Blogging is unpredictable. It began as innocent posting by me about the Segway, which is a sort of mobile Zimmer frame, on Transport Blog.
Then Patrick Crozier, presiding boss of Transport Blog, made this rather more profound comment.
I have no idea whether the Segway is a good idea or not. But it strikes me as one in a long list of good ideas eg. bikes, roller skates, the C5, which might have been the answer to all sorts of our problems had it only been possible to give them the right sort of road space.
Take roller skates. Small, fast, relatively easy to learn. They should be fantastic. Lots of people should be using them. Why aren’t they? Because if you skate on the pavement you are constantly bumping into people and if you skate on the road you get run over (if not arrested).
But what if you had dedicated roller skate lanes or even dedicated roller skate highways? Different story – perhaps.
Incidentally, this is one of the most compelling reasons (I think) to want a free market in transport – because if entrepreneurs could do their own thing we might actually find out what forms of transport were actually (given all the factors) the best. We certainly aren’t going to find out so long as the state runs the show.
From the ridiculous to the sublime. David Sucher of City Comforts Blog, copying and pasting all of Patrick’s comment onto his blog, responded thus:
1. Why not look at the way things are as the result indeed of a free-market of choices but in a vast time frame and not bound by the use of coin? There’s an expression “people get the kind of government they ask for.” I believe it. Think of it as people, individuals, corporations, etc making choices over the span of several centuries or even longer. In the USA, at least, state creation/control/limitation of the transport system has emerged out of the desires of the populace. (Perhaps that is difficult for either the extremists – I don’t mean the people at Transport Blog, of course – of left and right to accept, finding as they do on every hand a conspiracy to enslave the people.)
2. Crozier raises a valid question about the state monopoly over road space. This monopoly is an outgrowth of eminent domain.
And the reason we have (and forgive me for repeating myself yet again) eminent domain (compulsory purchase) is because earlier generations, going back hundreds of years, found it impossible to create transport networks without such a mechanism. Our tradition of eminent domain goes back to an era when The King’s Highway was to be taken literally. (Though I am an anti-monarchy – not that what the British do is any of my direct business – I can also readily concede the evolutionary necessity for kingship and pay it its historical due.) You cannot create a network which crosses the properties of thousands (or at least hundreds) without compulsory purchase; and you cannot leave compulsory purchase in the hands of a private party as that leads to the very abuses which so concern libertarians. So we have a double bind: the bargaining problem, the “hold-out” problem makes it structurally impossible to create a network without eminent domain and yet to delegate eminent domain to private parties is even more horrendous than leaving it with government. I think that any discussions of the government as monopoly over road space must start with those assumptions.
***
Perhaps I demonstrate my lack of imagination but I cannot visualize a scenario in which our routes and corridors are transferred to private parties. Does that mean that we might lose efficiency compared to how a private party might manage the space? Perhaps in theory yes a private party could build/manage a street grid (and in Seattle, btw, that consists of roughly 50% of the land area of the city) better than the government does. But that’s in theory.
I just can’t see how it would either evolve or be managed. Indeed, that does mean that lots of good ideas – more dedicated bike paths – will be ignored by conventional majoritarian thinking. But the transaction costs of the market itself require that government (or something similar) step in to create common, network systems because The market is incapable of doing it itself.
Or else it would have already done so.
And now a very few brief comments from me, because what I really want is for the Samizdata libertarian commenters gang to lay into this guy, politely of course, as politely as he lays into us.
First, I’ve long ago lost count of the number of times when an arguer against the free market confuses his own inability to imagine a market-based solution to some entrepreneurial problem or other with the permanent inability of any entrepreneur, in any market, anywhere, ever to come up with such answers. Sucher at least has the grace to use the phrase “Perhaps I demonstrate my lack of imagination …” in using this line of attack. Usually this argument is not so politely put, but the impolite version is no different in substance to Sucher’s version.
Second, doesn’t Sucher’s argument boil down to saying that might is right? “People get the kind of government they ask for.” David Sucher says he believes this. Does he really believe it? I was going to put: Only in America. But the truth is more like: Not even in America. The fact that something hasn’t yet happened maybe opens up the possibility that it is impossible, but it doesn’t prove it.
