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Road Socialism 197 2. Perhaps the p
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Road Socialism 199 bouncer, to each
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7 Compromising the Uncompromisable:
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Compromising the Uncompromisable: S
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8 Roads and the Immigration Issue T
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Roads and the Immigration Issue 217
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9 The Motor Vehicle Bureau Newly ar
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The Motor Vehicle Bureau 225 In the
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10 Privatize Public Highways * Acro
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Privatize Public Highways 231 Thoma
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11 Homesteading City Streets: An Ex
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Homesteading City Streets: An Exerc
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13 Transition to Private Roads * Le
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Transition to Private Roads 281 pre
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Transition to Private Roads 283 Blo
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Transition to Private Roads 285 to
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Transition to Private Roads 287 But
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Transition to Private Roads 289 The
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Part IV Critiques
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15 Comment on “Roads, Bridges, Su
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16 Roads, Bridges, Sunlight, and Pr
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Roads, Bridges, Sunlight, and Priva
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17 Who is Responsible for Traffic D
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Who is Responsible for Traffic Deat
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20 Aiding and Abetting Road Sociali
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Aiding and Abetting Road Socialism
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Part V Conclusion
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APPENDIX I Annual U.S. Street & Hig
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Appendices 423 It cannot be denied
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