The Public Sector, II

11

The Public Sector, II: Streets and Roads

Protecting the Streets

ABOLITION OF THE PUBLIC SECTOR means, of course, that all pieces of land, all land areas, including streets and roads, would be owned privately, by individuals, corporations, cooperatives, or any other voluntary groupings of individuals and capital. The fact that all streets and land areas would be private would by itself solve many of the seemingly insoluble problems of private operation. What we need to do is to reorient our thinking to consider a world in which all land areas are privately owned.

Let us take, for example, police protection. How would police protection be furnished in a totally private economy? Part of the answer becomes evident if we consider a world of totally private land and street ownership. Consider the Times Square area of New York City, a notoriously crime-ridden area where there is little police protection furnished by the city authorities. Every New Yorker knows, in fact, that he lives and walks the streets, and not only Times Square, virtually in a state of "anarchy," dependent solely on the normal peacefulness and good will of his fellow citizens. Police protection in New York is minimal, a fact dramatically revealed in a recent week-long police strike when, lo and behold!, crime in no way increased from its normal state when the police are supposedly alert and on the job. At any rate, suppose that the Times Square area, including the streets, was privately owned, say by the "Times Square Merchants Association." The merchants would know full well, of course, that if crime was rampant in their area, if muggings and holdups abounded, then their customers would fade away and would patronize competing areas and neighborhoods. Hence, it would be to the economic interest of the merchants' association to supply efficient and plentiful police protection, so that customers would be attracted to, rather than repelled from, their neighborhood. Private business, after all, is always trying to attract and keep its customers. But what good would be served by attractive store displays and packaging, pleasant lighting and courteous service, if the customers may be robbed or assaulted if they walk through the area?

The merchants' association, furthermore, would be induced, by their drive for profits and for avoiding losses, to supply not only sufficient police protection but also courteous and pleasant protection. Governmental police have not only no incentive to be efficient or worry about their "customers'" needs; they also live with the ever-present temptation to wield their power of force in a brutal and coercive manner. "Police brutality" is a well-known feature of the police system, and it is held in check only by remote complaints of the harassed citizenry. But if the private merchants' police should yield to the temptation of brutalizing the merchants' customers, those customers will quickly disappear and go elsewhere. Hence, the merchants' association will see to it that its police are courteous as well as plentiful.

Such efficient and high-quality police protection would prevail throughout the land, throughout all the private streets and land areas. Factories would guard their street areas, merchants their streets, and road companies would provide safe and efficient police protection for their toll roads and other privately owned roads. The same would be true for residential neighborhoods. We can envision two possible types of private street ownership in such neighborhoods. In one type, all the landowners in a certain block might become the joint owners of that block, let us say as the "85th St. Block Company." This company would then provide police protection, the costs being paid either by the homeowners directly or out of tenants' rent if the street includes rental apartments. Again, homeowners will of course have a direct interest in seeing that their block is safe, while landlords will try to attract tenants by supplying safe streets in addition to the more usual services such as heat, water, and janitorial service. To ask why landlords should provide safe streets in the libertarian, fully private society is just as silly as asking now why they should provide their tenants with heat or hot water. The force of competition and of consumer demand would make them supply such services. Furthermore, whether we are considering homeowners or rental housing, in either case the capital value of the land and the house will be a function of the safety of the street as well as of the other well-known characteristics of the house and the neighborhood. Safe and well-patrolled streets will raise the value of the landowners' land and houses in the same way as well-tended houses do; crime-ridden streets will lower the value of the land and houses as surely as dilapidated housing itself does. Since landowners always prefer higher to lower market values for their property, there is a built-in incentive to provide efficient, well-paved, and safe streets.

Another type of private street-ownership in residential areas might be private street companies, which would own only the streets, not the houses or buildings on them. The street companies would then charge landowners for the service of maintaining, improving, and policing their streets. Once again, safe, well-lit, and well-paved streets will induce landowners and tenants to flock to those streets; unsafe, badly lit and badly maintained streets will drive those owners and users away. A happy and flourishing use of the streets by landlords and automobiles will raise the profits and stock values of the street companies; an unhappy and decaying regard for streets by their owners will drive the users away and lower the profits and the stock values of the private street companies. Hence, the street-owning companies will do their best to provide efficient street service, including police protection, to secure happy users; they will he driven to do this by their desire to make profits and to increase the value of their capital, and by their equally active desire not to suffer losses and erosion of their capital. It is infinitely better to rely on the pursuit of economic interest by landowners or street companies than to depend on the dubious "altruism" of bureaucrats and government officials.

