Ludwig von Mises Institute

Private road

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A private road is a road owned and maintained by a private individual, organization, or company rather than by a government.[citation needed]

Private roads in the UK[edit]

First private roads[edit]

With the fall of Rome, Europe moved into a period dominated by very localized and largely self-sufficient agricultural communities. Direct knowledge of the process of development and maintenance of roads in Britain before the twelfth or thirteenth century is almost non-existent, but at least some parts of the road networks were in good condition is evidenced by the records of military marches, some averaging as much as fifty miles per day. There is substantial evidence that the kings and their courts "moved incessantly around the kingdom, occasionally with the army", requiring passable roads to carry a "very sizable company." The vast majority of road use involved local people traveling short distances, to markets, churches and courts. There was need for lanes to provide access to holdings in the fields; to take loaded wagons to the windmill or to the watermill in the meadows; to reach the woodland with its timber, its fruit and its pannage for swine; to take the flock to the common pastures and heaths. The course of the roads with a purpose so narrow would be determined only by local needs.

The land over which a road passed actually "belonged" to the owner of the land on either side of the road, so if a road was abandoned (e.g., because travelers began beating a different path), it would revert to that landowner. However, under Anglo-Saxon custom, one of the rights to part of the land (i.e., the road) was assigned to the extended community as an easement: "the right of passage was a communal right". Indeed, the concept of the "highway" initially referred to this customary right of passage rather than to the roadway or path itself. Individuals had customary obligations to other members of a community to remove any impediments to travel such as overhanging trees, hedges, logs, and perhaps water, through a drainage ditch, not to build roads. In fact, the word "road" apparently comes form the Anglo-Saxon word "ridan" (to ride) which may derive from the verb "rid," meaning to free or clear away any obstruction. Third, the members had a customary obligation to make sure that all members maintained the roadways over their lands. The actual need for enforcement was rare, however, due to the reciprocities that existed within these close-knit communities.[1]

After the Norman conquest[edit]

The road system that was in place through the middle of the eleventh century proved to be adequate enough to make "possible a centralization of national government to which there was no parallel in western Europe" following the Norman conquest in 1066. At the same time, however, many of the underlying incentives were undermined. For instance, William seized virtually all of the land in England, and while he held many large estates for his own use, he also granted use of large tracts to Barons and the Church in exchange for support. Enclosure of some land which had been controlled by local agricultural communities as open fields and common pastures soon followed. In particular, land granted to the aristocracy, called the demesne, could be enclosed (other types of land were controlled by freeholders who paid rent to the lord, and by the villiens who provided labor to the lords). The Statute of Merton (1236) also permitted the lords to enclose large portions of the "waste," the high woodlands and unimproved pastures that lay in clumps around the arable lands, at the expense of the freeholders and villiens who used such areas, and as noted in Darby, grazing was also significantly restricted in the vast royal forests and parks "in the interest of the chase." Then, in the 1400s, as wool prices rose relative to grain prices, the lords evicted large numbers of tenants and enclosed additional large tracts of land, converting it to sheep pasture from crops and stubble fields upon which cattle had grazed. Hundreds of local villages were abandoned. Many of the remaining kinship groups and tithing were broken apart as people were driven from their traditional homes.

While members of local communities probably still had incentives to maintain roads for local use, the breakdown of the voluntary hierarchical system apparently produced a growing problem of under-maintenance for some long-distance connections. At the same time that the demand for long distance travel was growing due to the activities of the king and his court. In addition, representatives of the church with its widespread holdings also traveled extensively. Trade also was expanding throughout eleventh and twelfth centuries. Most commercial retailing activities took place at fairs during this period, and merchants traveled from fair to fair in order to sell their wares and buy others, thus requiring increasingly intensive use of some roads.

Not surprisingly, it was not the royal government that took up the road-provision task; it was he religious and the merchant communities. Numerous examples of merchants and merchant organizations contributing to the construction and/or maintenance of roads, and especially bridges, can be found. Some guilds were particularly active in this regard, especially when much of the business of the country was conducted at local fairs, and this was the case until the establishment of more permanent markets in the sixteenth century. However, some guilds and wealthy merchant benefactors continued supporting bridges and roads well into eighteenth century.

