Quick Roundup 151

Wednesday, February 14, 2007

How Not to Promote Capitalism, Part 3002

An article at TCS Daily attempts to defend the idea of congestion pricing (i.e., the use of new technology to make government-owned highways into toll roads that can charge variable rates). As an advocate of laissez-faire capitalism, I would certainly have no problems with a private company setting up its own method of charging its customers. After all, in a truly free economy, an owner may do with his business as he sees fit, including charging rates so exorbitant or maintaining his property so poorly that he goes out of business.

But what I do have a problem with is alleged defenders of capitalism who concede not just the moral premise of socialism, but leave popular myths about capitalism completely unchallenged, as Joseph Giglio does. (And for bonus points, he calls a Texas government agency a "corporate body", further obliterating the distinction between government and industry.)

The advent of Electronic Toll Collection technology changed all this. Now we can charge motorists for using roadways without forcing them to stop at toll-booths, or even slow down. Just as consumers are billed for water, electric power, cooking gas, and other essential utilities, motorists pay according to how many miles they travel, how large a vehicle they're driving, how much air pollution they generate, and whether they're subject to certain physical or economic disadvantages that entitle them to special discounts. This can be especially important for commercial vehicles where time saved translates into fewer operating costs. And let's remember that the main purpose of surface transportation is to facilitate and enhance economic activity. [Except for the ability of the owners to do with their own property as they see fit? --ed]


Some corporate [sic] bodies like the Texas Department of Transportation have already started to work out a few of the most obvious kinks. That is, without any competition to hold down prices, the natural instinct of the enterprise's private owners would be to charge motorists the highest possible rates while providing the least amount of service.

So, the answer is to introduce a competing agenda - namely, the one represented by the same state and local governments that are going to be getting the federal government's funding windfall. They're not interested in maximizing profits, but in winning votes by providing lots of service while keeping user charges as low as possible. .... [bold added]
Not only does this scheme take for granted that someone in the business of running a highway is there to serve the public rather than make a profit and would have no incentive to do a good job or to keep prices down, but it also makes the gullible assumption that politicians after votes and with guns in their hands will allow such a scheme to exist for very long. After all, don't oil companies "overcharge" the public they are meant to serve? Why not take this "windfall" and use it to "keep our highways 'free'"?

The case for people paying for their own transportation cannot be made in a moral vacuum. We should pay to drive on privately-owned and operated highways for exactly the same reason that we should not be taxed to support public highways: government interference in the economy is a violation of individual rights.

Until more people accept this idea, the motoring public will continue looking for "free" roads at the expense of others, and politicians like Hillary Clinton will continue getting away with destroying the profit motive for our most important industries in the name of those of us who depend on their profit-motivated drive to serve us.

Romney as Social Conservative

I recently commented on the fact that questions about Mitt Romney's religion, while relevant on one level, are distracting on another. This article, while focusing mainly on Romney's failings as a fiscal conservative, makes hims sound like the worst of both worlds.
After an unremarkable four-year term, we have seen what happens when a Republican governor refuses to take a no-new-taxes pledge, and then, not surprisingly, raises taxes (and morphs into a social conservative and runs full time for president instead of governing.) ...

Plenty has been written about Romney's conservative conversion on social issues, but you in the New Hampshire GOP have historically been more concerned with how a candidate's record affects your wallet than your bedroom. And on that score, Romney's candidacy should give you pause.
In other words, in Romney, we have yet another big-government, religious conservative running as a fiscal conservative. This man, rather than being the face of a party I can support, looks more and more like a poster-boy for why I cannot support the GOP.