We now live in the Age of Democracy, as surely as people in earlier times lived in the Age of Kings, and earlier than that in the Age of Caesars. And democratic assemblies and electorates all of them seize control of “infrastructure”, and by the ubiquity of their thieving they suggest that such theft is necessary, and impossible not to have. And their apologists certainly say so, endlessly. (They say similar things about education and healthcare.) I daresay in earlier times people felt much the same about military conscription, capital punishment, interrogating prisoners with torture, and the upper classes raping the women of the lower classes with impunity, all of which are things which still happen a lot but which are not any longer considered inevitable or necessary if civilisation is to keep advancing.
But we shouldn’t be diverted from the outrageousness of the claim that, in general, governmentally speaking, people get what they ask for to divert us from the particular debate about whether linear and connected infrastructure of all kinds can or cannot be supplied in a purely free market.
Suppose a democratic assembly existed which had been persuaded that, although it could steal all the infrastructure it wanted to, it nevertheless ought not to. And suppose it further defcided that nothing infrastructural could be done without the consent (purchased freely) of all the property owners in the path of such plans. How would matters then develop? Would the assembly really be obliged to intervene, in order for us to have any running water at all, or any roads or footpaths? Would the concept of “right of way” lead necessarily and inexorably to the democratic equivalent of the King’s Highway, which the King (democracy, with taxation money) would then be obliged to look after, because if he didn’t no one would.
These are important questions, which I usually approach here at Samizdata from the other end. In my wonders of capitalism posts I often end by asking (by way of explaining what the post is really about) something like: Wouldn’t it be great if the stuff now engulfed by the public sector could be as good as [insert capitalist wonder of choice]? What if roads were constructed as carefully and as artfully as the vehicles that now travel on them? What if one could choose one’s water supply as happily and in the light of as many choices as one now chooses wine or fizzy drink of the sort that comes to us in supermarket bottles? What if improving the road system could be as relatively painless as the switch from LPs to CDs, or from VHS to DVD?
It would be a great shame for civilisation to miss out on such wonders merely because the people who believed them desirable accepted by default the argument that they are impossible, rather than because they really are impossible.
Roller skates?!
Speaking on behalf of the elderly, unathletic and infirm everywhere…bite me.
Isn’t the bike lane enough for you young psychedelics?
This is going to be a ramble.
The issue of compulsory purchase aka eminent domain has vexed me (and others) rather a lot. See Transport Blog’s Compulsory Purchase category.
To my mind, the fact that (with few exceptions) roads and railways have not been built without compulsory purchase is a real killer.
I once had a chat with an ex-Railtrack librarian. He really knew his stuff. Light reading for him were the acts that created the railways in the first place. “Are there any cases of railways being built without compulsory purchase?” I asked. “A few. But only short ones entirely built on one landowners land.”
Now bearing in mind that in the 1840s there was a railway mania and bearing in mind that aristocrats used their power in the House of Lords to fleece the railway companies you would have thought that if they could have built a railway without going to parliament they would have done.
Bruce L Benson has written an interesting paper on the UK’s private roads but is vague (if I recall correctly from a quick skim) on how they were put together. See http://garnet.acns.fsu.edu/~bbenson/
Walter Block has also tried to imagine how it might be done in a perfect free market. But, frankly, I find it unconvincing and rather fantastical. Unusual for him because usually he is very good. See http://www.mises.org/journals/jls/7_1/7_1_1.pdf
Which leaves us with a very unpleasant choice. Either we try to make compulsory purchase work or we eschew it and accept the consequences. Maybe something will come up. But I doubt it.
I should have pointed out in the above comment that I really, really would like to live in a world without Compulory Purchase. I really, really would like the principle of non-coercion to be have universal application and for the consequences to be good.
Patrick:
“Now bearing in mind that in the 1840s there was a railway mania and bearing in mind that aristocrats used their power in the House of Lords to fleece the railway companies you would have thought that if they could have built a railway without going to parliament they would have done.”
I’m not sure what you mean by aristocrats fleecing the railway companies. But in general terms, surely if you are a railway company with some friends in Parliament, compulsory purchase would be a much better bet than private purchase? If so, it would hardly be surprising if most railways were to be the result of compulsory purchase. It would ony be a true test if c/p were not available. If railways and roads still didn’t get built then you would have your answer. But otherwise, the test seems unfair.
Cydonia
Cydonia
The aristocrats owned most of the land. They also accounted for most of the seats in the House of Lords. Therefore, they could name their price. Britain’s railways were the most expensive to build anywhere in the world – mainly due to the cost of buying the land.
hmmm…
The weakest point that I can see is the transaction costs argument. A prominent feature of the last century’s capitalist development is the increasing reality of lower and lower transaction costs. The trend continues into the present and will likely continue into the future.
