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Homesteading City Streets: An Exercise In Managerial Theory1

by Dr. Walter Block
Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics
College of Business Administration
Loyola University New Orleans
wblock@loyno.edu

ABSTRACT

Privatizing all goods and services will satisfy consumers far more effectively than allowing their management to remain in the hands of the state, under socialist provision. If we have learned one thing from the fall of the economic system of the U.S.S.R., it is that. More controversially, city streets are no exception to this general rule. They, too, can be mismanaged by the municipal government, or run more efficiently though the institutions of private property and competition. What society needs is a system wherein entrepreneurs are rewarded for promoting consumer sovereignty, and penalized for failing to satisfy customers. The ballot box vote is perhaps aimed in this general direction, but it is cumbersome: elections occur only every four years, and the electorate is usually given a choice between only two or three options. In very sharp contrast, the “dollar vote” occurs every day, and can be focused in great detail upon choices at the micro level; it can distinguish between flavors of ice cream and colors of shirts. It can also reward and penalize individual street owners, tending to guarantee better performance on their part.


CONTENTS

  1. Introduction

  2. Privatization

  3. Transactions Costs

  4. Conclusions

    Endnotes

    References


I. Introduction

This paper is dedicated to an exploration of how city streets can best be privatized. Among the alternatives: giving them away or selling them to specific people (e.g., those who live on them, work on them, travel through them) or auctioning them off the highest bidder(s). Further, they could be disposed of piecemeal, e.g., in sections of 100 feet or so, or in their entirety, e.g., Broadway in Manhattan goes to one firm, or, alternatively, they might be packaged in neighborhood sections, for example, all the streets in Greenwich Village end up under the control of a single commercial entity, all those in the Upper East Side to another. (I use examples from New York City since this is perhaps the most well known locale in the world.)

To most scholars, this exploration will appear as ludicrous, idiosyncratic or even maniacal. Privatize the streets? "Under which controlled substance is a person laboring under the influence of, who would even raise such an issue, let alone attempt to soberly address it?," will be the likely reaction of most urban economists.

Nevertheless, we persist in our folly (This is meant sarcastically. I make no apology whatsoever for attempting to apply what we have learned about the best way to supply cars and chalk and cheese and computers namely, free enterprise to an analogous good, roadways). We will not here make the case for private rather than public enterprise in general. There is already a rather large extant literature on privatization (Anderson and Hill, 1983, 1996; Barnett, 1980; Benson, 1998; Block, 2001, 1989, 1990a, 1990b; Butler, 1988; Fitzgerald, 1989; Friedman, 1979, 1989; Hadfield, 2001; Hanke, 1987; Harrison, McGee and Block, forthcoming; Landes and Posner, 1979; Milgrom, North and Weingast, 1990; Ohashi, Spindler and Norrie, 1980; Pirie, 1986; Stringham, 1998-1999; Roth, 1987; Rothbard, 1978, 1998; Tinsley, 1998-1999; Tannehills, 1984; Walker, 1988; Woolridge, 1970). It makes the Adam Smithian (1776) case that we can more effectively organize an economic system through decentralization based on private property, freely fluctuating prices and unencumbered markets than centralization, bureaucracy and commands (Mises, 1933).

Nor will we again rehearse the arguments in favor of private rather than public roads in particular. There is already a relatively large body of work (given the admitted unpopularity of the argument) that attempts to justify this enterprise (Beito, 1988, 1989, 1993; Beito and Beito, 1998; Block, 1979, 1980, 1983a, 1983b, 1996, 1998; Block and Block, 1996; Cadin and Block, 1997; Cobin, 1999; DePalma and Lindsay, 2000, 2001; Foldvary, 1994; Klein, 1990; Klein, Majewski and Baer, 1993a, 1993b; Klein and Fielding, 1992, 1993a, 1993b; Lemennicier, 1996; Roth, 1966, 1967, 1987, Semmens, 1981, 1983, 1985, 1987a, 1987b, 1988a, 1988b , 1991a, 1991b, 1992, 1993, 1994a, 1994b, 1995a, 1995b, 1996a, 1996b). That is, it shows that private streets, roads, highways, bridges, tunnels and other vehicular thoroughfares are feasible, workable, violate no scientific or ethical codes, and, actually, were the historical practice, not the exception. It demonstrates benefits in terms of reduced traffic fatalities, declining automobile congestion (peak load pricing which has still eluded public sector road managers is more likely to be implemented), and more efficiency: if socialism cannot work in Cuba, North Korea, East Germany or the U.S.S.R., why should it be supposed it would function adequately on any nation's roads or its city's streets? This literature, further, deals with issues of eminent domain, bankruptcy, encroaching (a private road owner surrounds a domicile with concrete, and will not permit access or egress), monopoly, street sweeping, profiteering, policing, traffic lights, dealing with bad weather conditions, drunken motorists, etc.