North Korea's Criminal Enterprises

An article in the New York Sun ticks off a long list of illegal activities North Korea is involved in. This is hardly a surprise. What I find interesting is how much of what it does is enabled by our own government's improper activities.
  • For years, the North Korean state has been raking in money from the illicit, international sale of drugs, ranging from heroin, cocaine and methamphetamines....
  • The next North Korean racket to grab attention was the counterfeiting of U.S. currency.
  • In recent years, Kim's regime has been wallowing in profits on counterfeit cigarettes. A tobacco industry study in 2005 estimated the gross revenues from these sales to be $520 million to $720 million per year. (Cigarette smuggling is highly profitable because a pack costs just pennies to produce; most of the retail price is excise taxes.)
  • [I]n selling missiles and missile technology over the years to such places as Venezuela, Egypt, Libya, Pakistan, Syria and Iran, North Korea has by some educated guesses earned $1 billion or more.
In each case, our government is creating opportunities for North Korea either by wrongly interfering with the economy (e.g., illegal drugs, fiat currency, vice taxes) or by being derelict in its duty to protect American lives (e.g., leaving its arms sales to our enemies completely unchallenged).

-- CAV


Galileo Blogs said...

Your point about toll roads is a good one. Any investor in a privately-owned toll road who does not make explicit allowance for government interference with the operation of his road at some point in the future is a fool. Given that the right to property in America (or anywhere else) has been abandoned, the freedom to use one's property as one sees fit is provisional, constantly subject to government interference.

In the case of a toll road, this means that tolls and even ownership of the road are highly likely to be controlled by the state, sooner or later.

The issue of private roads reminds me of the New York City subway system. It was privately built, owned and operated from 1904 until 1940. But the politicians set the rates and refused to let the subway operators charge more than the nickel fare they had been charging for several decades.

Eventually, the private subway operators went bankrupt in 1940.

Today we pay $1.60 to ride the subway...

Of course, there is inflation, but a 32-fold increase in the nominal price of a subway ride represents an increase in real terms.

Every day I ride New York's subways, I marvel at the ingenuity of a system that can move so many people underground, without clogging street traffic. But the brilliant system I see is frozen in time, stuck in pre-World War II technology.

Imagine how much cheaper fares would be and how much better service would be if it had been privately owned and operated, without restrictions, all these years.

Gus Van Horn said...

Thank you for that interesting comment about the subway system.

You remind me of a point the article brings up somewhat obliquely, but which I don't have the time to discuss in any detail.

There is a parallel between the situation in the old West, when railroads were built before the market called for them by using government-granted land and the situation in many suburbs today, which were built along government-financed highways. Privatizing these roads may well result in situations where people are rudely awakened by the rates they find themselves paying.

In both cases, though, it is government intervention, not capitalism, that created such situations -- where infrastructure is in place before it is really economically feasible. And yet if we were to privatize the roads, capitalism would be blamed -- and this author has done nothing to point this out

Galileo Blogs said...

Your point about the subsidized roads is a good one. Suburban dwellers use roads for which they largely pay a marginal price of zero. Of course, they are paying for the roads through taxes, but so is everyone, so it is unlikely they are feeling the full cost of the roads in their tax bill.

When you look further and see the rural areas that benefit from state or federally-subsidized "free" (i.e., marginal price = zero) roads, people in those areas will experience a tremendous shock if they have to pay the full toll for their roads. If that happened, in all likelihood rural areas would see their rate of out-migration of people increase, and urban areas would see their rate of in-migration increase.

Of course, all of this could only happen if the political environment tolerated such a price adjustment. Imagine if we lived in a society where newspapers actually published articles by economists and historians that explained the adverse consequences of government-financed roads, and therefore provided guidance to the populace during the transition to private ownership...

That day will happen, and in some ways it already is, in piecemeal fashion. For instance, the debate over "congestion pricing" of city centers (which has already been implemented in London) is a step toward a fuller debate of the issue of privately-owned roads.