The strongest point for eminent domain is in dealing with irrational holdouts. But that’s getting weaker as people tend to travel more and are less rooted to hearth and home. If you’ve moved in 5 years before and can get a better place with your profits 10 blocks away in a better school district the number of people who would take the deal grows much higher than when neighborhoods are filled with people who have many decades of residence.
Railways are a special case. To run a sensible railroad, you need to lay and then centrally control zillions of miles of track. Roads are different. Can roads be built without compulsory purchase? Yes, and they mostly were. They can be privately made, and if I link my road to yours, we both gain.
I suspect the king’s highway was such not because the king was needed to make it, but far more because the king wanted to control it, for military and strategic purposes.
Railways are a special case. To run a sensible railroad, you need to lay and then centrally control zillions of miles of track
I agree that railways are a (slightly) special case. But my understanding was that their special feature was the need for gentle gradients. Therefore, the number of routes available to them is reduced, therefore they are particularly susceptible to the holdout problem.
Can roads be built without compulsory purchase? Yes, and they mostly were.
Were they now? And does this include modern motorways and other trunk routes?
It is of course a possibility that railways, as clasically understood, are such an economic nonsense and bad idea that they wouldn’t exist at all in a genuine free market.
We know, from the philosophical analysis of political economy, that there is NO clash between maximal liberty and maximal welfare. The possibility of a tradeoff does not exist. If it is true that railways could or cannot exist without violations of liberty then the building of railways will make us worse, not better, off. The fact that we may not be able to imagine this scenario does not make it any the less true.
We know, from the philosophical analysis of political economy, that there is NO clash between maximal liberty and maximal welfare.
I think I may have missed that particular lecture at re-education camp. Could you precis it for us?
Here’s an idea.
An agency is created. It maps out routes. It approaches the landowners and says: “How much are you prepared to sell your property for and how long are you prepared to stick to that price?” The agency and the landowner then sign a deal. If, during the period of the contract, the agency stumps up the cash the landowner has to sell. An option so to speak.
What this would give us is a number of routes and a number of prices. Potential railway/road builders now know how much their new route will cost and that they can have it anytime they like.
But won’t landowners demand sky-high prices? Ask yourself how much you would be prepared to sell for. Let’s say it’s £100,000. But what happens if you demand £200,000? Then you miss the opportunity to sell at £150,000 – a price you would have been happy to accept. So, you are probably not going to do it. OK, so some people will only be prepared to sell at a very high price but that will only be because they put a very high value on staying put.
Any comments?
But won’t landowners demand sky-high prices? Ask yourself how much you would be prepared to sell for. Let’s say it’s £100,000. But what happens if you demand £200,000? Then you miss the opportunity to sell at £150,000 – a price you would have been happy to accept. So, you are probably not going to do it.
But exactly the same point can be made if a road or railway company is buying the land without an intermediary. Why should the holdout problem be solved in one case but not the other?
But exactly the same point can be made if a road or railway company is buying the land without an intermediary.
Hmm. Of course, it is a possibility. I was just thinking that it might be more efficient to have the land priced up first and then for the railway companies to enter rather than the other way round where people get a whiff of the railway company’s money and start holding out for more.
Anyway, it would be for the market to decide.
OK, so some people will only be prepared to sell at a very high price but that will only be because they put a very high value on staying put.
Or they might put a value on it that cannot be met in monetary terms.
Or they might not act perfectly rationally.
Or the values that people put on their property on all possible routes is so high it makes all the routes impractical.
I was just thinking that it might be more efficient to have the land priced up first and then for the railway companies to enter rather than the other way round where people get a whiff of the railway company’s money and start holding out for more.
But if the land owners know that the agent is intending to sell the land onto a railway company, then they will get a whiff of the agent’s money instead.
Which leads onto another tangent: do you know of any explanation as to why using a number of agents to buy land in secret hasn’t been successful?
Or they might put a value on it that cannot be met in monetary terms.
Or they might not act perfectly rationally.
Or the values that people put on their property on all possible routes is so high it makes all the routes impractical.
Points 1 and 3 suggest that the costs of the road exceed the benefits and so the road should not be built anyway.
Point 2 isn’t a particularly useful objection. Irrationality could just as easily imply that some landowners will give away their land for free.
Points 1 and 3 suggest that the costs of the road exceed the benefits and so the road should not be built anyway.
That would assume that you can measure the ‘benefits’ and balance them with the ‘costs’ and say one is greater than the other.
