“But who will build the roads?”

This is a very common question, and I have a market anarchist friend who wrote up a very good answer, so (with his permission) I’m just going to put a direct quote of his answer here:

Private road construction can be both competitive and profitable. There is simply no need for road welfare. By 1800 there were over 60 private road companies in the United States and by 1830 they had built over 400 private “turnpikes” (highways).

People who think government must provide the roads (and bother to try to justify their beliefs at all) generally believe the way they do because of a small number of misconceptions they have about private roads.

1) They (falsely) believe there is no profit motive in providing roads. This is just silly. Roads are a product (and a service, when you think about it) that is demanded by everyone who is not a hermit. Therefore there are profits to be made.

2) They (falsely) believe that private road ownership would lead to monopolies. This boggles my mind because this, of course, is exactly the situation that we have now. But beyond that, it’s just not the case. Consider this. I have a navigation system in my car. Given a starting point and a destination, my navigation system can calculate thousands of different routes in seconds and weight them by which is either the quickest or the shortest (or even some combination thereof). If the data were available, you can easily imagine a system that would choose the most scenic routes! Similarly, if roads are privately owned such a system could easily devise routes that are the least expensive, or some combination of lowest cost and time, and say road quality (number of potholes for example, as rated by the company that provides the maps and datasets for the navigation systems). Thus there is immediate competition between road owners to provide well maintained low cost roads. Poor roads or roads that cost too much are avoided and their owners suffer losses. More efficient and competitive owners reap profits.

3) They (falsely) believe that private road ownership would imply what we now call “toll roads,” i.e. that people would have to stop at every corner or intersection and pay a toll. Nothing could be more ridiculous. I can drive virtually everywhere in the country at 80 miles an hour or more and have a conversation with someone anywhere else in the country also driving 80 miles an hour all without stopping every ten feet to plug my phone into a new outlet. Wireless technologies and encrypted transactions could easily make per-mile payment for road usage totally transparent and anonymous. You pay for gasoline, water, and milk by the gallon, electricity by the kilowatt hour, you pay for phone calls by the minute. In otherwords you pay for only the service that you actually use. Roads should be no different. As I have mentioned elsewhere, advances in technology make so-called “natural monopolies” less and less possible and eventually impossible (without government intervention). Wireless communications had this exact effect on the (government created) telecommunications monopoly.

4) They (falsely) believe that evil businessmen could essentially hold people and communities “ransom”. I love this one. It’s a completely pathological hypothetical that these private road conversations always lead to. “Oh yeah? Well what if Bill Gates [it's always Bill Gates, that evil bastard] bought up all the roads surrounding your house and charged you a million dollars to use them? Huh? Huh? What are you going to do TEHN?” It’s completely absurd, for a number of reasons:

a) One thing’s for certain: I’m not going to pay Bill Gates exorbitant amounts for access to the roads. So he’s not going to make as much as he could by simply charging competitive rates. It’s just a bad business plan.

b) To do this, one has to presume that the person buying up the roads has a large supply of capital to invest in his nefarious scheme. How did he accumulate that capital? Presumably through some profitable business (like Microsoft). No sane businessman is going to divert capital that could be invested into profitable businesses into kooky schemes like buying up all the roads in Gotham and then holding the city for ransom; the whole scheme is a bad comic book plot (Holy Robber Road Baron Batman!).

c) Who the hell would sell their roads once they saw what was about to happen? Even if Gates managed to buy up a large fraction of the roads surrounding a community, the inhabitants would quickly catch on and not sell their remaining roads, because they’d be shooting themselves in the head.

d) The whole idea relies on the wrong ownership model, an ownership model that is simply unlikely to exist in a free market. A free market road ownership model might look like this: Private property owners own the roads on their individual property (e.g. you own your own driveway). Within a subdivision the roads are owned by a company that all the homeowners have shares in (like a Homeowner’s Association). The company makes decisions about what company to contract with to maintain the roads, with homeowners voting their shares. Because subdivisions are small, numerous, and voluntary, if a homeowner doesn’t like the decisions his the HOA company is making (about the roads or anything else), he can easily “vote with his feet” and simply move across town.

Similarly roads servicing businesses would be owned by companies whose shareholders are the businesses they serve. Businesses would also own shares in the companies that provided the main roads connecting workplaces, recreation, and shopping centers to the residential neighborhoods, since they can’t produce if their employees can’t get to work and they can’t sell if consumers don’t have access to their products and services. This is how the private road companies were owned at the start of the 19th century in the US; local businessmen needed access for their suppliers and their distributors, so they invested in road companies. Main highways and “interstates” would simply be owned by companies looking to cash in on the huge demand for long distance travel and commerce.

How would a competitive private road industry be better than a monopoly one? In a number of ways:

1) The roads would be less expensive and better maintained. This is always the case when competition is allowed versus when it is not.

2) Because there is a huge profit motive to increase traffic flux, companies have an enormous incentive to make roads more efficient. If the road owner earns a penny for every mile every car drives on his road it clearly benefits him to increase traffic flux; i.e. the density of traffic the road may handle. Modern roads running at full speed and full capacity are 95% empty. This is simply because of psychological factors of human drivers; they need space and time to feel comfortable, break in time, and maneuver to avoid accidents. There is ZERO incentive for government to do anything about this. But a private road owner would be highly incentivized to perfect automated traffic control systems that would pack cars much more closely and increase traffic speeds. This would vastly increase the traffic flux and the carrying capacity of the roadways, while at the same time removing the human error, and hence the vast majority of accidents, injuries, deaths, and liability (another large incentive). I.e. roads would become vastly more efficient and at the same time safer. The technology required for this has been around for at least a decade. But there’s just no incentive for government to implement it. In fact, the worse the traffic problem is, the better it is for government, because the government can plausibly claim they need ever more money. Traffic jams are what you get when capitalists provide the cars but socialists provide the roads.

3) Pollution costs would no longer be externalized. Currently the costs of pollution from traffic is externalized, i.e. the people pumping out the pollution do not have to pay for the damages it causes. If the roads were privately owned and were polluting the air and affecting neighboring properties, they would be liable to lawsuits. In fact, they would probably be sued so often they would just negotiate payment schedules with surrounding properties owners to compensate them for their damages. This would be a internalized cost that the road companies would pass on to their customers. There would be incentives to purchase, and hence incentives to develop, ever lower-emissions vehicles because the the roads would be cheaper for the owners who drove cleaner vehicles.

If you’re interested to learn about it in more detail see here: Who will build teh roadz?. I also handle some common objections at this page: Common Objections to Private Roads.