Roads played a very significant role in determining the success of a market town and those trading with it, so other members of both the local community and the merchant community tended to be vary grateful to someone who aided the two communities in this way. Thus, building and maintaining roads and bridges was an investment in reputation. And for Christians, even more significant personal benefits were anticipated.

The medieval Church was a major trader, and in addition, many of the important fairs were held at priories and abbeys. Furthermore, the Church encouraged pilgrimages. The Church also maintained frequent tours by preachers and friars, but perhaps the most significant source of Church-related travel was the monasteries, whose scattered estates required constant visits. Therefore, the Church promulgated the belief that care of the roads was "a work of Christian beneficence, well pleasing to God". This created incentives for private citizens within the Christian community to aid in the maintenance of roads and bridges, and the Bishops' registers throughout the United Kingdom provide ample evidence of such activity. Indeed, such religious beliefs explain the development of the long-lasting customary obligation that local parishes accepted for road maintenance. The monks also accepted a customary obligation to maintain roads, willingly taking on the task because it "was a pious work highly to be commended".[1]

After the dissolution of monasteries[edit]

This system of voluntary road maintenance was also ultimately undermined, however, as a consequence of the almost continuous struggle for power between the English kings and the Church. Henry VIII finally dissolved the monasteries in 1536-39, divided their properties, and transferred them to "a class of rapacious landlords who would be slow to recognize any claim upon their rents for the maintenance of roads.... The inevitable result would be a rapid decadence of many highways which had hitherto been in common use".

Local parishes continued to maintain roads in many areas, particularly for local travel (probably 80 to 85 percent of the actual roads in Great Britain), and various merchants and guilds also continued to provide support for some roads and bridges near market towns, but the elimination of the monasteries and the undermining of the incentives of the Church to encourage its parishioners to maintain roads that were important for long-distant travel was apparently quite significant. The roads that had been maintained with the assistance and urging of the monasteries began to deteriorate (possibly 15 to 20 percent of the roads). Indeed, it is contended that the seizure of the monasteries was the primary factor leading to passage of the "Statute for Mending of Highways" in 1555 which mandated that parishes establish a very specific institutional arrangement for maintenance of all roads in each parish.

The local justices-of-the-peace were ordered to appoint surveyors and collect fines that arose as a result of the failure of individuals to contribute their required inputs. Both the justices and the surveyors were to perform their tasks without compensation. All of the manual labor, tools, horses and carts needed for repairing the roads were to be provided by the parishioners, also without any compensation. For the roads where travel remained largely local, the highway statute of 1555 was largely unnecessary, and for roads that were heavily used by travelers who did not live in the local community, they were largely unsuccessful. A long series of additional statutes attempted to create sufficient negative incentives for the parishioners and surveyors to do their mandated duties. Ultimately none worked and the system of fines evolved into commutations to be collected from individual parishioners that relieved their obligations to perform the statutorily mandated duties and allowed the justices to hire laborers to work under the supervision of the surveyors. These funds also proved inadequate for the heavily traveled arteries, however.

Thus, commutations were supplemented with a general highway tax from the mid-seventeenth century onward. However, an even more important source of funds was generated through the criminal law by fines levied by the royal courts through presentment or indictment of the parish as a whole for the non-repair of its highways. Some parishes were perpetually under indictment, and "At varying dates in the different Counties, but eventually ... nearly all over England, it became the regular thing for a parish periodically to find itself indicted at the Sessions for neglecting to keep its highways in repair" and to pay a substantial fine rather than repair the roads. Despite these sources of revenues, however, the quality of road and bridge construction and repair on the major arteries did not compare to what had been done under the supervision and encouragement of the monks in the previous centuries.[1]

Turnpikes[edit]

The right to charge a toll in the United Kingdom had been severely restricted, in part because tolls were an important source of royal revenues. These revenues were not earmarked for road maintenance, however, so they went into the general treasury. Kings, and later parliament, had the power to grant the right to collect tolls to private individuals or organizations. In fact, there is evidence that burgesses (merchants who formed local governments in market towns) in several communities had petitioned for and been granted the right to collect tolls as early as 1154. Furthermore, there was one situation under which tolls could be collected by a private citizen without getting government permission: land owners could charge for passage through private land as long as an easement (customary or mandated) had not already been established. Not surprisingly, there is considerable evidence that enterprising land owners began to establish new "private roads" that allowed travellers to avoid the "ill-repaired public highways".

