Leitmotif

Reason as the Leading Motive

Private Ownership of Roads

Posted by Jerry on February 11, 2008

I decided to make this comment into a post after all; that way, relevant comments can proceed under this post.

When we think of privatizing roads, the scenario is so far removed from anything we have witnessed in real life that we respond–almost instinctively–with concern… of uncertainty, anarchy, and unpredictability. Our ability to imagine the operations of a free society is not inhibited our by level of intelligence but by the strictures of thought that we–and the current philosophical system–have placed upon our minds; the concept of the government is so entrenched in our socio-political thinking that life without government produces a mental blank-out.

This is a good test of whether you hold your philosophy as a body of abstract, rationalistic principles or as a properly integrated system that you use in daily living, and which you can readily apply to concrete situations.

The effort required is much like shrugging off theism and stepping into a world without a god, which appears at first to be daunting, anarchic, amoral, uncertain, and even barbaric.

1) We just have to think about analogous situations that most closely resemble the operations of a free market; I submit that in a free society most people will not have to pay for practically any use of the roads. As analogous situations, think of your use of the Internet and the radio. The vast resources of the Internet are available to most of us for free. The Internet operates in such a way that there’s not only an abundance of voluntary content generators but also massive revenue generators: the revenue is generated by amazingly innovative methods that would be simply impossible were the Internet to be a government-regulated operation. The people who invest and wish to make money from the Internet are making their profits (provided they have been sensible in how they went about it), and those who simply wish to derive the benefits of using the Internet are doing it for FREE (like myself. :)) And note that the Internet is a globally free phenomena, at least in all the places where governments have not been foolish enough to interfere.

2) The radio is another similar example. Most of us do not pay for radio, and yet we derive the pleasurable and important benefits of it. Radio frequencies were only recently privatized in India; if our broadcast TV frequencies were also privatized likewise, then–as in America–we would even be enjoying high-quality broadcast programming for free on TV (however, since this is not the case, we have rampant cable thievery instead).

3) Who pays for all this? To a communist or socialist, it seems incomprehensible that such awesome benefits on the radio, television, and the Internet is being offered for free; to that kind of mindset, the limitation is not necessarily a low level of intelligence, but the accepted premise that man should not (indeed, cannot) be free to devise his own ways and means of living, trading, producing, and pursuing happiness.

4) In a society where roads are privatized–like radio air frequencies–I envision most roads to be of superior quality and mostly free for people to use: corporations and businesses that are situated alongside these roads will make it a point to have their access roads in good condition with ample parking space for customers to visit their stores and businesses.

5) Utility (water, electricity, telephone, etc.) and cable corporations will contract with road owners to gain access to establishments situated on their roads; they will pay the road owners a certain amount of money or percent of profits for laying their wires and pipes on top of or under these roads. The road owners, in turn, will ensure that these wires, pipes, cables, etc. are laid in place quickly, efficiently, and esthetically in order to maintain the high value of their property. The utility companies will pay the road owner a fee for access to residents, businesses, and the use of the owner’s property. This can be one of the many revenue models for private roads. (Objectivist blogger Qwertz made this point persuasively and at length in his post; I am indebted to him for this idea.)

6) Roads with all installed utilities and esthetic considerations will have high-property values, which would translate to high property rates for residents and businesses in that neighborhood and the surrounding area; property owners will be able to command higher prices for their property–either in rentals or in a sale. Thus, road ownership will be a big and thriving business, which means, more investors will be interested in ownership of roads and highways. This will invariably lead to increased competition, competitive rates, higher benefits and services on these roads, and a greater value for consumers, business owners, advertisers, restaurants, etc. The cost to the end user of these roads will be either very minimal and competitive or simply nothing at all.

7) I imagine monthly or annual subscription passes for the use of those few roads that are not free (perhaps, major expressways); and these passes could be highly subsidized by advertising, competition, rest-stop areas, or other perks that road owners might want to sell or include on their roads

8.) One of the best benefits of privatized roads (especially for India) would be the non-existence of public protests on the streets, processions, road blockages, and vandalism: corporations, businesses, and road owners would not want their private property to be clogged, their customers to have no access to their businesses, and their brandnames and reputation associated with such hooligans. Therefore, they will ensure and pay for strict security measures to enforce safety and brand value. Perhaps, these private corporations will threaten with the withdrawal of advertising revenue or legal suits if the operators of these roads become lapse in their duties to ensure safety and prevent road protests or blockages.

9) Finally, street hawking will become illegal only if the owner does not permit it or the vendor has violated certain parameters. I do not see why hawking will be extinguished entirely. I believe that some neighborhoods might wish to project a certain kind of charm to their area and thus encourage streetside vendors who are consistent with their neighborhood theme: for example, Chinatown, Little Italy, Indian Village, Little Mexico, Greek Town, etc., could be neighborhood themes that can attract tourism, business, night revellers, and much revenue. Therefore, street vendors could add to the charm and distinctness of such areas, and it could be entirely within the operations of a free society with privately owned roads.

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12 Responses to “Private Ownership of Roads”

  1. Mike N said

    Ergo:

    Great post! Examples of how a laissez-faire society would work are badly needed today since so many people seem unable to visualize such a thing. I think more people would be willing to try greater freedom if they can be shown it can and will work. As it is, most people get a steady diet of ‘laissez-faire is impossible’, ‘capitalism has failed’, ‘freedom doesn’t work’ and so on. We’ll be hearing more of this from our next president. The moral argument is a valuable tool too.

