Market Urbanism

Liberalizing cities | From the bottom up

“Market Urbanism” refers to the synthesis of classical liberal economics and ethics (market), with an appreciation of the urban way of life and its benefits to society (urbanism). We advocate for the emergence of bottom up solutions to urban issues, as opposed to ones imposed from the top down.

Yes, Virginia, government roads really are government subsidized, and no, they don’t approximate freed-market outcomes

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Recently, I came accross an article by Charles Johnson, who blogs at Rad Geek.  The article had linked to a Market Urbanism post about how user fees and gas taxes fall well short of funding road use in the US. Charles’ article further debunks the Urbanism Legend asserted by free-market imposters that a free-market highway system would be similar to the system we see today.
I like the post so much that I asked Charles about posting it at Market Urbanism.  Charles requested that I, “indicate that the post is freely available for reprinting and derivative use under the terms of the Creative Commons Attribution-ShareAlike 1.0 license.” I am happy to comply, and must admit that I haven’t taken the time to acquaint myself with Creative Commons.  So, here it is, in it’s original form, and feel free to read the comments in the link:

Yes, Virginia, government roads really are government subsidized, and no, they don’t approximate freed-market outcomes

by Charles Johnson, RadGeek.com

When left-libertarians argue with more conventionally pro-capitalist libertarians about economics, one of the issues that often comes up is government control over roads, and the ways in which state and federal government’s control over roads has acted as a large subsidy for economic centralization and national-scale production and distribution networks (and thus, to large-scale “big box” retailers, like Wal-Mart or Best Buy, dependent on the crafty arrangement of large-scale cross-country shipping as a basic part of their business model). People who have a problem with this analysis sometimes try to dispute it by arguing that government roads aren’t actually subsidized — that heavy users of government roads are actually getting something that roughly approximates a freed-market outcome, because users of government roads pay for the roads they get, in proportion to how heavily they use them, because government roads are funded by gasoline taxes, tire taxes, and government-imposed licensing fees, which all go up in cost more or less proportionally to increases in use of government roads. Thus (the argument goes), funding for government roads is more like a fee-for-service transaction on a freed market than it’s like a classic case of government subsidies. But in fact, this argument is completely bogus, for at least three reasons.

The first reason is that, contrary to popular misconception, government-imposed gasoline taxes and “user fees” on road users do not actually fully fund the costs of government road-building and maintenance; government funding of roads actually includes a substantial subsidy extracted from taxpayers independently of their usage of the roads. Government budgets for road building and maintenance in the US draw from general funds as well as from earmarked gas taxes and “user fees”, and those budgets are subsidized by state, local, and federal government to the tune of about 20–70 cents per gallon of gasoline expended.

The second reason, which ought to be obvious to libertarians given how much we have talked about the use of eminent domain over the past few years, is that government road-building is substantially subsidized by the fact that government can — and routinely does — use the power of eminent domain to seize large, contiguous stretches of land for road building at arbitrarily fixed rates below what the land-owners could have demanded in a free market land sale. Even if it were the case (as it is not) that usage-based levies like gasoline taxes and government licensing fees were enough to cover the budget for government road building and maintenance, that budget has already had a massive, unmentioned government subsidy factored into it due to the use of eminent domain.

The third reason is that a freed market is able to match the supply for roads to the demand at something like the appropriate cost not only because people pay for the roads in proportion to their use of the roads, but also because the prices for road use are set by negotiations between road users and road builders in a competitive market, and because the ownership and management patterns of roads are determined by patterns of free economic decisions to buy, sell, lease, develop, abandon, reclaim, and subdivide land. Freed markets aren’t just a matter of paying for what you get (as important as that is); they also have to do with the freedom to get what you get by alternative means, and with patterns of ownership and control based on consensual negotiation rather than on force. No matter how roads are funded, there is no way to approximate freed-market results with government monopoly on sales or politically-determined allocation of ownership. (Again, this is something that ought to be obvious; it is just the socialist calculation problem applied to the market for road transportation.)

And roads funded by government-imposed gasoline taxes will always be either noncompetitive or subsidized: if there were any significant private roads competing with roads funded by government gasoline taxes, the taxes on the gasoline that drivers burn on those roads become a subsidy to the government-controlled roads. The more users use the non-government roads, the more they would be subsidizing the government roads.

Further, the ownership and management patterns of government roads are determined by electoral horse-trading and arbitrary political jurisdictions, not by free economic actors. As a result, decisions about what roads to build, how to direct funds to those roads, how to price the use of those roads, etc. are typically made by state or federal legislatures, or state or federal executive bureaus. Governments are far more responsive to political than to economic pressure; governments generally will not, or cannot, sell off roads or spin off control over local roads to the people who use them most and can best manage them; state and federal governments exercise centralized control over far larger fiefs than it would ever be possible or profitable to amass on a free market. Thus, for example, because the building and maintenance of roads in Las Vegas is controlled, not by free market actors in Las Vegas, but rather by the Nevada state government, we have Las Vegas drivers paying in 70% of the state’s gas taxes and getting back only 61% of the state’s spending on roads (which is an increase over the 2003–07 average of 53%) — meaning that we are forced to turn tens of millions of dollars over to subsidizing highway building and maintenance in the rest of Nevada. Here’s NDOT’s reasoning as to why we should get stuck with the bill:

If NDOT based its road building program strictly on usage, [NDOT assistant director of engineering Kent] Cooper said, then no new highways would be built outside of Clark County.