A long series of parliamentary acts were passed beginning in 1663 enabling the establishment of local ad hoc bodies known as "Turnpike Trusts," however, these were not parliamentary innovations. The initiative was always at the local level, as parishioners had to petitioned parliament for each segment of road on which they wanted to establish tolls.

After about 1700 the turnpike-establishment process became fairly standardized. A group of local landowners and/or merchants would accumulate the money necessary to fund pursuit of a Turnpike Act in parliament and to carry the cost of the trust through its start-up period. Turnpike Acts established a Turnpike Trust and granted it an exclusive right to operate a road (generally for 21 years), but trustees did not have complete private rights to the roads they were to operate. They were responsible for erecting gates to collect tolls, appointing collectors and a surveyor to supervise repairs, and a Clerk and Treasurer to administer the trust, but they were required to be unpaid. The tolls to be charged for various types of traffic were often specified in the legislation, and the funds collected could only be applied to the road named in the Act. No revenues could be diverted to other uses or retained as profit. If the tolls were insufficient to cover costs at particular times (e.g., up front), trusts were allowed to borrow at a rate of interest fixed by the Act.

Turnpikes were usually existing highways, although new roads were also built, particularly after 1740, and more importantly, the extent of "usable" roads for heavy traffic expanded significantly. The early turnpikes were maintained using the same techniques as the monasteries and parishes had employed before, but much more intensively. However, Trusts employed paid surveyors who, thorough specialization, developed expertise in road maintenance, and after about 1750 there is considerable evidence of experimentation and innovation in construction and maintenance by some of these specialists.

Innovations in surfacing, road widening and banking, and later, improvements in administration all made travel in the United Kingdom faster and less expensive. Turnpike formation really accelerated during the 1750s (and actually, during the 1740s as well), and by 1770 Trusts controlled almost 16,000 miles of turnpikes. The period of rapid expansion in turnpikes (1740-1830) involved a dramatic increase in heavy long-distance traffic due to the industrial revolution. Indeed, the early period of the industrial revolution was supported by turnpike road (and to a degree, by water) transport, rather than by the railroad system that often seems to get credit for supplying the transportation needs of the revolution.[1]

Decline of the Turnpike System[edit]

Turnpike activity peaked in about 1830 when there were 1,116 Turnpike Trusts operating 22,000 miles of roads, and declined thereafter.

The mandated structure and characteristics of the trusts created significant principal-agent problems. The Trustees were not allowed to be paid or earn profits, so other income generating activities (farms, businesses) commanded most of their attention. Toll gates were farmed out, and while trustees were supposed to monitor the gate-keepers and surveyors, their incentives to do so were very weak. There was no threat of takeover when a trust was operated inefficiently. With little monitoring and no competitive threat, corruption was rampant "and only a small part of the money collected for the upkeep of the road was in fact used for that purpose".

The political limitations on trusts also led to significant complaints by shippers and travellers. While they probably did not want to pay tolls at all, that may not have been the most significant cost imposed by the turnpike system. A serious complaint was that there were too many toll booths, requiring too many stops, thereby slowing transportation services unnecessarily. While consolidation of small trusts was desirable, the trusts operated at the prerogative of parliament, and any formal consolidation required parliamentary approval. Some efforts were made to obtain parliamentary approval to combine small trusts into larger organizations, but parliament did not respond with necessary enabling legislation that might have led to widespread consolidation, choosing instead to deal with such proposals individually and quite slowly. The vast majority of the small trusts remained independent until their bankruptcy and demise.