At this point in the discussion, someone is bound to raise the question: If streets are owned by street companies, and granting that they generally would aim to please their customers with maximum efficiency, what if some kooky or tyrannical street owner should suddenly decide to block access to his street to an adjoining homeowner? How could the latter get in or out? Could he be blocked permanently, or be charged an enormous amount to be allowed entrance or exit? The answer to this question is the same as to a similar problem about land-ownership: Suppose that everyone owning homes surrounding someone's property would suddenly not allow him to go in or out? The answer is that everyone, in purchasing homes or street service in a libertarian society, would make sure that the purchase or lease contract provides full access for whatever term of years is specified. With this sort of "easement" provided in advance by contract, no such sudden blockade would be allowed, since it would be an invasion of the property right of the landowner.

There is of course nothing new or startling in the principle of this envisioned libertarian society. We are already familiar with the energizing effects of inter-location and inter-transportation competition. For example, when the private railroads were being built throughout the nation in the nineteenth century, the railroads and their competition provided a remarkable energizing force for developing their respective areas. Each railroad tried its best to induce immigration and economic development in its area in order to increase its profits, land values, and value of its capital; and each hastened to do so, lest people and markets leave their area and move to the ports, cities, and lands served by competing railroads. The same principle would be at work if all streets and roads were private as well. Similarly, we are already familiar with police protection provided by private merchants and organizations. Within their property, stores provide guards and watchmen; banks provide guards; factories employ watchmen; shopping centers retain guards, etc. The libertarian society would simply extend this healthy and functioning system to the streets as well. It is scarcely accidental that there are far more assaults and muggings on the streets outside stores than in the stores themselves; this is because the stores are supplied with watchful private guards while on the streets we must all rely on the "anarchy" of government police protection. Indeed, in various blocks of New York City there has already arisen in recent years, in response to the galloping crime problem, the hiring of private guards to patrol the blocks by voluntary contributions of the landlords and homeowners on that block. Crime on these blocks has already been substantially reduced. The problem is that these efforts have been halting and inefficient because those streets are not owned by the residents, and hence there is no effective mechanism for gathering the capital to provide efficient protection on a permanent basis. Furthermore, the patrolling street guards cannot legally be armed because they are not on their owners' property, and they cannot, as store or other property owners can, challenge anyone acting in a suspicious but not yet criminal manner. They cannot, in short, do the things, financially or administratively, that owners can do with their property.

Furthermore, police paid for by the landowners and residents of a block or neighborhood would not only end police brutality against customers; this system would end the current spectacle of police being considered by many communities as alien "imperial" colonizers, there not to serve but to oppress the community. In America today, for example, we have the general rule in our cities of black areas patrolled by police hired by central urban governments, governments that are perceived to be alien to the black communities. Police supplied, controlled, and paid for by the residents and landowners of the communities themselves would be a completely different story; they would he supplying, and perceived to be supplying, services to their customers rather than coercing them on behalf of an alien authority.

A dramatic contrast of the merits of public vs. private protection is provided by one block in Harlem. On West 135th Street between Seventh and Eighth Avenues is the station house of the 82nd Precinct of the New York City Police Department. Yet the august presence of the station house did not prevent a rash of night robberies of various stores on the block. Finally, in the winter of 1966, fifteen merchants on the block banded together to hire a guard to walk the block all night; the guard was hired from the Leroy V. George protection company to provide the police protection not forthcoming from their property taxes.¹

The most successful and best organized private police forces in American history have been the railway police, maintained by many railroads to prevent injury or theft to passengers or freight. The modern railway police were founded at the end of World War I by the Protection Section of the American Railway Association. So well did they function that by 1929 freight claim payments for robberies had declined by 93%. Arrests by the railway police, who at the time of the major study of their activities in the early 1930s totalled 10,000 men, resulted in a far higher percentage of convictions than earned by police departments, ranging from 83% to 97%. Railway police were armed, could make normal arrests, and were portrayed by an unsympathetic criminologist as having a widespread reputation for good character and ability.²

Street Rules

One of the undoubted consequences of all land areas in the country being owned by private individuals and companies would be a greater richness and diversity of American neighborhoods. The character of the police protection and the rules applied by the private police would depend on the wishes of the landowners or street owners, the owners of the given area. Thus, suspicious residential neighborhoods would insist that any people or cars entering the area have a prior appointment with a resident, or else be approved by a resident with a phone call from the gate. In short, the same rules for street property would be applied as are now often applied in private apartment buildings or family estates. In other, more raffish areas, everyone would be permitted to enter at will, and there might be varying degrees of surveillance in between. Most probably commercial areas, anxious not to rebuff customers, would be open to all. All this would give full scope to the desires and values of the residents and owners of all the numerous areas in the country.

