Re: Privatizing the Roads [Eric]

I fail to really see the benefit of privatizing existing highways.

The problem is the question of a monopoly. A road gets put in a certain place for a reason, serving the people who need the road to get from point A to point B. Once a road is laid down, there's an inherent monopoly only one road could be going through that particular spot, and nobody could ever truly compete with it by offering the same product. Someone else could put a road nearby, but not in that same exact location.

Privatization of highways doesn't really solve that; it just replaces a public monopoly with a private monopoly. And since the whole point of private ownership is that superior products will result through competition, how is any problem actually solved here?

And if competition is to be introduced, offering a similar road nearby, the barriers to entry are enormous. Competition would have to come through a rival company building a whole separate road nearby, first buying up and developing land that could have provided housing, businesses, green space, etc. It would take years to raise the business capital, then take care of all that overhead and construct the separate road, and finally open for business. That sort of situation would hardly put much competitive pressure on a current monopoly holder.

On the other hand, if we were to experiment with road privatization, I know exactly where I'd try it. New Jersey has two separate toll roads that each run the length of the state from north to south, the Garden State Parkway and the New Jersey Turnpike. They're fairly close to each other, and would be redundant if not for the fact that the state's traffic needs are so severe.

It might not be a bad idea to quasi-privatize the two highways via indefinite leases, with the condition that the two roads can never come back under the same ownership any attempt to do so would result in the forfeiture of ownership back to the state government. That way, two companies would have to maintain their roads and offer decent tolls in order to attract drivers to come to their highway as opposed to the other. And since these two separate roads already exist as it is, the barriers to entry don't apply.

But New Jersey is more of a special case, so specific that it practically disproves the general argument for private roads by demonstrating just what the necessary conditions would be.

On the whole, the case for any grand benefit coming from privatization doesn't really withstand tough scrutiny. It's more just a way for state governments facing tight budgets to unload an expense and get a decent cash windfall from the initial sale.

At the end of the day, a public monopoly on the roads is preferable. If people get really angry about a bad road in case of a bridge collapse, for example they can vote for candidates who promise road improvements. But the private monopoly wouldn't have that safety mechanism, and the owners would be unlikely to face any true competition, either.