There was also significant political opposition to the trusts themselves. Opposition came from those involved in competitive transportation modes such as the river and canal barges and railroads, from the trade centers that already had effective transportation connections and feared competition from other centers if their road connections were improved, from some landowners and farmers who feared that better roads would make it easier for their low-wage laborers to be attracted away, from farmers who supplied local markets and feared that improved roads would bring in competition from distant suppliers, from heavy road users who did not want to pay tolls for access even though they wanted the roads to be maintained, and so on. Therefore, in order to gain sufficient support for passage, Turnpike Acts always had to reflect significant political compromise, including long lists of toll exemptions for powerful individuals and groups who opposed each Act. Agricultural interests and in some areas, industrial groups, were particularly effective at obtaining exemptions. Often those with exemptions were some of the worst abusers of what to them remained a common pool resource. Exemptions also grew over time (individual Trust Acts were annually renewed, with revisions possible), seriously reducing trust revenues.

The Parliament also imposed steep tolls for steam carriages, despite their safety, cost advantages, speed, capacity, and reduced road damage. Many interests - corn merchants, harness makers, horse-copers, railway promoters, iron masters hoping to make rails, and those who were simply against change - would unite against steam carriages. As a result, the use of mechanical vehicles on Britain's roads was delayed for some 60 years. That was another reason why highways were not competitive with the developing railroads.

As chronic insolvency spread, the burden of maintenance for more and more turnpikes was shifted, once again, onto the parishes. This simply led to resistance which actually flared into a "conclusive popular rebellion known as the Rebecca Riots" in South Wales during 1842-43. This resulted in a royal Commission to inquire about the grievances in South Wales, and finally to the dismissal of all Turnpike Trustees throughout the area and the merger of all trusts into "County Road Boards" which took over the roads, their debts, and the tolls of the former trusts. A "General Superintendent of County Roads in South Wales" was appointed by the central government, putting the roads in the area "Under what was virtually Government control" which also loaned 218,000 Pounds to counties so they could pay off creditors and consolidated debts at low interest rates. These county organizations were able to substantial reduce the number of toll gates as well as the level of tolls that had led to the revolts. Furthermore, they actually were able to operate efficiently enough to pay off the accumulated debts over the next 30 years, suggesting that if Parliament had responded earlier to the need for consolidation, the riots and subsequent government control might have been avoided.

The Parliament started to gradually abolish more and more tolls. Most Trusts were renewed each year, although from 1864 onward, 20 to 30 trusts were dissolved annually, with the roads turned over to a local parish or a highway district. Dissolution accelerated, however, and in 1871 all tolls were ended in the London area. The number of trusts was down to 854 in 1871, 588 in 1875, 184 in 1881, 71 in 1883, 15 in 1887, and 2 in 1890. The last trust ended operations in November of 1895.

This rapidly placed thousands of miles of roads back into the care of the parishes, leading to increased local resistance. In order to mitigate some of the local opposition the central government began giving Grants in Aid in 1876 to help pay for maintenance. More and more aid from the central treasury was given to counties for road maintenance and the parishes were finally formally dissolved of their road maintenance liability in 1895. Funding shifted from tolls to county taxes along with subsidies from the central government, and government expenditures on roads increased rapidly. The average government expenditure per mile of county roads rose from 43 pounds in 1890 to 69 pounds in 1902, for instance while expenditures on urban roads increased from 49 to 207 pounds over the same period.[1]

Private roads in the US[edit]

Once the state of Pennsylvania chartered a private company in 1792 to build a road connecting Philadelphia and Lancaster, rival states felt impelled to follow. Private initiative was the only effective means of providing new highways, because state and county finances were almost nonexistent and town resources were meager.

The turnpikes were financed by private stock subscription and set up to pay dividends. Built with a surface of gravel and earth, turnpikes were usually 15 to 40 miles in length, and cost $2,000 per mile to build. They were massive undertakings and relied on widespread investment from the community. Stock purchased was more like a contribution to community improvement rather than a business investment. Some travelers objected to the idea of paying tolls, particularly to a corporate monopoly. Legislators, often suspicious of corporate motives, wrote extensive (and economically debilitating) restrictions into company charters, specifying conditions for construction, maintenance, and toll rates, and toll collection.

Only Pennsylvania, Virginia, and Ohio subsidized their turnpike companies; New York chartered the most turnpikes. The opening decade of the nineteenth century saw the most charter activity, though roughly one-third of the companies chartered failed to construct a single mile of roadway.

