January 1998
Libertarian Solutions: Private highways: A solution whose time has come (again)?
EDITOR'S NOTE: How can Libertarianism solve America's problems? Each issue, LP News will showcase how "Libertarian Solutions" -- or interim steps in a libertarian direction -- can help improve our nation.
By Daniel Klein
Private ownership of "public" resources may be an idea whose time has come. There are proposals for the privatization of Grand Coulee Dam, Dulles airport, Conrail, and Amtrak. State and local governments are studying private urban transit, garbage collection, and prisons. If privatization maintains its momentum, we will have to consider a logical candidate: The roads.
The best way to understand the notion of private roads is to examine America's own era of private turnpikes. In 1821, there were over 4,000 miles of private roadway in the state of New York. Between 1792 and 1840, some 230 New England turnpike companies built and operated 3,800 miles of roads. It was private enterprise that really got the "show on the road" in America.
In early America, routes had not been beaten through the wilderness, and roads were sorely needed. People wanted to move westward, and commercial interests in the coastal cities sought to tap the trade of distant areas. State and local governments instituted feeble systems of mandatory labor and taxation to provide roads, but their failures were manifest.
Operated for profit
In the 1790s, the road business was opened up to private enterprises throughout New England and the mid-Atlantic region. Private turnpike companies constructed and operated their own roads. They were equity-financed and operated for profit. User payment was made at tollgates along the route. No government financial assistance was made, except inand in New Jersey and in Pennsylvania.Between 1795 and 1830, turnpike construction was brisk, crisscrossing the Northeast with private roads. During the same period, public construction virtually ceased. In New York between 1790 and 1821, for example, the state's expenditure of $622,000 on the construction of roads and bridges is dwarfed by the investment in similar private concerns: $11 million in turnpike companies and $850,000 in bridge companies. A mixed system of private and public roads emerged.
Not only did private enterprise boost road mileage in America, it greatly improved the qualities of the roads as well. As the leading transportation historian B. H. Meyer stated, "It is evident that the turnpike movement resulted in a very general betterment of roads."
Although the turnpikes were private, the government maintained tight control through heavy regulation. Most important were the limits on tollgates and the restrictions on the placement of tollgates. These regulations made turnpike profits practically nonexistent. It wasn't long before everyone knew that there was no money to be had by way of turnpike dividends.
Despite the poor direct returns that resulted from government interference, turnpikes still found enthusiastic support for the indirect benefits they conferred. Local merchants, farmers, and landowners bought turnpike stock because the turnpike would make their businesses and holdings more valuable through improved transportation.
During the mid-1800s, state governments brought the era of private roads to a close by gradually reclaiming control of roads, although a few private turnpikes survived into the 20th century.
Technological Advances
What lessons can we draw from America's experience with private roads? Clearly, with today's technology, road provision through private enterprise could be even more successful. Electronic metering devices could make stopping at tollbooths obsolete. In Hong Kong, Japan, and elsewhere, authorities are experimenting with tamper-proof electronic plates, the size of cassette tapes, which are placed on cars. The plates interact with equipment built into the road surface to register the driver's toll, which he pays through the mail. If this system is feasible, private enterprise could provide roads as easily as it does movie theaters.Think about recent advances in technology; personal computers are household items; supermarket cash registers now speak to us; ATMs handle our banking; and Blue Cross issues credit card-sized "Lifecards" that can contain the equivalent of 800 pages of medical information. Now think about the roads you drive on: How much improvement have you seen in the past 15 years? How much do you expect to see in the next 15? Nil, in both cases. The reason: Government control.
Private roads may sound far-fetched, but a familiarity with American history casts the idea in a different light. There was a period when private enterprise was able to provide such "public goods." Now, the idea of privatizing the roads is beginning to be taken seriously again. Even the federal government's National Research Council has held a conference on "Roles of Private Enterprise and Market Processes in the Financing and Provision of Road Services." The future may be closer than we think.
Reprinted with permission from Private Cures for Public Ills: The Promise of Privatization, published by the Foundation for Economic Education, 1996.
