Bastion of Socialism


I have long said roads are the last bastion of socialism in the US. While I had to temper those remarks after the US nationalized the auto industry and some banks during the Crisis of 2008; now that those holdings have been sold off, we are back to highways as the flagship of US Socialist Enterprise.

The Interstate Highway System was fathered in part by that life-long state bureaucrat (and in the end, Republican) Dwight David Eisenhower (he had a short stint in the “private” sector as President of Columbia University, but even then, he soon returned through the revolving door back into Washington, serving as Chair of the Joint Chief of Staffs, and then as head of NATO before becoming President).

Socialism “is an economic system characterized by social ownership of the means of production and co-operative management of the economy.”

Almost all the roads in the United States are state-owned (either by states, counties, or cities or towns). They are allocated first-come, first-serve, without regard to wealth (aside from the entry cost of owning a vehicle), paid for by taxes (some on users, some on land owners, some otherwise). One might almost say “from each according to his abilities, to each according his needs.”

A critique of such socialist, (or dare we say it, communist), allocation schemes is that they are inefficient, they allocate resources poorly. Queues are quite common due to undersupply and lack of a real-time price signal (which gas taxes cannot replicate). Clearly we still see congestion, which is nothing if not queueing.

However, not all roads have always been socialist, many were initially private turnpikes. (They were also largely unprofitable). There are even a handful of private highways in the US today (and far more in other countries). Other places have non-profit but non-government private road associations (even nominally socially democratic Sweden has two-thirds of its road network managed this way).

But efforts at building new private roads are highly constrained. For one, these private roads are competing against subsidized (“free”) public roads, limiting their pricing powers. Second, the public has an exclusive monopoly on the power of eminent domain, enabling it to build roads without the hold-up problem that a private entrepreneur trying to fashion a means of production through the fields of others might face. Yet even opportunities that might suggest a perfect opportunity, for instance a bridge between two states with little nearby competition, is built by the government because there clearly is insufficient benefit to attract a private firm. Third private roads are subject to taxes, while public roads are tax-free.

(Now wipe away those tears, put away that tiny violin playing that small sad song, we come not to weep for poor capitalists).

Should roads be socialist? If they are socialist, what government should govern?

Though in politics, words like communist, socialist, and capitalist are thrown around as pejoratives, when we actually decide whether a sector is public or private, it is usually based on history, a set of contingent events that could have played out differently. In the US, transit was private, now it is public. Railroads are private. In the UK, bus transit was private, than was public, and again is privately provided (under public franchise agreement), but railway track (to a first-order approximation, the legalities are complex) is public.

There is no universal principal, unless you are a Marxist or an anarcho-capitalist. As Hans Rosling says “People who don’t like government, go into this corner and discuss Somalia, People who don’t like markets, go into that corner and discuss North Korea.”

Pragmatics decide. Many things are clearly better in the private sector, we are collectively (if not unanimously) confident the government could not provide the same quality good for the price. Other things are clearly better in the public sector, since the private sector cannot provide the good as universally as we desire for technical reasons (free rider problems for instance.) We have multiple goals, efficiency is among them, though equity may also be important.

I like this table (and used it earlier in a post: Markets Attack!):

Yes No
Rivalry Yes Private “Congesting”
No Club Public

Public goods are non-excludable and non-rivalrous, (uncongested arterials)

Private goods are both excludable and rivalrous. (congesting, limited access highways)

Club goods (for instance a country club membership) are excludable, but non-rivalrous (in the absence of crowding). (local neighborhood streets, which only neighbors and their visitors would use, or rural roads serving local markets)

Congesting goods are rivalrous but not excludable, for instance a crowded street. While an individual cannot be excluded from a city street that person’s presence may cost you extra time and his occupation of space does prevent you from occupying the same space at a given time.

Roads fall under any of the four categories, depending on their characteristics. Even if they are “public”, which public becomes a question, as there are multiple layers of government, and as the Swedes show, one can easily create new special layers of government for the purpose of managing roads, which have spatially distinct sets of users.

Against this differing nature of roads falls the idea that there must be some economies of scale in managing roads (even if there isn’t much at the margins). Clearly everyone maintaining the road in front of their own home would be costlier than some centralization (a homeowners association, a town), since not everyone has specialized tools to do proper maintenance, and has little incentive to monitor. So even if in the absence of these economies, there would be an argument for different owners, with the economies, we may sacrifice some type of efficiency for another.

A feature (or bug) of socialized roads is the lack of pricing. This of course is not required, but far more likely, as socialized roads are subject to more political interference than a different governance structure.

The auto-highway system is mature, it is on the cusp of decline. Many declining sectors demand (and get) public subsidies they may not have needed during growth. In the US roads have been getting subsidies (though user fees could easily be adjusted to avoid this, the evidence is the range of prices globally). But this is also an opportunity to experiment, to find different models for managing the system (since there is little controversy about maintaining the existing network, while there is great controversy about building new roads, which we seem not to be doing much of any more).

There is not one model, transportation is a big sector, and what is public and what is private is fluid.