The unprofitability of turnpikes soon became obvious. The vast majority of turnpikes paid only very small dividends or none at all. First, toll evasion was rampant, as people would circumvent tollgates, a practice known as "shunpiking." Second, many roads were built in advance of settlement and travel demand was low. Third, legal restrictions and regulations, limiting both toll rates and countermeasures to shunpiking, hamstrung the turnpikes’ abilities to improve their financial situation.

But poor financial returns did not necessarily mean unfruitfulness. Even an unprofitable turnpike stimulated commerce, raised land values, and aided expansion. Therefore, community leaders resorted to a fascinating array of tactics to boost the turnpike cause despite the sad prospects for dividends. Supporters used newspaper appeals, town meetings, door-to-door solicitations, and correspondence to apply social pressure. In this way as in others, American communities relied on voluntarism, as so elegantly described by Alexis de Tocqueville, to meet local needs. "With but few exceptions, the vast majority of the stockholders in turnpike were either farmers, land speculators, merchants or individuals and firms interested in commerce."

In the late 1820s canals began competing with many of the major turnpikes. Railroads joined in a bit later. Between 1825 and 1845 turnpike mileage dropped considerably. At the same time, however, the canals and railroads changed the patterns of trade and development, and stimulated new demands for shorter toll roads that would serve as feeders. Turnpike activity by no means ceased with the advent of canals and rails.

The toll road idea endured to the end of the century. Discoveries of gold, silver, copper, and other minerals in California, Colorado, and Nevada sparked rushes of newcomers. Even before statehood for Colorado and Nevada entrepreneurs organized their own toll road enterprises to serve the mining communities, and some got rich in the process. Well over 360 toll roads were constructed in California, Colorado, and Nevada alone. This experience indicates that private initiative can provide infrastructure for economic development.

By the end of the nineteenth century, state and county governments had grown in capabilities and new agencies began setting goals for centralized highway management. Independent private toll roads were not thought appropriate in the era of progressive governance, and most of those remaining were bought out or shut down.[2][3]

Turnpike Incorporation, 1792-1845:[4]
State 1792-1800 1801-10 1811-20 1821-30 1831-40 1841-45 Total
New Hampshire 4 45 5 1 4 0 59
Vermont 9 19 15 7 4 3 57
Massachusetts 9 80 8 16 1 1 115
Rhode Island 3 13 8 13 3 1 41
Connecticut 23 37 16 24 13 0 113
New York 13 126 133 75 83 27 457
Pennsylvania 5 39 101 59 101 37 342
New Jersey 0 22 22 3 3 0 50
Virginia 0 6 7 8 25 0 46
Maryland 3 9 33 12 14 7 78
Ohio 0 2 14 12 114 62 204
Total 69 398 362 230 365 138 1562


Bridges and other infrastructure[edit]

The first private toll-bridge company, the Charles-River Bridge, opened in 1786 was called "the greatest effect of private enterprise in the United States." Its investors were rewarded with a return of 10.5 percent annually for the first six years. Through 1798, about 59 bridge companies were chartered in the states under consideration, principally in New England. Many of them failed and some were unprofitable, but a considerable number, especially in the Boston area, had proven themselves lucrative by the end of the century. In contrast to the turnpikes, the bridges did not suffer from toll evasion and liberal exemptions, and when profits were low they commonly obtained toll increases.


Many enterprises were undertaken to make improvements, and it is debatable whether they can be counted as business corporations. There were marine and agricultural societies, but then come corporations for land improvement, lumber cultivation, and inland navigation. For example, a "case near the line" is the River Machine Company, incorporated in 1790 to dredge the Providence River. "The merchants of Providence had agreed to raise $1,000 in forty ’equal shares’" for the project. The company was to collect tolls from certain vessels, but any surplus was to be used at the end of twenty years for other improvements. "Thus no dividends were contemplated." [3]

Early 20th century[edit]

In 1908 was opened the Long Island Motor Parkway, the first road built specifically for the automobile. Created by William Kissam Vanderbilt II (the great-grandson of Cornelius Vanderbilt), a car enthusiast who loved to race. His race came under fire after a spectator was killed in 1906, and Vanderbilt wanted a safe road on which to hold the race and on which other car lovers could hurl their new machines free of the dust common on roads made for horses. The parkway would also be free of "Interference from the authorities," he said in a speech. The toll road was built of reinforced concrete, had banked turns, guard rails and, by building bridges, eliminated intersections that would slow a driver down.