It is important to realize, too, that there are numerous real world examples of private streets which function highly effectively. These include the private streets of St. Louis; the streets internal to shopping malls and shopping centers (even the aisles of groceries and department stores may be considered for our purposes in this regard); gated communities world wide, and the rural roads owned by associations of property owners in Finland and Sweden.2 Contrast the private streets in Disney World with those in New York City's famous Central Park; it is no accident that the former are safe for passersby, while the latter have been the location of numerous murders and rapes.

Yes, yet another article along these lines would still have a high marginal product, given that there are still no fully private road initiatives being undertaken at the present time. (The quasi-private highways now in operation in Virginia and California are not exceptions. The goal of road privatization is to turn vehicular thoroughfares fully into the hands of private enterprise; in these cases, the state is still the ultimate owner). On the other hand, hardly any work at all has been done on the practical issue of converting the present collectivism which earmarks road management to free enterprise. This, too, is worthy of considering, both because it can also move forward the analysis of private streets, and can offer, as shall be seen, interesting economic insights of its own. It is to that task that we now turn.

II. Privatization

What, then, is the best process for converting vehicular thoroughfares from the public to the private sector, stipulating if only for the sake of argument that this is not a quixotic quest, that it can work, if it is but implemented?

There are several choices. First, let us address the issue of whether these resources should be given to the citizenry, or sold to it. The case for the former seems clear: it is the people whose resources went into the creation of the roads in the first place, not that of the government. True, the state was the proximate cause of the spending, but, ultimately, the money came from the long-suffering taxpayer. Indeed, the state has no money of its own, over and above that mulcted from the citizenry. Further, it is the government, if we are correct in our underlying analysis, which is responsible for the problems of road socialism in the first place. It would come with particular ill grace for the guilty institution to reap the fruits of correcting problems it itself created. The point is, if the roads are sold, the proceeds will be given to the city administration, the last group of people deserving of them.

Given, then, that we reject sales, and favor give-aways, who are the worthy recipients? Several immediately come to mind: those who travel on the streets (or otherwise use them), those who live or work in the surrounding buildings, those who own these edifices. How can the claims of these various candidates be reconciled? How can they be ranked, so that those with a greater ones are given proportionately more ownership rights than those with lesser?

Fortunately, there is a theory that can elucidate these problems. It may not give definitive answers to the nearest four decimal points, but at least it can point in a proper direction. The theory is that of libertarianism, based on private property rights and homesteading; this may be readily used as a means of determining how un-owned resources can pass from that state into human control. Again, we will not justify this perspective, but rather apply it to the case at hand.3

How would it work? First off, if there were any case of a privately owned street seized from its legitimate owners and brought into the public sector (e.g., nationalization, or, in this case, municipalization.), those with first claim on it would be its former owners.4 For example, in the New York City case, while there never were any private streets condemned by City Council, there were two other transportation modes which were: the Independent Rapid Transit Corporation (IRT), and the Brooklyn-Manhattan Transit Company (BMT). When these are privatized, they will be given back to their former owners, not to those who traveled on them, or lived next to them, or above or below them, nor, even, to those who owned such surrounding properties. Borrowing a leaf from this experience, then, the first claimants on public streets are the taxpayers who were forced to finance them. These are the real and rightful owners of the streets: those who paid for them.

Assume, however, that the identity of such persons is lost in antiquity.5 Which other "stakeholder" would then have the next best interest in these properties?

One way to discern this is to ask, not as we are now doing, "Given the status quo, how shall we divide up the streets?," but, rather, "What would the world now look like had the city government never taken over the municipal streets, but had instead allowed this industry to develop purely under free enterprise strictures?" Had there been no government intervention, the likelihood is that the sites would have been claimed, and streets would have been built, by private road companies. This, at least, was the experience during medieval European times as well as in 18th century America. Who, in turn, might have invested in such companies? Although it can only be speculation, call it an educated guess, one reasonable candidate would be owners of the property alongside the street. This would be one way for the market to "internalize the externality" which might otherwise arise from different ownership of street and neighboring property. Insofar as this is true, we have another set of candidates for street ownership: those whose property abuts the street.