The ‘costs’ of course may include the possibility that ‘free trade’ is hampered due to the impossibility of moving goods or even that no ‘human progress’ of any worthwhile kind can be made.
Point 2 isn’t a particularly useful objection. Irrationality could just as easily imply that some landowners will give away their land for free.
I would have expected you to say that irrationality lay at the root of all three objections, irrationality here being defined as the failure to act in a way that would be predicted by free market economic models.
That would assume that you can measure the ‘benefits’ and balance them with the ‘costs’ and say one is greater than the other.
But the success or failure of an attempt to trade is such a measurement, so it’s a reasonable assumption – at least as far as the costs and benefits to the trading parties are concerned.
I would have expected you to say that irrationality lay at the root of all three objections, irrationality here being defined as the failure to act in a way that would be predicted by free market economic models.
Since, as far as I’m aware, you’ve never met me, I don’t see how you could have expected anything.
But anyway, rationality is an assumption of economics in general, not just economic models of free markets. If you want to drop the assumption of rationality, you would need a theory of irrational behaviour. In the absence of such a theory you have no grounds for arguing that irrationality will tend to exarcebate rather than ameliorate the holdout problem.
But the success or failure of an attempt to trade is such a measurement, so it’s a reasonable assumption – at least as far as the costs and benefits to the trading parties are concerned.
But the landowner may not want to ‘attempt to trade’, therefore your assumption is not reasonable.
Since, as far as I’m aware, you’ve never met me, I don’t see how you could have expected anything.
What a strange comment. Since when did you have to meet someone to build up expectations about them?
..you would need a theory of irrational behaviour..
Do you not understand the practical point that a road or rail building project, which may be of immense value to thousands of people, could be stymied by one intractable, seemingly irrational landowner who refuses to sell? It does not follow that the roads’ costs therefore outweighs its benefits unless you place an infintesimally large value on the right of one individual to deprive everyone else of those benefits. In my view it is a case where compulsory purchase should be used.
But the landowner may not want to ‘attempt to trade’, therefore your assumption is not reasonable.
But that implies that the value to him is more than whatever price is being offered, so the assumption is reasonable.
Since when did you have to meet someone to build up expectations about them?
I was just a little puzzled about what you were basing your expectations on.
Do you not understand the practical point that a road or rail building project, which may be of immense value to thousands of people, could be stymied by one intractable, seemingly irrational landowner who refuses to sell?
But you don’t need irrationality to get that conclusion. The holdout problem is a consequence of rational behaviour. Objecting that a possible solution will not work on the grounds that some behaviour is irrational isn’t very useful unless you have some means of predicting irrational behaviour. Irrational behaviour could just as easily make the problem easier to solve.
Howard writes,
“Do you not understand the practical point that a road or rail building project, which may be of immense value to thousands of people, could be stymied by one intractable, seemingly irrational landowner who refuses to sell?”
How about this,
Do you not understand the practical point that having sex with Howard may be of immense value to thousands of people and yet this could be stymied by his intractable, seemingly irrational refusal to rent his arse out!
What’s the relevant difference Howard?
Further to Howard:
“It does not follow that the roads’ costs therefore outweighs its benefits unless you place an infintesimally large value on the right of one individual to deprive everyone else of those benefits. In my view it is a case where compulsory purchase should be used.”
If that the this:
It does not follow that Howard’s arse’s costs outweigh its benefits unless you place an infinitesimally (sic) large value on the right of one individual to deprive everyone else of its benefits. In my view it is a case where compulsory purchase should be used.
“Do you not understand the practical point that a road or rail building project, which may be of immense value to thousands of people, could be stymied by one intractable, seemingly irrational landowner who refuses to sell? It does not follow that the roads’ costs therefore outweighs its benefits unless you place an infintesimally large value on the right of one individual to deprive everyone else of those benefits. In my view it is a case where compulsory purchase should be used.”
But in that case, surely those thousands of people, to whom that road is of “immense” value, would be willing to directly or indirectly (i.e., tucked away in the cost of goods shipped over that road) pay the cost of its production, including the asking price of the land. If not, then it doesn’t seem to be that the “immense” value that those thousands of people place on that road is in fact greater than the value the landowner places on his land.