The motor parkway was open until 1938, but it could not compete with the public roads, even after the toll was reduced to 40 cents. The urban planner Robert Moses eventually gained control of the pioneering road for back taxes of about $80,000. The day of public roads had come, supplanting private highways.[5]


Lincoln Highway was initiated in 1912. Carl Fisher, father of the Indianapolis 500, envisioned a well-paved, reliable cross-country road to avoid urban congestion, encourage travel, promote the automobile industry, and build up the rural communities along the way. His idea was so popular and necessary, that droves of private citizens, fed up with muddy backcountry roads, paid $5 each to become members of the highway organization that Fisher founded with Frank Seiberling of Goodyear and Henry Joy of the Packard Motor Car Company. Local communities, in exchange for providing labor, received free road-building materials from the organization and, more important, a significant boost to local commerce. Automobile manufacturers saw the highway plan as an essential foundation for the growth of their industry and volunteered substantial funds.

Despite its lack of federal support, the highway plan was anything but uncoordinated. As a 1916 guidebook touted, the Lincoln Highway cut the time needed for cross-country travel by two-thirds and reduced the cost to an affordable $5 a day. Even when lack of funds threatened the future of the road, the association worked with local governments to build sections of the highway to connect with the “seedling miles” of concrete road built in strategic locations by the association.

The federal government realized too late the importance of what the Lincoln Highway Association was the first to promote, and by 1921 it was anxious to catch up. The private initiative symbolized by the highway association was crowded out by the Federal Highway Act.[6]

Current private roads[edit]

By 2007, Indiana governor Mitch Daniels has auctioned the rights to operate the Indiana Toll Road — a 157-mile road linking the Chicago Skyway in the west to the Ohio Turnpike in the east — to a private group for $3.8 billion. Meantime, Chicago mayor Richard Daley has harvested $1.8 billion auctioning the Skyway to a private group, and another half-billion or so turning city-owned garages over to private operators. Across the country, cash-strapped governors and mayors were discovering that their airports, bridges, toll roads, water systems, and other revenue-generating operations are worth far more than they thought, and were eyeing auctions that might produce windfalls similar to those in Chicago and Indiana. They’re also looking to recruit private investors to build and operate new toll roads, bridges, and other infrastructure.

Confronting a $3 billion transportation-funding shortfall, Indiana decided to use an auction to extract the Toll Road’s long-term value. In effect, a private operator gave Indiana an up-front payment in exchange for the right to collect tolls on the road for 75 years. Like the Chicago deal, which hands over the Skyway for 99 years, the Indiana lease is basically a sale, since its term exceeds the road’s anticipated life. Each agreement requires the private operator to invest in rebuilding the road as it falls apart and to follow a lengthy list of operating standards, from how best to fill potholes to how quickly to clear roadkill.

In California, a private company was constructing a nearly ten-mile, $800 million extension of Route 125, south of San Diego, in exchange for a 35-year lease to manage the road and collect tolls.[7] The California Private Transportation Company provided, in the median of California’s State Route 91, the first "Express Toll Lanes" with variable tolls, electronically collected, designed to ensure congestion-free travel at all times.[8]

Utah contemplated private financing to build the Mountain View Corridor, a road connecting Salt Lake City Airport to towns in Salt Lake and Utah Counties, instead of raising its gas tax by up to 50 cents per gallon. Virginia has inked an agreement with Australian toll-road firm Transurban, which already leases the state’s nine-mile Pocahontas Parkway, to study expanding Interstate 95 with high-occupancy toll lanes. If approved, the project would cost nearly $1 billion. "These roads don’t exist and in many cases they won’t ever exist unless the private sector builds them," says Mark Florian, a Goldman Sachs investment banker and an advisor on several such transactions in Texas.[7]

A number of U.S. states have moved ahead with public-private partnerships (PPP) and privatization. The following projects from Virginia illustrate the possibilities of expanding the private role in infrastructure investment:

