No Free Rides: How Much Would it Cost if All Roads Were Private?

For a number of years, there’s been a drumbeat of support for the free market, armed with the maxim that anything the public sector can do, the free market can do better. This tattoo continues even though every first-year Econ textbook has a section on market failures illustrating where free market solutions lead to an inefficient outcome. And one of those market failures is the underproduction of public goods in a pure market economic system.

Public goods have widespread benefits and concentrated costs: things like roads, bridges, ports, national defense, education, etc. These goods have non-rival consumption and are non-exclusive. This means that when one person accesses the good it is still available for another consumer, and that even those who do not access the good still benefit from its existence. This leads to the free rider problem, where those who benefit from a good don’t have to pay for it. Thus, businesses can’t maximize profit, and don’t produce many public goods.

Yet this “free market above all” conventional wisdom has lead to the privatization of many public goods including education, roads, even war — but is the free market always the most efficient and inexpensive means of production? Using roads as an example –specifically, a toll road in Orange County, California — we can examine just how much private roads would cost us. Highway 73 cuts through some of the most beautiful coastal hillsides in Southern California.

Construction on the first three miles of the highway began in the 1970s and was completed in 1978. It was a small extension of a public freeway known as the Corona del Mar Freeway. The last 12 miles was bitterly opposed by environmentalists and other locals who dreaded the road and the development that would certainly follow. It took nearly two decades of court battles and demonstrations before the road was completed. The promise was that this road would be a solution to the congestion along the 5 freeway and that the financing would be entirely private. When the road opened, the highest cash toll for an automobile was $2.00, now it is $5.50 (cash at peak times) to drive 12 miles. That is more that 45 cents per mile.

If all of the roads were private and cost 45 cents per mile, and if the average person drove 12,000 miles per year, that would amount to $5,400 per year paid in tolls. Just for the privilege of driving on the roads. Now think of the other government provided public goods we take for granted and imagine how much we would pay for private fire and police protection, border control, national defense, education, etc. What about the agencies that protect our health and safety like the FDA, FAA, EPA? For most people, government provided public goods are the cheapest, smartest way to go.

Teresa Laughlin is a professor of economics at Palomar College

Image: HCL

3 thoughts on “No Free Rides: How Much Would it Cost if All Roads Were Private?

  1. There’s so much ridiculous free market fundamentalism in this country today, much of it funded by powerful interests that want to further privatize the commonwealth. Thanks for countering their absurdity with some much needed reason.

  2. this is one of the lamest critiques on the free market i’ve read. what’s even more sad is that you’re actually a professor of economics, and yet you know very little about what constitutes a free market.
    “It took nearly two decades of court battles and demonstrations before the road was completed.”
    gee! don’t suppose all those court fees played into how much people are paying to use the toll way, do ya? in a truly free market, you’re free to do with your property what you like. you don’t have to spend twenty years tied up in ridiculous litigation trying to justify building something that benefits society.
    and even assuming the owners of private roads could charge as much as (or even more than) 45 cents/mile, you can’t assume people will ultimately pay over $5000/yr to drive on private roads. if anything, people would be more conscientious about driving. they’d look for alternative means of getting from point a to point b, like walking or using mass transit systems. this would, in turn, cut down on carbon emissions much more so than any plan i’ve ever seen government come up with.
    further, the 45 cent rate, as you mentioned was the rate during peak times. charging such a rate has the added benefit of cutting down on traffic congestion. once again, this also has the added benefit of reducing carbon emissions, not just in having fews cars on the road, but the cars that are on the road are spending much less time in bumper to bumper traffic.
    as for non-peak times, it’s in the best interest of the owners of private roads to keep rates as low as possible, so as not to discourage people from driving altogether. the cost of driving 5.2 miles on hwy 73 entering on the 405 and taking the bonita canyon exit is only 80 cents. that’s only 15 cents/mile.
    the bottom line is we (tax-payers) spend tens of billions dollars every year, not just in money going to the department of transportation, but also to fund other government institutions which encourage us to drive less. with more toll roads we could easily cut down drastically on the amount of money we spend funding these government agencies while at the same time, greatly reducing the amount of air pollution we produce.

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