by Gennady Stolyarov II*
to Some Frequently Asked Questions on Road Privatization (Print Version)
Le Québécois Libre,
15, 2009, No 270.
I recently received a series of questions pertaining to my articles, "The
Necessity of Road Privatization" and "The
Mechanisms and Benefits of Road Privatization." I make my answers
available to the public, as I have heard the same questions frequently
posed to advocates of turning roads over to free-market competition.
Issue: Unavailability of Electronic Technology
Question: "You suggested that electronic tolling can be used for
private roads, but what if this technology is not available for some
countries? If the technology were not in place, would privatization
still be desirable?"
Answer: Road privatization is desirable no matter what the
technological level of the society adopting it. There are several
justifications for this:
1) In a private, competitive road market, the
requisite technologies for providing easy,
convenient access to roads for customers will
develop quickly, as entrepreneurs will be
motivated by profit to invest in them. After
all, if customers must spend a lot of time
waiting at toll booths to get on the road, they
will take their business elsewhere.
2) At any level of initial technology, it is
possible to have superior organizational and
logistical methods that maximize user
convenience. For instance, if we assume no
electronic technology whatsoever and physical
cash collection as the only feasible means of
obtaining payment, we can still conceive of
entrepreneurs having large numbers of toll
booths at each checkpoint to ensure that
customers can pay quickly and be on their way.
Alternatively, entrepreneurs can always charge
road users regular membership fees and issue
members identification papers that would be
checked anytime the user enters the road. It is
not always possible, of course, to predict the
specific form an organizational innovation will
take. However, tens of competing producers, each
working under the hard budget constraint of a
private enterprise, are much more likely to come
up with innovative, efficient solutions than a
monopoly producer with a soft budget constraint.
3) Historically, some of the first major roads
in the United States—the turnpikes of the late
18th and early 19th centuries—were privately
built and operated, in an era long before
today's advanced technology. The roads
functioned quite well for their time,
facilitating inter-state commerce and the
westward migration of large numbers of settlers.
Private roads have existed with much more
primitive technology than is available anywhere
today, and so there is no reason to suppose that
a given technological level is required for them
to be viable. Technology certainly improves
quality in this area, as in virtually all others,
but the laws of economics function in a society
of any level of advancement.
Issue: Different Ownership and Different Rules
Question: "If every road is owned by different people and
different rules are imposed, would it not be too confusing?"
Answer: Standardization of rules often happens to a significant
extent in private markets. For instance, railroads standardized many of
their practices in the 19th century by mutual agreement of private
railroad companies. In any business, it is useful and profitable to
enable the customers to rely on some common and well-known elements and
practices, and it is quite likely that many rules of the road will be
extremely similar. On the other hand, this similarity will not be of the
rigid, ossified sort that currently exists on government roads—where the
rules are uniform and immutable, irrespective of how well they actually
work in facilitating safe and efficient roadway use. Entrepreneurs would
be free to experiment with new rules and arrangements, and if consumers
do not like a particular arrangement, they would always be free to use a
competing road. Entrepreneurs will be aware of this and so will hesitate
to adopt measures that would be difficult for users to understand and to
follow. Roads that do things differently and continue to attract traffic
will likely need to prominently advertise the aspects that make them
unique, so that potential users are well aware of the peculiarities in
advance and in a concise, easy-to-understand manner. The best road
innovations will take hold among other entrepreneurs and will eventually
become part of a new set of evolving standards.
Issue: Private Road Monopolies
Question: "Can a road monopoly be allowed to charge exorbitantly
if there's no alternative to a place?"
Answer: It is extremely unlikely that any individual business
would be able to purchase all possible access routes to a
given place, as this would be extraordinarily expensive. If any
alternative route exists, and a non-coercive monopoly currently charges
exorbitant prices, this will be a strong signal for competitors to enter
the market, buy up land on the alternative route, build their own roads,
and charge lower prices than the former monopolist. If there is a single
provider of a road to a particular place, even the potential of
this kind of competition would keep such a provider charging reasonable
In the odd event that competition does not enter the field, people might
simply choose not to go to the place for which the only road requires an
exorbitant fee for its use. In this case, many individuals will come to
see the benefits of going to the place in question as being outweighed
by the costs, and so the place will cease to become popular, and the
road provider's revenue will diminish greatly. At that point, the road
provider will either need to lower its prices to attract more business
or go out of business entirely.
It is important to recognize that a road monopoly is precisely what
exists virtually everywhere in many countries today. This
monopoly, unlike the transitory monopolies that may sometimes occur on
the free market, is supported by law. The consequences of a coercive
monopoly in the provision of any good are easy to foresee and identify:
lower quality at a higher price. It is reasonable to believe that
taxpayers are already being charged exorbitantly for the use of
government roads today.
Stolyarov II is a science fiction novelist and philosophical
essayist, and is Editor-in-Chief of The Rational Argumentator.
He lives in Carson City, Nevada.