Freeman

ARTICLE

Privatize Public Highways

Private Ownership of Highways Would Yield Improvements in Safety and Efficiency

FEBRUARY 01, 1997 by WALTER BLOCK, MICHELE S. CADIN

Michelle S. Cadin is a student, and Dr. Block a professor of economics, at the College of the Holy Cross in Worcester, Massachusetts.

Across the United States, more than four million roads, streets, and highways tie cities and states together and enable citizens to work, travel, and shop. Americans enjoy unprecedented freedom and convenience, as our whole economy is directly dependent upon this mobility. This makes the entire nation, in effect, one gigantic assembly line for the production and transport of goods.

Because of the importance of the U.S. transportation system, many believe that only the government can own and manage it. This is not the case. Privatization of the public highway system would provide economic efficiencies and other benefits.

Private ownership, which would include competitive roads owned by people and corporations that can charge tolls, would allow the incentive for profit to benefit consumers, as it does in other areas of our lives. We would see the results in increased safety, reduced traffic congestion, and, of course, tax savings.

The public highway system is a prime example of a public firm that is large in size, lax in management, and a costly burden to taxpayers. Public highways are suffering from problems of urban traffic congestion, poor maintenance, and high fatalities. The demands on road systems are continually changing in a society where in months a new shopping center, office complex, or residential area can appear.

According to the American Public Works Association, Americans spend more than two billion hours tied up in traffic on urban highways each year. The Federal Highway Administration (FHA) estimates that over the next 20 years travel on public highways will rise by two-thirds, adding even more strains to an already overburdened system. The FHA also estimates that over 234,500 miles of U.S. roads are in either poor or mediocre condition.

Every year, thousands of people lose their lives in highway accidents. Fatal crashes are variously attributed to vehicle speed, intoxication of the driver, lack of safety regulations, or mechanical failures. These are proximate causes, but government management and control are major factors as well. While there will always be some accidents, as long as customers wanted safety, private owners would compete to provide it. If a good safety record on a road attracted customers, it would be in the interest of owners to provide it.

Owners of airlines know the importance of safety and regular maintenance of their aircraft, for they face the consequences when safety fails. If the cause is believed to be the airline’s, customers choose another carrier. As a result, air transportation is extremely safe.

But today’s highway monopoly means that there is no monetary incentive for government to improve its safety record. People have to drive regardless of the safety of the road.

Traffic Congestion

Another major concern about the public highway system is the massive congestion in and around many of the urban areas during rush-hour periods. This not only leads to aggravation and waste of gas while idling in traffic but also constitutes an immense loss of time and productivity. According to Representative Thomas Petri, chairman in the 104th Congress of the House Surface Transportation Subcommittee, if each Federal Express and United Parcel Service driver encounters traffic delays for five minutes in a day, the cost mounts to $40 million over the course of a year. Multiplying this by all U.S. drivers gives some rough indicator of the cost to society.

The government has come up with ways to address the traffic problem, but none has worked. For example, the federal government has called for employers to stagger work hours for their employees so that the traffic coming into urban areas would be spread out more. In some states, special lanes for high-occupancy vehicles have been constructed at great expense. For many drivers, the inconvenience or impracticality of carpooling overrides the benefit of such a contrivance.

Owners of private highways would undoubtedly offer cheaper rates at off-peak times, thus providing a monetary incentive for staggered work hours. With today’s highways, governments, too, could employ such a procedure. But instead of charging more for peak road travelers, the state usually charges less. It is common to reduce the price for regular commuters who purchase tokens for 40 or more trips a month. These are precisely the peak-load users who add to the congestion.

Other solutions the government has come up with are one-way streets and limited turns in busy areas. While these are intended to cut down on traffic, the secondary effects are often the opposite. The restrictions may necessitate circuitous routes and drivers may end up driving more. This increases the amount of miles driven in certain areas within a constrained time period.

Under private ownership, the builder of a road would want to secure the highest profits with the least cost. The builder would consider the businesses and residents located near the highway. A system where the transportation owners worked cooperatively with industry and residents would encourage efficiency as well as profits for the road owner.

The owner of a private highway would need to satisfy the customer in order to make profits. The governmental public owner of the highway, the politician, is usually able to give the customer poor service and does not need to satisfy the voter in order to receive money. If the public enterprise is sued for negligence, the person in charge does not directly pay; all monies come out of general tax revenues. In the case of private ownership, the owner must pay. Thus there are much higher incentives for the private owner to provide good service.

Today it is difficult to imagine a private highway system because the government has owned almost all roads for most of the twentieth century. But in Anaheim, California, over 30,000 drivers are using the new 91 Express Lanes, a ten-mile automated toll road.

The 91 Express Lanes was developed, financed, and operated by the California Private Transportation Company (CPTC) in response to motorists’ frustration with the amount of traffic on the Riverside Freeway (route 91). The toll road was built without a dollar of state or federal funds. It is the world’s first fully automated toll road, it is the first example of congestion pricing in America, and is the first toll road to be privately financed in the United States in more than 50 years. We’re seeing a steady, upward trend both in the use of the Express Lanes and in growth of our customer base, says CPTC General Manager Greg Husizer.

Yes, private owners should be able to manage the highway system and provide the same level of efficiency as they are able to do in other aspects of our lives. With Express Lanes 91, we may see in microcosm the improvement that could be achieved with private ownership of highways.

ASSOCIATED ISSUE

February 1997

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