  2. rambodoc said

    Very, very interesting article.

  3. Very persuasive. First, you ask us to think out of the box. The examples of free radio and the Internet are excellent.

    Then you make a very convincing case as to how a private road enterprise would work. Electricity, gas, sewage and telecommunications rights-of-way are very valuable. It makes eminent sense that the providers of these services would pay for the provision and maintenance of roads.

    Incidentally, as I mentioned in response to the Qwertz posting, privately owned roads is the only way for utilities to avoid the alleged problems of monopoly. Any electric or gas utility operator would only need to contract with various road owners to supply service to his customers. There is no way for a single utility to develop a monopoly position over a wide geographic area if the roads — i.e., the rights of way — are privately owned.

    Thank you for your insightful post on a topic that bedevils advocates of laissez-faire.

  4. Akhil said

    Jerry,

    Thanks for the post. Very well thought out and convincing. Makes sense. Yeah, revenue streams from utility companies and advertisements in form of hoardings and screens would create an economically viable market for roads and may not require tolls apart from say expressways. Expressways, where traffic usually is thin and fast and in most cases don’t have properties alongside them, will most likely not generate adequate revenues in the way roads inside a city would from utilities and ads and thus may require additional sources of revenue. And users of expressways don’t mind paying tolls as it reduces travel time. Regular travellers of expressways could have passes and stuff and there could be rest and food stop areas, petrol stations and maybe shops to generate additional revenue as suggested by you.

    Apart from property values rising alongside good and well maintained roads, as private ownership of roads would develop a market for it, owners of roads would also have a vested interest in maintaining it as it would fetch them good resale value. There would be companies especially focussed on owning and operating them and listed on the capital markets. Your analogies of radio, internet and television are very apt. Privatisation of roads might lead to innovative methods of deriving revenue. Possibilities could be immense.

    Your point about hawkers in private roads too is well taken.

    Thanks for the post again, especially in light of the discussion we earlier had and for removing my doubts.

    Cheers
    akhil

  5. Flibbert said

    Great post.

    I do think that in a free society, initial development of roads would begin with pay-per-use arrangements, but as you’ve pointed out, the market would likely shift to where the use of roads would be “free.”

    I’ll add another analogy to your list of examples: Online billpay.

    I used to work in internet banking and financial institutions used to charge their customers to pay for the use of online bill pay features. What we discovered, though, is that users who do pay their bills online are better customers and, therefore, worth more. So, removing the fee gives an incentive to more customers, thereby paying for the feature. Many financial institutions now offer free online bill payment as a standard feature with their accounts even though they pay other companies to perform and maintain the service for them.

  6. Nikhil said

    Hi Jerry

    Another stimulating post. Great examples to back up ur claim. It would be so great to get rid of those ridiculous processions celebrating nothing on the road and creating an inconvenience to so many! But as usual I have a question…

    Now I understand that your point is the possibility and advantage of such a private system and you are not giving the exact model of working but simply stating an example. Yet, in the case of private ownership of roads, I’m interested in knowing how and why would a private owner build a road to, lets say, a small village. Assuming the village has no major industry or resource save a small workforce, and it does not lie en route to another major city how and why would a pvt player build a road here?

  7. K. M. said

    Nikhil,
    I have a couple of questions for you. Why would private individuals set up a small village far off from any city with no major resources? And if they do, why are they entitled to have someone build a road for them?

  8. Ergo said

    Nikhil,

    Assuming the following:

    Village is small and remotely located
    Has no major industry or resource
    Has a small worforce (but where they work is a question; perhaps, they are all private farmers who till their own land)
    The village does not lie on route to any major city (does this exlude other small towns and villages? Are they interconnected with each other?)

    My answer is, it would be a major tax burden to even have the government build some kind of superhighway to connect this remote village. Given your assumptions, the villagers in this case seem to be rather self-sufficient in their lifestyle: they are farmers or self-employed in some way; they are connected with other small villages and towns for trade; they already must have some kind of a road that connects them to a nearby big city–else, how did they get there in the first place? If indeed they have something substantial to offer to a big city, a new road can and will be of selfish/profitable interest to some private entrepreneur or group of private stakeholders.

  9. Nikhil Pawar said

    K. M.

    Well you see private individuals wont really “set up” a small village far off from a city, but in a country like India where villages well and truly outnumber the cities, this is almost a default situation. Most villages have been there since before cities sprung up.

    Of course the additional parameters I mentioned are just a one off case. Most do have some small industry and other means of livelihood.

    Jerry,
    I agree that it would be a tax burden (and is). I see your point that if they have a product, they will end up having a road. If they have nothing but a a few ppl willing to work somewhere, well these ppl will have to migrate to the cities. Seems reasonable. Thanks

  10. I really really believe in what you are saying. I Definitely believe that india needs this, partly because the government is so incompetent. Look at Indian Railways! It’s better suited to be a toilet.

    We need to team up and urge the Indian Government to Liberate the Economy. I dont know what to do besides scream! haha

    i wish to request an audience with the prime minister. I think he has leading the country to this libertarian direction, but he has yet to fully derail the indian government with all it’s impotence.

    India needs a free society and a fair court system that protects the freedoms of the people.

  11. Ergo said

    A new libertarian political party is not the solution to India’s woes; in fact, this is not even possible so long as the Constitution mandates Socialism as part of every party’s manifesto.

  12. […] some where you’ve never been shopping and you’ll see what i mean. Another reason for private roads. That guy isn’t even incentivized and his imagination is at […]

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