He noted that freeways in Las Vegas attract 150,000 to more than 200,000 vehicles a day. No other area in the state has such high use.

—Ed Vogel, Las Vegas Review-Journal (2008-11-26): Southern Nevadans get less bang for their road tax buck

Now, maybe Kent Cooper thinks that it is just and wise to force Las Vegas drivers to pay tens of millions of dollars in subsidies so that NDOT can build expensive roads that nobody wants to use.

Maybe he’s right about that, and maybe he’s wrong. But whatever the case may be, the only way to get freed market results in roads is by freeing the market. Under government ownership, government funding, and government control, roads are subsidized by taxes that are levied independently of road usage, built using a subsidy created by forced seizure of land, and users of high-volume local roads are typically forced to subsidize expensive, long-distance cross-country roads that they aren’t using. This kind of allocation of resources for long-distance, non-local highways — which further distorts an already subsidy-distorted system by distorting the flow of money within that system away from the heavily-used local roads and into the high-cost, high maintenance long-distance roads, can certainly not be called any kind of approximation of a freed market in roads.

© by Charles Johnson
This post is freely available for reprinting and derivative use under the terms of the Creative Commons Attribution-ShareAlike 1.0 license.
  • Benjamin Hemric

    It’s great to see that government subsidies of government “roads,” and other aid to them also (e.g., the use of eminent domain, etc.), is being so thoroughly discussed here at Market Urbanism and elsewhere. (Skepticism about government subsidized “roads” is one of the things that most attracted me to the Market Urbanism blog.) However, I think the usefulness of such discussions (and some other somewhat related discussions, too) might be significantly enhanced by an especially careful use of language and the making of certain distinctions.

    For instance, in discussions of “roads,” it seems to me that it might be particularly useful to make a distinction between local thoroughfares (e.g., alleys, streets, boulevards, etc.) and limited access highways.

    Local thoroughfares (when publicly owned) are typically open to anyone and everyone — pedestrians, bicyclists, buses (and also, potentially, to trolley cars, elevated lines, monorails, etc.). They are necessary to the very existence of cities — being the capillaries, blood vessels, arteries and veins of cities. They are truly public spaces and they SHOULD (so it seems to me) be government regulated and subsidized. (Who else is going to create, regulate and maintain such public, non-remunerative thoroughfares?)

    Limited access highways (even when publicly owned), on the other hand, are typically intended for only certain users (e.g., cars, trucks, motorcycles [?], etc.). And some limited access roadways, like NYC’s parkways, are even limited to just non-commercial traffic (i.e., private autos)! Rather than enhancing urban districts, such roadways actually damage them both directly (e.g., creating barriers, etc.) and indirectly (by favoring suburban residential and commercial development). So even if such roadways were totally free of government subsidies (a near impossibility in urban areas, however, although conceivably possible on some gigantic California or Texas ranch as a shortcut between cities) they would still be very damaging to cities.

    Here are some other distinctions that I think might eventually prove useful in such discussions (and in similar related discussions, too): a distinction between roads and thoroughfares (which might also include pedestrian streets, etc.); a distinction between roads and roadbeds (are the portion of roads used by vehicles) and rights-of-way (which might also include, in addition to roadbeds, sidewalks, bikeways, bus lanes, etc.).

    For instance, these later distinctions could be useful, so it seems to me, in discussions about the ideal amount of space that should be devoted to “streets,” which seemed to be the subject of a post that was linked to a few weeks ago. The linked to post seemed to feel that “streets” (with no distinction made between rights-of-way and roadbeds) take up too much space. While the author of the post may believe this to be true in any case, whether such distinctions are made or not, I would argue (as Jane Jacobs has) that “streets” (rights-of-way) constitute very important and useful urban open spaces and that the “real” problem, instead, is likely to be too much space devoted to roadbeds — especially when an overabundance of roadbed space is concentrated into just a few very wide streets (rather distributed among many small streets, that would, among other things, create lots of small blocks).

    – – – – –

    P.S. — Lots of great posts, recently. Hope I’ll find the time to comment on more of them.

  • Benjamin Hemric

    It’s great to see that government subsidies of government “roads,” and other aid to them also (e.g., the use of eminent domain, etc.), is being so thoroughly discussed here at Market Urbanism and elsewhere. (Skepticism about government subsidized “roads” is one of the things that most attracted me to the Market Urbanism blog.) However, I think the usefulness of such discussions (and some other somewhat related discussions, too) might be significantly enhanced by an especially careful use of language and the making of certain distinctions.

    For instance, in discussions of “roads,” it seems to me that it might be particularly useful to make a distinction between local thoroughfares (e.g., alleys, streets, boulevards, etc.) and limited access highways.