  • Midtown Tunnel. Skanska and Macquarie are building, and will operate, a three-mile tolled tunnel under the Elizabeth River between Norfolk and Portsmouth. Private debt and equity are covering most of the project’s $2.1 billion cost.
  • Capital Beltway. Transurban and Fluor have built and are now operating and maintaining new toll lanes along 14 miles of I-495. The firms used debt and equity to finance about $1.5 billion of the project’s $2 billion cost. The lanes opened in November 2012 after being completed on time and on budget. The same firms will be partnering with Virginia to finance, build, and manage new toll lanes south from the Beltway along I-95.
  • Dulles Greenway. The Greenway is a privately owned toll highway in Northern Virginia completed in the mid-1990s with $350 million of private debt and equity, and without government aid.
  • Jordan Bridge. FIGG Engineering Group and partners fully financed and constructed a $142 million highway bridge over the Elizabeth River between Chesapeake and Portsmouth. The cost of this handsome and soaring private bridge will be paid back by toll revenues over time. The bridge opened in 2012.[9]

Europe[edit]

Privately financed infrastructure has made another appearance in post–World War II Europe. Starting with 1955 legislation, France began to tap private investors to build and operate what eventually amounted to 3,400 miles of autoroutes between cities.[7] For years there was a gap in the ring road surrounding Paris that created huge traffic problems. Then private developers made an unsolicited proposal to build a $2 billion toll tunnel in exchange for a 70-year lease to run it. They built a double-decker tunnel that fits six lanes of traffic in the space usually required for just two. The tunnel's profit-seeking owners have an incentive to keep traffic moving. They collect tolls based on congestion pricing, and tolls are collected electronically, so cars don't have to stop. The tunnel operators clear accidents quickly. Most are detected within 10 seconds -- thanks to 350 cameras inside the tunnel. The private road has cut a 45-minute trip to 10 minutes.[10]

Margaret Thatcher’s energetic privatization drive in 1980s England sold existing government assets and spawned scores of public-private construction projects. The Soviet Union’s collapse led to extensive privatization in former Eastern bloc countries during the nineties. As of 2007, the U.S. Department of Transportation estimated that worldwide, more than 1,100 public-private deals have taken place in the transportation field alone over the last two decades. Total value: approximately $360 billion.[7]

Analysis from a public goods perspective[edit]

To what extent can we expect private initiative to have been successful in providing roads, as evidenced in early United States? Despite the large social benefits of the roads, it would seem that the individual could find no advantage in supporting them. Since citizens knew that turnpike stock was a poor investment, purchasing stock was much like paying for the road. Once stock subscriptions were sufficient to construct the road, there would be no way to withhold the benefits of the road from those who did not contribute. The input of a single individual would not make the difference, or so it would seem.

On the basis of narrow self-interest it would have been foolish for any one person to make a voluntary sacrifice. Turnpike stock subscription appears to have been a free rider problem par excellence. In view of the apparent free rider problem, the success was striking. The movement built new roads at rates previously unknown in America. Over $11 million was invested in turnpikes in New York, some $6.5 million in New England, and over $4.5 million (excluding state investment) in Pennsylvania. (A turnpike typically had a construction cost of $700 to $3,000 per mile and a length of 15 to 40 miles.) Based on the population of 1830, per-capita turnpike investment was approximately $3.90 in Massachusetts. Between 1794 and 1840, 238 private New England turnpikes built and operated about 3,750 miles of road. New York led all other states in turnpike mileage with over 4,000 as of 1821. Pennsylvania was second, reaching a peak of about 2,400 miles in 1832. New Jersey companies operated 550 miles by 1821; Maryland’s operated 300 miles of private road in 1830. Turnpikes also represented a great improvement in road quality .

The local turnpike was supported by the more prominent citizens, but it is not as though a handful of affluent landowners paid for the project. Stock subscription was broad-based, In most cases upwards of 50 people contributed, usually over 100 for a larger turnpike, no one with more than 15 percent of the stock. After the most travelled routes had been converted to turnpikes, it became more difficult to raise money for their construction, but nonetheless turnpikes continued to be built, even though, by 1805, hope of direct remuneration had disappeared. Yet between 1805 and 1838 over 500 turnpikes were chartered and built, each one representing a separate instance of public good provision. Even though the turnpikes offered enormous nonexcludable benefits, far outweighing the costs of the project, a straight application of the simple public-goods model would lead us to doubt that many turnpikes were built and that a single one was built after 1805.