On a somewhat side note, my most enjoyable driving experiences have been over toll roads. One of my favorite roads in the whole world is the Chesapeake Bay Bridge Tunnel that connects Norfolk, Virginia, with the Delmarva Peninsula. That is an expensive-as-hell road (something like $10 if I remember correctly), but it is a true engineering marvel. The bridge actually goes under the water of the bay in two places. It travels under the sea-bed to emerge as another bridge. It does this as a military security measure since Norfolk is the headquarters of our Atlantic naval fleet. By submerging portions of the bridge, the design denies the enemy the opportunity to bottle-in our fleet by destroying the bridge.

My other favorite toll road is a road I traveled some time ago that traveled through Switzerland. It was quite expensive, but featured long tunnels and huge bridges so that it could maintain superhighway gradual turns and gentle inclines. It was a man-made arrow shot straight through the mountains. It is an engineering marvel.

I look forward to seeing more innovations like these two engineering marvels all around us, everyday, with private ownership of the roads.

Resident Egoist said...

"Today we pay $1.60 to ride the subway..."

Isn't it actually $2?

Galileo Blogs said...

If you buy a minimum of 10 rides on a MetroCard, you get a 20% discount from the single-ride rate of $2.00. Therefore, I assume most people only pay $1.60 a ride...

Gus Van Horn said...

I used the Chesapeake Bay Bridge-Tunnel to move from Connecticut to Virginia Beach back in my Navy days. Quite impressive indeed.

And, the next time I make it to New York, I'll know something about subway fares, making myself better able to afford the $15.00 hot dogs I saw being sold there on my last trip nearly a decade ago!

Inspector said...


I have to disagree on one thing: what suburbanites really want.

Just look at L.A.

People pay upwards of $500,000-1,000,000 for housing and spend hours upon hours sitting in traffic to enjoy their lifestyles. I doubt a few dollars in tolls would make even the slightest dent; quite to the contrary, by removing the socialist breadline that is traffic, I think people would be much more inclined to stay put.

I'd welcome paying the full cost and then some, if only there could be a functioning road system. And under private ownership, there would be!

Galileo Blogs said...

That's an interesting point, Inspector. Perhaps more of the businesses would actually locate in the suburbs, where the people live. Or, perhaps "telecommuting" would become more innovative. Imagine life-size 3-D images transmitted via super fiber-optic cable. Science-fiction type advances like this will occur with much greater frequency in a laissez-faire society. After all, electricity and all that has resulted from it would be pure science fiction to someone living in the early 1800s.

As for how and whether people would commute, it really becomes almost an exercise in science fiction speculation. So many variables will have changed if our society has advanced to the point culturally where private ownership of roads is taken for granted.

Still, it is an interesting area of speculation. I would contend that the "distortion" from nominally free public roads is so great in our economy that the (beneficial) impact of privately owned roads on how we live our lives would be huge.

One of the key points, which I mention, is that it would trigger tremendous innovation, so all aspects of commuting (or not) would most likely be radically different from what they are today. It is amazing just how passively people accept the nearly complete lack of innovation in road transportation in the past 50 years.


By the way, Gus, where do you get those $15 hot dogs? I bet they're really good! :-)

Gus Van Horn said...

Weird. I replied to Inspector's last and it never got posted. That's okay, though. I like Galileo's reply better.

On the $15 hot dog, I don't remember where I got it, but I bought in part so I could joke about how expensive hot dogs were in Manhattan. It was good, but it was so huge -- a foot-long with an absurd amount of trimmings -- that I could not finish it.

I guess the Big Apple got the last laugh.

Inspector said...


That's a good point. I've speculated elsewhere on just how much we really are losing by living in this welfare state. The wealth and technology that would result from full unregulated laissez-faire capitalism would likely blow all of our minds.

Flying cars, anyone?!? Oh, how I want my flying car!

But yeah, anyway, in the near term I and many others would gladly pay $5, $10, maybe even $15-20 or more in tolls so long as it meant no traffic jams whatsoever. Which is something that is only possible if the roads are owned by profit-seeking private owners rather than indifferent government bureaucrats.

So what I am saying is that there would be quite a market out there!