It might be charged that all this will allow freedom "to discriminate" in housing or use of the streets. There is no question about that. Fundamental to the libertarian creed is every man's right to choose who shall enter or use his own property, provided of course that the other person is willing.

"Discrimination," in the sense of choosing favorably or unfavorably in accordance with whatever criteria a person may employ, is an integral part of freedom of choice, and hence of a free society. But of course in the free market any such discrimination is costly, and will have to be paid for by the property owner concerned.

Suppose, for example, that someone in a free society is a landlord of a house or a block of houses. He could simply charge the free market rent and let it go at that. But then there are risks; he may choose to discriminate against renting to couples with young children, figuring that there is substantial risk of defacing his property. On the other hand, he may well choose to charge extra rent to compensate for the higher risk, so that the free-market rent for such families will tend to be higher than otherwise. This, in fact, will happen in most cases on the free market. But what of personal, rather than strictly economic, "discrimination" by the landlord? Suppose, for example, that the landlord is a great admirer of six-foot Swedish-Americans, and decides to rent his apartments only to families of such a group. In the free society it would be fully in his right to do so, but he would clearly suffer a large monetary loss as a result. For this means that he would have to turn away tenant after tenant in an endless quest for very tall Swedish-Americans. While this may he considered an extreme example, the effect is exactly the same, though differing in degree, for any sort of personal discrimination in the marketplace. If, for example, the landlord dislikes redheads and determines not to rent his apartments to them, he will suffer losses, although not as severely as in the first example.

In any case, anytime anyone practices such "discrimination" in the free market, he must bear the costs, either of losing profits or of losing services as a consumer. If a consumer decides to boycott goods sold by people he does not like, whether the dislike is justified or not, he then will go without goods or services which he otherwise would have purchased.

All property owners, then, in a free society, would set down the rules for use of, or admission to, their property. The more rigorous the rules the fewer the people who will engage in such use, and the property owner will then have to balance rigor of admission as against loss of income. A landlord might "discriminate," for example, by insisting, as George Pullman did in his "company town" in Illinois in the late nineteenth century, that all his tenants appear at all times dressed in jacket and tie; he might do so, but it is doubtful that many tenants would elect to move into or remain in such a building or development and the landlord would suffer severe losses.

The principle that property is administered by its owners also provides the rebuttal to a standard argument for government intervention in the economy. The argument holds that "after all, the government sets down traffic rules—red and green lights, driving on the right-hand side, maximum speed limits, etc. Surely everyone must admit that traffic would degenerate into chaos if not for such rules. Therefore, why should government not intervene in the rest of the economy as well?" The fallacy here is not that traffic should be regulated; of course such rules are necessary. But the crucial point is that such rules will always be laid down by whoever owns and therefore administers the roads. Government has been laying down traffic rules because it is the government that has always owned and therefore run the streets and roads; in a libertarian society of private ownership the private owners would lay down the rules for the use of their roads.

However, might not the traffic rules be "chaotic" in a purely free society? Wouldn't some owners designate red for "stop," others green or blue, etc.? Wouldn't some roads be used on the right-hand side and others on the left? Such questions are absurd. Obviously, it would be to the interest of all road owners to have uniform rules in these matters, so that road traffic could mesh smoothly and without difficulty. Any maverick road owner who insisted on a left-hand drive or green for "stop" instead of "go" would soon find himself with numerous accidents, and the disappearance of customers and users. The private railroads in nineteenth-century America faced similar problems and solved them harmoniously and without difficulty. Railroads allowed each other's cars on their tracks; they inter-connected with each other for mutual benefit; the gauges of the different railroads were adjusted to be uniform; and uniform regional freight classifications were worked out for 6,000 items. Furthermore, it was the railroads and not government that took the initiative to consolidate the unruly and chaotic patchwork of time zones that had existed previously. In order to have accurate scheduling and timetables, the railroads had to consolidate; and in 1883 they agreed to consolidate the existing fifty-four time zones across the country into the four which we have today. The New York financial paper, the Commercial and Financial Chronicle, exclaimed that "the laws of trade and the instinct for self-preservation effect reforms and improvements that all the legislative bodies combined could not accomplish."³

Pricing Streets and Roads

If, in contrast, we examine the performance of governmental streets and highways in America, it is difficult to see how private ownership could pile up a more inefficient or irrational record. It is now widely recognized, for example, that federal and state governments, spurred by the lobbying of automobile companies, oil companies, tire companies, and construction contractors and unions, have indulged in a vast over-expansion of highways. The highways grant gross subsidies to the users and have played the major role in killing railroads as a viable enterprise. Thus, trucks can operate on a right-of-way constructed and maintained by the taxpayer, while railroads had to build and maintain their own trackage. Furthermore, the subsidized highway and road programs led to an overexpansion of automobile-using suburbs, the coerced bulldozing of countless homes and businesses, and an artificial burdening of the central cities. The cost to the taxpayer and to the economy has been enormous.