Would this apply, as well, to the tenants of these buildings? Not a bit of it. Tenants are not residual income claimants; they have no right to the real estate in question, per se. Their rights are limited to the use of these amenities, for a certain specified time. They could not possibly be entitled to the property in question, let alone ownership to it from centuries, decades, or even years ago.

What of the fact that these properties may have changed hands dozens of times throughout the years since the streets were first laid out and built? The rights survive. For the new owner(s) purchase the entire rights to the property, those recognized in law at the time, and, also, those that were not, e.g., that ownership of contiguous property would confer a claim over the abutting street.

Another way to discern who is entitled to street ownership is based on homesteading. Again, as it would take us too far a-field to explain or justify such a procedure, we shall content ourselves with merely applying it. A modicum of entitlement is automatically captured by those who "mix their labor" with an un-owned (or in this case, illegitimately or improperly owned -- by the state) piece of property. Thus, all of those who have traveled on the street by that token alone thereby obtain a claim of ownership over it. It is here that tenants of contiguous buildings can make their claim: not as tenants per se, but, rather, as commuters between their homes and places of work.

At first glance, this creates more problems than it solves. For there are many, many people who have walked, ridden cars, taxis, horse drawn vehicles, bicycles, motorcycles, etc., on the streets of Manhattan, for example. It would be a real "dog's breakfast" to determine who has a legitimate claim and who does not on this basis. People don't save their bus transfers, or taxi-cab bills, which, even on the best of assumptions, would only be the veritable tip of the iceberg of evidence of road use. Bills for gasoline in Manhattan, or in the surrounding boroughs, would also serve as only the most indirect of evidence for use of any specific street.

Under these conditions, the most accurate assessment might well be derived through proxy. That is, we can assume that all residents of Manhattan use its streets to a certain specific degree, call it X, and those in the surrounding areas to a lesser degree, say, X/3. Or, as a rough approximation, that all of the inhabitants of the entire city (or each of the residents of all five boroughs) are the legitimate owners of all of their respective streets.

Based on these considerations, we are faced with two very different implications, and thus two very different ways of distributing the thoroughfares to the people. On the one hand, the owners of the property alongside the road own it; on the other, all members of the society own one quotal share each.

But we have only begun to encounter complications. Another one concerns how the properties shall be divided up on the basis of either of these criteria. To wit, consider one long street in Manhattan, e.g., Broadway, which runs the entire length of the island. Suppose there are 10,000 separate properties that abut this avenue. Do each of these 10,000 property owners assume control over 1/10,000 of the entire facility? Or do they each own that little bit of it that touches upon their property? (In this case, every real estate holder would own exactly half of Broadway affronting his property, and the other half would be given to the owner across the street.)

The latter is clearly infeasible. With 10,000 separate owners of Broadway, this avenue would quickly become impassible to traffic. Each individual, particularly if he could get the cooperation of the man across the street, would be able to bring motorists to a standstill. Streets would come to resemble a Parcheesi board, and blockades could become the order of the day. This option must be rejected, but not only because of its undoubted impracticality. Fortunately, for our underlying homesteading theory, roads could never have been built in the first place in any such manner, for the same reason: initial susceptibility to blockades. Indeed, this model serves principally as an entirely refutable objection to the whole idea of private roads.6

It follows, then, that no abutting real estate holder may establish such a chokehold over any street. If so, how is ownership to be divided? Clearly, the best way would be to accord with the practice of ancient road enterprises; to set up a joint stock company composed of these 1,000 people, who together would control the entire venture. This in turn leads to another question: would each of the 1,000 own an equal 1/1000 of a share of the corporation, or would the division be unequal?

The latter is far more in keeping with homesteading theory than the former. That is, a building that stretches along Broadway from 55th to 56th Street is far more valuable than the same physical structure occupying the area between 155th to 156th. Naturally, the former would have more of a stake in Broadway than the latter. Were a road company to be set up de novo, it is inconceivable that the shares would be apportioned according to mere physical length. Based on these considerations, the ownership rights over Broadway would be distributed in a manner proportional to the assessed valuation of the property in question.