    Local thoroughfares (when publicly owned) are typically open to anyone and everyone — pedestrians, bicyclists, buses (and also, potentially, to trolley cars, elevated lines, monorails, etc.). They are necessary to the very existence of cities — being the capillaries, blood vessels, arteries and veins of cities. They are truly public spaces and they SHOULD (so it seems to me) be government regulated and subsidized. (Who else is going to create, regulate and maintain such public, non-remunerative thoroughfares?)

    Limited access highways (even when publicly owned), on the other hand, are typically intended for only certain users (e.g., cars, trucks, motorcycles [?], etc.). And some limited access roadways, like NYC’s parkways, are even limited to just non-commercial traffic (i.e., private autos)! Rather than enhancing urban districts, such roadways actually damage them both directly (e.g., creating barriers, etc.) and indirectly (by favoring suburban residential and commercial development). So even if such roadways were totally free of government subsidies (a near impossibility in urban areas, however, although conceivably possible on some gigantic California or Texas ranch as a shortcut between cities) they would still be very damaging to cities.

    Here are some other distinctions that I think might eventually prove useful in such discussions (and in similar related discussions, too): a distinction between roads and thoroughfares (which might also include pedestrian streets, etc.); a distinction between roads and roadbeds (are the portion of roads used by vehicles) and rights-of-way (which might also include, in addition to roadbeds, sidewalks, bikeways, bus lanes, etc.).

    For instance, these later distinctions could be useful, so it seems to me, in discussions about the ideal amount of space that should be devoted to “streets,” which seemed to be the subject of a post that was linked to a few weeks ago. The linked to post seemed to feel that “streets” (with no distinction made between rights-of-way and roadbeds) take up too much space. While the author of the post may believe this to be true in any case, whether such distinctions are made or not, I would argue (as Jane Jacobs has) that “streets” (rights-of-way) constitute very important and useful urban open spaces and that the “real” problem, instead, is likely to be too much space devoted to roadbeds — especially when an overabundance of roadbed space is concentrated into just a few very wide streets (rather distributed among many small streets, that would, among other things, create lots of small blocks).

    – – – – –

    P.S. — Lots of great posts, recently. Hope I’ll find the time to comment on more of them.

  • I hadn’t thought about the cost-savings through eminent domain. That could be significant.

    yeah, I would make the same distinction that Benjamin did. Limited-access roads should really have a funding mechanism that resembles the free market, but local roads (if they are done well) could serve enough public purposes that it becomes too hard to tease apart the various benefits and assign costs accordingly. I would just specify a couple of conditions (that I think were implied anyway):

    1. The local roads should be sufficiently connected. (grids allow for a better flow)
    2. Need to be complete streets. Through design features, try to avoid any kind of modal bias. This would probably mean narrower roadbeds and adequate sidewalks, maybe bike lanes for a busier street.

  • I hadn’t thought about the cost-savings through eminent domain. That could be significant.

    yeah, I would make the same distinction that Benjamin did. Limited-access roads should really have a funding mechanism that resembles the free market, but local roads (if they are done well) could serve enough public purposes that it becomes too hard to tease apart the various benefits and assign costs accordingly. I would just specify a couple of conditions (that I think were implied anyway):

    1. The local roads should be sufficiently connected. (grids allow for a better flow)
    2. Need to be complete streets. Through design features, try to avoid any kind of modal bias. This would probably mean narrower roadbeds and adequate sidewalks, maybe bike lanes for a busier street.

  • To: Benjamin Hemric

    marketurbanism.com will explain to you about the distinction between local thoroughfares and limited access highways.
    The website will also explain to you about rights-of-way and more.

    Mr. Hemric, please be careful with what you are saying about such distinctions because it is no laughing matter about growth fetishism in the transportation sector. This can arouse misunderstanding about the philosopical & ideological phenomenon which is actually a justification for incoherently present and future policies.

    Thank you very much.

    Fr: J.P.K.

  • To Daniel Nairn:

    It is time for you to think carefully about the rationale of limited access roads, local roads and what you called “complete streets” during a series of discussions – not just in the U.S., of course. But it also has to be dscussed in different parts of the world, too. Do you really understand what I am trying to say specifically?

    Let the experts and other people challenge you to debate on your own viewpoints regarding the these types of roads. Tell them that you can specify two of those conditions you wrote above if you will, and the experts will discuss with you on the merits of limited-access roads, local arterial roads, city streets (or “complete streets” if you will), etc.

    Finally, please discuss about design features like, for example, narrower roadbeds (which, I think, too narrow for large, wide-size vehicles), adequate sidewalks (that is so good to be true, I think), lanes for bicycles (can you really see this anywhere?), etc. on your own merits with other people. And don’t forget to dicuss about enforcement, maintenance, lanscaping and other aspects which I suspect they contribute to what I call “streets and avenues of fairness”.

    Do what you want to do in such different ways, so as not to force upon anywhere else. Go and see outside if you have to and please tell others about what you experience with. This is part of a learning experience in reality.

    As for ordinary people like me around the globe, we must be careful with the claims that risk aversion is good for fairness. And that is not all: smart growth is part of hidden agenda behind the contempt for economic growth, standards of living, etc. Say, are you really listening about this phenomenon?

    From JPK

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