Particularly subsidized has been the urban auto-using commuter, and it is precisely in the cities where traffic congestion has burgeoned along with this subsidy to overaccumulation of their traffic. Professor William Vickrey of Columbia University has estimated that urban expressways have been built at a cost of from 6 cents to 27 cents per vehicle-mile, while users pay in gasoline and other auto taxes only about 1 cent per vehicle-mile. The general taxpayer rather than the motorist pays for maintenance of urban streets. Furthermore, the gasoline tax is paid per mile regardless of the particular street or highway being used, and regardless of the time of day of the ride. Hence, when highways are financed from the general gasoline tax fund, the users of the low-cost rural highways are being taxed in order to subsidize the users of the far higher-cost urban expressways. Rural highways typically cost only 2 cents per vehicle-mile to build and maintain.⁴

In addition, the gasoline tax is scarcely a rational pricing system for the use of the roads, and no private firms would ever price the use of roads in that way. Private business prices its goods and services to "clear the market," so that supply equals demand, and there are neither shortages nor goods going unsold. The fact that gasoline taxes are paid per mile regardless of the road means that the more highly demanded urban streets and highways are facing a situation where the price charged is far below the free-market price. The result is enormous and aggravated traffic congestion on the heavily traveled streets and roads, especially in rush hours, and a virtually unused network of roads in rural areas. A rational pricing system would at the same time maximize profits for road owners and always provide clear streets free of congestion. In the current system, the government holds the price to users of congested roads extremely low and far below the free-market price; the result is a chronic shortage of road space reflected in traffic congestion. The government has invariably tried to meet this growing problem not by rational pricing but by building still more roads, socking the taxpayer for yet greater subsidies to drivers, and thereby making the shortage still worse. Frantically increasing the supply while holding the price of use far below the market simply leads to chronic and aggravated congestion.⁵ It is like a dog chasing a mechanical rabbit. Thus, the Washington Post has traced the impact of the federal highway program in the nation's capital:

Washington's Capital Beltway was one of the first major links in the system to be completed. When the last section was opened in the summer of 1964, it was hailed as one of the finest highways ever built.

It was expected to (a) relieve traffic congestion in downtown Washington by providing a bypass for north-south traffic and (b) knit together the suburban counties and cities ringing the capital.

What the Beltway actually became was (a) a commuter highway and local traffic circulator and (b) the cause of an enormous building boom that accelerated the flight of the white and the affluent from the central city.

Instead of relieving traffic congestion, the Beltway has increased it. Along with I-95, 70-S, and I-66, it has made it possible for commuters to move farther and farther from their downtown jobs.

It has also led to relocation of government agencies and retail and service firms from downtown to the suburbs, putting the jobs they create out of reach of many inner city dwellers.⁶

What would a rational pricing system, a system instituted by private road owners, look like? In the first place, highways would charge tolls, especially at such convenient entrances to cities as bridges and tunnels, but not as is charged now. For example, toll charges would be much higher at rush-hour and other peak-hour traffic (e.g. Sundays in the summer) than in off-hours. In a free market, the greater demand at peak hours would lead to higher toll charges, until congestion would be eliminated and the flow of traffic steady. But people have to go to work, the reader will ask? Surely, but they don't have to go in their own cars. Some commuters will give up altogether and move back to the city; others will go in car pools; still others will ride in express busses or trains. In this way, use of the roads at peak hours would be restricted to those most willing to pay the market-clearing price for their use. Others, too, will endeavor to shift their times of work so as to come in and leave at staggered hours. Weekenders would also drive less or stagger their hours. Finally, the higher profits to be earned from, say, bridges and tunnels, will lead private firms to build more of them. Road building will be governed not by the clamor of pressure groups and users for subsidies, but by the efficient demand and cost calculations of the marketplace.

