Thursday, July 24, 2014

Rediscovering the Road Less Traveled

It is no secret that most Americans want to spend part of their short time on this planet doing fun things in interesting places. That means they want to travel, and to do so safely, quickly, and, ultimately, efficiently. Unfortunately, getting around this great nation is becoming ever more dangerous, time consuming, expensive, and even unfair.

Transportation woes already accost Americans almost daily and more troubles loom on the horizon. The vast bulk of America’s transportation infrastructure -- the airports, bridges, canals, ports, roads, railroads, and tunnels that speed Americans to their vacation destinations and, more importantly, also allow them to trade with other Americans and the rest of the world -- is aging faster than the government can fix it. The federal highway trust fund is essentially bankrupt, kept temporarily afloat with legislative bandages while commute times and accident rates remain sky high and bridges collapse due to disrepair and poor management.

The best solution to the crisis is to privatize the nation’s transportation infrastructure, i.e., to sell (or lease) it to private companies. Done properly, privatization would make traveling the country safer, faster, more efficient, and fairer, much as it was, adjusting for changes in technology, in the nineteenth century.

For the last century or so, governments, especially the one in Washington, have financed and controlled the bulk of the country’s transportation infrastructure. So it seems natural to look to the federal government to control and finance our bridges, roads, railroads, and so forth. But there are economic and moral reasons why national ownership of transportation infrastructure is in crisis and why Congress cannot find a fix.

One government-based solution is to increase fuel taxes at the pump but that is unfair because such taxes are regressive – they fall hardest on the poor – and inefficient because the number of gallons spent on fuel is a poor proxy for how much wear a vehicle places on roads and bridges, which is mostly a function of speed, weight, and number of axles.

Government could also pay for infrastructure out of general tax revenues but that is unfair to those who do not use the infrastructure. Why should South Dakotans subsidize Amtrak, which has a total of zero stations in their state? Likewise, why should someone who does not own an automobile pay to fill potholes in I-90? Why can’t Americans pay for the infrastructure they use, just as they do with most other things in life?

A private transportation system would be “pay as you go.” That means tolls but lower ones than you might expect. Most tolls collected today go not to private companies but to government agencies that waste them (Google “corruption” and “Pennsylvania Turnpike” for an inkling) or use them to subsidize other parts of the transportation system (for example, Golden Gate Bridge users subsidize Bay area ferry and bus service).

New technology makes toll collection cheap and easy, eliminating one of the major rationalizations of transportation infrastructure nationalization in the early twentieth century. (Tolls can even be adjusted in real time to alleviate congestion.) The differences between competitive and monopolistic markets are better understood today, as well, reducing the risk of “highway robbery” at the tolls. Even local bridges, roads, and tunnels could be privatized, as many were in the nineteenth century.

Amtrak could also be privatized. Passenger rail died in this country after World War II because of government over-regulation and its subsidization of the interstate highway system. Railroads will probably never regain their cultural status or economic importance but they can provide efficient service in some congested corridors. Florida, in fact, recently permitted a private company to build and operate a new rail system between Miami and Orlando that looks promising. Even if it fails, however, the burden will fall on its investors, not taxpayers.

Investors want to generate profits, of course, but that does not necessarily, or even often, mean high prices or shoddy products so long as markets remain competitive. Think of all of the wonderful products you consume, from chewing gum to vodka, that stem from the efforts of entrepreneurs backed by private investors or large, publicly-traded corporations. Imagine what those same products would be like if only the government provided them. (If you can’t, look up what consumer products were like in the Soviet Union or other communist countries, if they could be had at all.) 

Why is transportation infrastructure any different from beds, haircuts, or televisions? Private transportation companies will work hard to get you to use their road or mode of transportation by offering better value and that means safer, faster, fairer, and cheaper travel options.

For additional reading, see two publications due out in the next month or so:
Robert E. Wright, “The Pivotal Role of Private Enterprise in America’s Transportation Age, 1790-1860.” Journal of Private Enterprise 29, 2 (Spring 2014), 1-20.
Robert E. Wright, “Specially Incorporated Transportation Companies in the United States to 1860: A Comprehensive Tabulation and Its Implications,” Journal of Business and Economics 5, 7 (July 2014), 249-66.