Daniel Klein points out that community isolation, citizen familiarity, and weak, decentralized government bred close social ties and a strong participatory ethic. Towns of the early nineteenth century were independent and strong, and in the first three decades of the republic, the township held almost all of the administrative power of government. Alexis de Tocqueville, in his opus Democracy in America, says the towns "are independent in all that concerns themselves alone; and among the inhabitants of New England I believe that not a man is to be found who would acknowledge that the state has any right to interfere in their town affairs." The participatory nature of town government in early America has been well noted. This feature often makes it pointless to draw lines separating private and public works. At the same time, religious congregations often showed a penchant for making themselves busy in various improvement endeavors, such as schools, libraries, and poor relief. By generating the requisite social relations, or "social capital", as well as human capital, the religious and benevolent activities not only incited but empowered the application of voluntary efforts to community goals. The citizens’ cooperation with government efforts is noteworthy, but more significant is the willingness to forge public improvements by voluntary association.

Things have changed a lot since 1810. Neighbors are often strangers, so how can we expected social pressure and the like to curtail free riding? On this, Klein has two remarks: one, whether it be a street association or the American Cancer Society, suasion tactics often yield results, as reported regularly in Nonprofit and Voluntary Sector Ouarterly. Second, if voluntary forces are deemed ineffective in providing public goods, that in itself is a policy issue. The ability of voluntary association to provide infrastructure, education, security, and poor relief depends on the exercise and spontaneous development of certain institutions, activities, and sentiments. Since governmental bodies dominate these services it is no surprise that the faculties of sodality remain degenerate. When a problem arises government is expected to deal with it. Participation does not become a personal responsibility and organizing leadership does not become a source of social esteem. Thus there is a lesson in the broader circumstances of early America which bred effective voluntary forces, as well as in the specific ways those forces established turnpikes.[3]

In modern times, private contractors are much better than government at getting construction done on time and on budget. A 2002 government study in the United Kingdom, where public-private transactions are more common, found that 70 percent of public construction undertaken by the government ran late and that 73 percent of it finished over budget. But when government contracted projects to private firms, just 24 percent of them were late and only 20 percent were over budget. There’s no mystery here, since private contractors can’t start collecting revenues until properties are up and running.[7]

References[edit]

  1. 1.0 1.1 1.2 1.3 1.4 Bruce L. Benson. "Are Roads Public Goods, Club Goods, Private Goods, or Common Pools?" (pdf), 2002, referenced 2013-01-17.
  2. Daniel Klein. "Private Highways in America, 1792-1916" (pdf), The Freeman, February 1994. Referenced 2012-12-06.
  3. 3.0 3.1 3.2 Daniel Klein. "The Voluntary Provision of Public Goods? The Turnpike Companies of Early America" (pdf), Department of Economics, University of California at Irvine, Reprint No. 18, Economic Inquiry, March 1990. Referenced 2012-12-08.
  4. Daniel B. Klein and Gordon J. Fielding. "Private Toll Roads: Learning From the Nineteenth Century" (pdf), Department of Economics and Institute of Transportation Studies, University of California, Irvine, December 1991. Referenced 2012-12-06.
  5. Phil Patton. "A 100-Year-Old Dream: A Road Just for Cars", The New York Times, published: October 9, 2008. See also the Long Island Motor Parkway on Wikipedia. Referenced 2013-12-15
  6. Leigh Jenco. "Freeing the Freeways, The Freeman, November 01, 2000, referenced 2013-02-15.
  7. 7.0 7.1 7.2 7.3 7.4 Steven Malanga. "The New Privatization", City Journal, Summer 2007, referenced 2013-02-15.
  8. Gabriel Roth. Roads Are Too Important to Be Left to Governments, The Independent Institute, September 26, 2006, referenced 2013-02-17.
  9. Chris Edwards. "Infrastructure Investment: A State, Local, and Private Responsibility" (pdf), Cato Institute, No. 67, January 2013, referenced 2013-02-15.
  10. John Stossel. "Private Enterprise Does It Better", Reason.com, August 5, 2010, referenced 2013-02-15.

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