While many people can envision the working of private highways, they boggle at the thought of private urban streets. How would they be priced? Would there be toll gates at every block? Obviously not, for such a system would be clearly uneconomic, prohibitively costly to the owner and driver alike. In the first place, the street owners will price parking far more rationally than at present. They will price parking on congested downtown streets very heavily, in response to the enormous demand. And contrary to common practice nowadays, they will charge proportionately far more rather than less for longer, all-day parking. In short, the street owners will try to induce rapid turnover in the congested areas. All right for parking; again, this is readily understandable. But what about driving on congested urban streets? How could this be priced? There are numerous possible ways. In the first place the downtown street owners might require anyone driving on their streets to buy a license, which could be displayed on the car as licenses and stickers are now. But, furthermore, they might require anyone driving at peak hours to buy and display an extra, very costly license. There are other ways. Modern technology may make feasible the requirement that all cars equip themselves with a meter, a meter which will not only click away per mile, but may speed up in a predetermined manner on congested streets and roads at peak hours. Then the car owner could receive a bill at the end of the month. A similar plan was set forth a decade ago by Professor A. A. Walters:

The particular administrative instruments which might be used include... special mileometers (similar to those used by taxis).... The special mileometers would record mileage when the "flag" is up and a charge would be levied on this mileage. This would be suitable for large urban areas such as New York, London, Chicago, etc. "Flag-up" streets could be specified for certain hours of the day. Vehicles might be allowed to travel on those streets without a special mileometer provided that they bought and displayed a daily "sticker." The occasional traffic on "sticker" authority would have been charged more than the maximum amount paid by those on mileometer authority. The supervision of the scheme would be fairly simple. Cameras could be set up to record those cars without sticker or flag, and a suitable fine could be levied for contravention.⁷

Professor Vickrey has also suggested that TV cameras at the intersections of the most congested streets could record the license numbers of all cars, with motorists sent a bill each month in proportion to all the times that they crossed the intersection. Alternatively, he proposed that each car could be equipped with the Oxford electronic metering device; each car would then emit its own unique signal which would be picked up by the device placed at the given intersection.⁸

In any case, the problem of rational pricing for streets and highways would be an easy one for private enterprise and modern technology to solve. Businessmen on the free market have readily solved far more difficult problems; all that is needed is to allow them the room to function.

If all transportation were set completely free, if the roads, airlines, railroads, and waterways were freed of their labyrinthine networks of subsidies, controls, and regulations in a purely private system, how would the consumers allocate their transportation dollars? Would we return to railroad travel, for example? The best estimates of cost and demand for transportation predict that railroads would become the main staple for long-haul freight, airlines for long-range passenger service, trucks for short-haul freight, and busses for public commuter travel. While railroads, in short, would stage a comeback for long-haul freight, they would not be revivified for much passenger service. In recent years, many liberals who have become disenchanted with the overbuilding of highways have been calling for massive discouragement of highway use, and the subsidizing and building of subways and commuter railways on a vast scale for urban traffic. But these grandiose schemes ignore the enormous expense and waste that would be involved. For even if many of these highways should not have been built, they are there, and it would be folly not to take advantage of them. In recent years, some intelligent transportation economists have raised their voices against the massive waste involved in constructing new rapid transit railroads (such as in the San Francisco Bay area) and have called instead for making use of the existing highways through employing express busses for commuting.⁹

It is not difficult to envision a network of private, unsubsidized and unregulated railroads and airlines; but could there be a system of private roads? Could such a system be at all feasible? One answer is that private roads have worked admirably in the past. In England before the eighteenth century, for example, roads, invariably owned and operated by local governments, were badly constructed and even more badly maintained. These public roads could never have supported the mighty Industrial Revolution that England experienced in the eighteenth century, the "revolution" that ushered in the modern age. The vital task of improving the almost impassable English roads was performed by private turnpike companies, which, beginning in 1706, organized and established the great network of roads which made England the envy of the world. The owners of these private turnpike companies were generally landowners, merchants, and industrialists in the area being served by the road, and they recouped their costs by charging tolls at selected tollgates. Often the collection of tolls was leased out for a year or more to individuals selected by competitive bids at auction. It was these private roads that developed an internal market in England, and that greatly lowered the costs of transport of coal and other bulky material. And since it was mutually beneficial for them to do so, the turnpike companies linked up with each other to form an interconnected road network throughout the land—all a result of private enterprise in action.¹⁰

As in England, so in the United States a little later in time. Faced again with virtually impassable roads built by local governmental units, private companies built and financed a great turnpike network throughout the northeastern states, from approximately 1800 to 1830. Once again, private enterprise proved superior in road building and ownership to the backward operations of government. The roads were built and operated by private turnpike corporations, and tolls were charged to the users. Again, the turnpike companies were largely financed by merchants and property owners along the routes, and they voluntarily linked themselves into an interconnected network of roads. And these turnpikes constituted the first really good roads in the United States.¹¹