Now I can see cases where a single landowner owns land that must be included in the only reasonable ground route between point A and point B. My preferred solution in such cases would be not to throw up our hands and say that competition is impossible and the government must therefore take over, but to look for ways that seemingly unrelated products, services, or idea can introduce added competition from an unexpected quarter, and start deregulating anything that might fill the bill. For instance, the operation and ownership of private aircraft is highly regulated, and accordingly relatively rare. Deregulating in this area might eliminate nearly all bottleneck cases of this kind. For instance, I’d like to see pilots subject to only one rule: minimum liability insurance requirements, to cover damage in case you crash into something. Every other standard and requirement is between you and your insurance company.
“For instance, I’d like to see pilots subject to only one rule: minimum liability insurance requirements, to cover damage in case you crash into something.”
BTW, I’m talking about requirements about who may pilot a plane and what sort of plane is permitted in the sky. I’m not really talking about regulations such as assigned routes of approach or other things analogous to ground traffic rules.
I’ve got a modest idea: Contingent contracts.
The exact path of a transport or utilty line is in most cases not pre-destined. There are naturally some choke points, but we’ll ignore those for the moment.
You create a market in rights-of-way. You lay out as many paths as possible, sign contingent contracts with people along the route stating the price they will sell at, given that everyone else on the route agrees to sell.
Then you buy from the lowest bidder-set. Each property owner now has it in their interest to work with the others to gain the profit from land sales. The are in competition with all the other possible routes.
For historical grist: many of “The Kings Highways” are just Roman roads, and many of those were built when much of the landscape was still tribal, not parcels of private property. Even some of the major motorways are just RomanRoad v6.0.
In America, almost all the NYC subways were privately built and operated. They were forced to sell out to the city by the use of predatory pricing by the government’s line.
The early roads and canals were also all privately built.
A second idea. Make each landowner member of a successfully bidding route-consortium a shareholder based on the kilometerage of road on their land. Then the landowners get dividends.
This is better than rents: if a road at times in its’ history has traffic too low to support a given rent, it will fail.
Even then, there might be ways to work a rent-like regime with each landowner getting a fixed fee based on usage, like a songwriter gets on airtime of their songs.
“Make each landowner…”
(emphasis added)
Sounds compulsory to me.
A world without compulsary purchase is exactly what was envisioned by Coase in his argument that an optimal outcome can be found simply by assigning property rights. But even Coase acknowledged that this only works in certain situations. The most notable limitation is transaction costs. And in most of the visions of an alternative to eminent domain transaction costs seem to also be a major barrier.
The proposal that a system be established where people put a price on selling their land would have huge transaction costs as the complexity of the contract involved would be enormous. I say this because the permutations of what you would sell what portion of your property for what usage are near endless.
Then there is the assertion that hold-outs are being irrational. Well, considering the sale of a property from a game theory perspective holding out is actually a perfectly rational action, and one where no sale might be an equilibrium outcome, even if it is not a socially optimal outcome.
Imagine a situation where you know that you own property on a high value route. If you price your property at normal market rates you know that it will be sold. But you know that the value to the developer is higher than that. So you price to capture the surplus produced by building the road. But, you don’t know what portion of that surplus is yours, so you try to price to capture the highest amount possible. Now each person does this, and the price of all the land is now too high for the road.
The point is that optimal pricing requires coordination among all of the parties, and acheiving this coordination is very, very expensive. In the face of these costs, we have found a solution that does not rely on property rights reaching the optimal outcome, but rather a central body decision. The goal is to make this central body as responsive to the values of society and the property owners as possible.
It is my belief that as we see technology and information technology advance there is a vision that we can reduce transaction costs, and thus overcome the barriers of the past that made eminent domain neccesary. There might be some truth in this assertion, but it is my belief that we are not there yet, as we still don’t have people able to construct precise algorithms for their thinking that allow some computer to produce the optimal solution that meets the needs of all parties.
David Sucher seems to have almost intentionally misunderstood my words. I use Make as in “Let X equal”.
“Make each landowner member of a successfully bidding route-consortium a shareholder based on the kilometerage of road on their land”
Where the hell is an indication of coercivity in that statement? I as the roadbuilder set out a request for proposals with certain contractual criteria. I then negotiate with the consortiums formed by landowners to bid for the contract. One of the enticements I can potentially add is to “make” each member of the consortium a shareholder based on how much property they supply. No force, no coercion. If they want the contract they negotiate the terms with me. If they don’t like it and I have alternatives, I tell them to take a hike on their roadless land.
Not in the least intentional; I take the plain meaning of the word “make” to involve coercion.
If there is none, then you end up with the same ‘holdout’ problem as before: someone may choose not sell no matter how “rational” it may appear to others.
The marvelous thing about private property is that you can do with it what you like, whether that is rational to others or not.