reply on: BuT, wHaT aBoUt ThE rOaDs? \ stacker news ~libertarian

279 sats \ 4 replies \ @ek 3 Jan \ on: BuT, wHaT aBoUt ThE rOaDs? libertarian

Here is my more thoughtful and less emotional response:

If you sell the entire road network at once, there will be issues of monopoly pricing that will piss everyone off. However, if you auction of individual roads, potential buyers might not be able to earn the revenue needed for maintenance and liability, because drivers will shift to the still free state owned roads.

The problem I see with this is that it seems to rely on the premise that roads are fungible. Please correct me if I am wrong. Assuming this premise is right, then I have following questions:

Are roads really fungible? Isn't it the case that some roads are way more important than other roads? Will there really be competition between buyers (once there are no "free state owned roads" as "alternatives" anymore)? Will one buyer just build another road next to another road to compete? Is this even what we want? Roads that are fungible because they are next to each other? Wouldn't that be a waste of space?

Isn't a road network something where a natural monopoly would arise?

A natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming advantage over potential competitors. Specifically, an industry is a natural monopoly if the total cost of one firm, producing the total output, is lower than the total cost of two or more firms producing the entire production. In that case, it is very probable that a company (monopoly) or minimal number of companies (oligopoly) will form, providing all or most relevant products and/or services. This frequently occurs in industries where capital costs predominate, creating large economies of scale about the size of the market; examples include public utilities such as water services, electricity, telecommunications, mail, etc. Natural monopolies were recognized as potential sources of market failure as early as the 19th century; John Stuart Mill advocated government regulation to make them serve the public good.

Imo, a great example of a natural monopoly is rail ways:

The costs of laying tracks and building networks coupled with that of buying or leasing the trains prohibits or deters the entry of any competitor. Rail transport also fits other characteristics of a natural monopoly because it is assumed to be an industry with significant long run economies of scale.

There are also other examples like anything logistics related or telecommunications.

So I think the same would happen with roads since a road network is probably similar enough to a rail way network, no?

Keep in mind that I am not saying that the current situation has no problems. I just want to say that I am currently not convinced that private roads will fix the current situation. So basically my answer to this ...

How do you all think the existing road network should be dealt with?

... is that I don't know. There might only be solutions that are less worse than others. But there are probably people in here (@Undisciplined included) that have thought way more about this than me.

Btw, thanks for this post. This is a topic I am very interested to hear different opinions on.

1053 sats \ 0 replies \ @BlokchainB 3 Jan

I like this take. Time is scarce having people compete to the price of zero for roads is dumb. Opportunity cost is the reason natural monopolies will always exist.

Roads are not as arbitrary as it may seem. You have all different types of asphalt/concrete mixes and subgrade designs for all different types of climates and use cases plus every road you build will need heavy machinery to finish the construction.

993 sats \ 2 replies \ @Undisciplined OP 3 Jan

Roads are definitely not fungible. I think it makes more sense to think of the different routes connecting two places as being imperfect substitutes for each other, with roads to all other locations in the network being imperfect complements. The problem with that framework is that the same two specific roads are complements for some people and substitutes for others.

I don't see the natural monopoly case, although there is definitely scope for rent seeking. Roads, rail, air, and sea are all in competition with each other, although one may have the technical advantage on a particular route. The nature of network effects also puts pressure on owners of particular networks to connect with other transportation networks, rather than to operate in silos.

An interesting historical note on private rail development, is that in19th century America, only the Great Northern Railroad rejected government subsidies and it was also the only profitable railroad in that era.

As for how I think privatization should proceed, I tend to be a gradualist. So, I would start with the easy stuff, like allowing home-owners associations and other neighborhood organizations to take ownership of their roads, as well as allowing private development of parallel routes where there's tons of traffic. At the same time, I would introduce mechanisms, like tolls, that introduce pay for use of state owned roads. That's where the incentive to reduce state inefficiency really starts playing a role. Retailers may want to buy some of the roads, since they may be willing to take over the costs in order to facilitate customer traffic.

279 sats \ 1 reply \ @ek 3 Jan

I don't see the natural monopoly case, although there is definitely scope for rent seeking. Roads, rail, air, and sea are all in competition with each other, although one may have the technical advantage on a particular route. The nature of network effects also puts pressure on owners of particular networks to connect with other transportation networks, rather than to operate in silos.

Ah, I see, interesting. I definitely saw these transportation networks more isolated. But my own experience shows that I do check how walking, cycling, taking the train or even driving myself even though I don't even own a car compare in time and money when I want to go somewhere.

An interesting historical note on private rail development, is that in 19th century America, only the Great Northern Railroad rejected government subsidies and it was also the only profitable railroad in that era.

Also interesting, didn't know that. But also didn't verify that yet ;)

As for how I think privatization should proceed, I tend to be a gradualist. So, I would start with the easy stuff, like allowing home-owners associations and other neighborhood organizations to take ownership of their roads, as well as allowing private development of parallel routes where there's tons of traffic. At the same time, I would introduce mechanisms, like tolls, that introduce pay for use of state owned roads. That's where the incentive to reduce state inefficiency really starts playing a role. Retailers may want to buy some of the roads, since they may be willing to take over the costs in order to facilitate customer traffic.

Yeah, I can definitely see how it makes more sense that the people who need the roads for their own personal reasons also maintain them. Else, the tragedy of the commons strikes which is kind of what we currently see with public funded roads:

Congestion on public roads that do not charge tolls is another example of a government-created tragedy of the commons. If roads were privately owned, owners would charge tolls and people would take the toll into account in deciding whether to use them. Owners of private roads would probably also engage in what is called peak-load pricing, charging higher prices during times of peak demand and lower prices at other times. But because governments own roads that they finance with tax dollars, they normally do not charge tolls. The government makes roads into a commons. The result is congestion.

823 sats \ 0 replies \ @Undisciplined OP 3 Jan

The tragedy of the commons is definitely applicable, but I think it's an interesting case here. We don't only value roads for our own direct use, but also so that others can use them in ways that benefit us. So, unlike a typical tragedy of the commons, part of the value is in the openness of the commons to others.