This leaves open the question of whether the stock company should own lengthwise, or in terms of geographical areas. That is, should a company own all of Broadway or 3rd Avenue, or 23rd Street or 42nd Street (the one dimensional format), or should one be assigned to Greenwich Village, another to Hell's Kitchen, a third to Harlem, etc. (the two-dimensional format.) In terms of road management, each has advantages and disadvantages.

The main drawback of the one-dimensional model is the dispute over green light time on traffic signals. If one firm owns 3rd Avenue, and another 23rd Street, and they cross at right angles, each will naturally wish to have the green light for as much time as possible, and the red for as little. In that way, traffic can flow more easily on its own property, and its revenues be enhanced.7 How, then, to settle this potential dispute? Simple. Each will bid against the other for the proportion of red and green light time. It is akin to the situation in which two ex-partners find themselves upon dissolution of the company: who keeps the firm? And the answer is, whichever of them is willing to pay more for the other's half. Presumably, the north-south artery, which in Manhattan usually serves more customers, will be able to outbid the east-west thoroughfare for the lion's share of the green light time, based upon the derived demand for these services emanating from the final consumer.

Another difficulty in this scenario will be the arrangement of staggered traffic lights; those timed in such a manner so that motorists can move at a steady pace (e.g., 25 m.p.h.) without being forced to stop and wait for a red light. This will call for no mean talent of negotiation if each and every street and avenue comes under the management of a different firm.

These problems will be as nothing under two-dimensional ownership. Staggered lights and allocation of green light time are all arranged under the aegis of one firm, so that by definition no negotiation or transaction costs need be undertaken. Instead, the practical difficulties arise when the streets of one neighborhood connect with those of another. What to do, for example, when Turtle Bay gives over to the East Village? Here, similar negotiating efforts must be undertaken in terms of coordinating staggered lights and green light time.

Historical precedents can be found on each side of this debate as well. Ancient stock companies typically owned long thin thoroughfares; this, too, was the practice of private inter city railroads. But equally free enterprise ventures such as Disneyland, Knott's Berry Farm, Universal Studios, etc., and hundreds of smaller shopping malls have organized themselves into the neighborhood, or two-dimensional format.

Given that there is in effect a "draw" 8 between these two models, I opt for the neighborhood format, if only because it is more modern. This indicates that the technology of private development has migrated from one to two dimensions. Since we are privatizing in the modern era, the latter is more appropriate. If this exercise were being carried out a century or two ago, the alternative option might well have been picked.

But why choose between having your cake and eating it? Why not have both? That is, were all the roadways in Manhattan owned by a single firm, all transactions cost vanish in one fell swoop. Well, not exactly. This is somewhat of an exaggeration, as negotiations would still be necessary vis a vis all the tunnels and bridges connecting this borough with its three neighbors, as well as New Jersey.

III. Transactions Costs

It is impossible to reduce such negotiation problems to zero, for wherever automobiles may travel, there will always connections between one road owner and another under any system, free enterprise or socialistic.9 This certainly applies under government control, where the authorities in charge of city streets, bridges, tunnels, thruways, roads of contiguous states, etc., must all deal with one another. It might appear that transactions costs could be avoided if there were only one state authority, or one private road owner wherever highways or streets connect. But this is a mirage. The costs of coordination under such a system might be labeled management instead of transactions costs, but they would remain costs nonetheless.

It cannot be denied that such costs would still exist, even under a full free enterprise road system. But if we have learned anything from the fall of the Berlin Wall and the economic debacle that was the economic system of the U.S.S.R., it is that one of these systems is highly efficient, and not the other. The government system, after all, is the one that brings us the horse and buggy U.S. Post Office. Need any more be said?

But let us posit that management within one firm is cheaper, within the relevant range, than negotiation between different street companies. Taking this idea to its ultimate logical conclusion would imply a single firm, for example, in all of North and South America, since all roads on these two continents are connected to each other. (We pass over the "problem" of the discontinuity in Panama, given that there are bridges that enable cars to travel north and south over it.) If there were none, then, instead of only one owner, there would be two, one for each of the American continents. Does this present any particular problem or embarrassment for the theory? Not to those (Anderson, Block, DiLorenzo, Mercer, Snyman and Westley, 2001; Armentano, 1972, 1982, 1991; Armstrong, 1982; Block, 1977, 1982, 1994; Boudreaux and DiLorenzo, 1992; DiLorenzo, 1997; High, 1984-1985; McChesney, 1991; Rothbard, 1970; Shugart, 1987; Smith, 1983, 1995) who maintain that the success of One Big Firm is no threat as long as it arises from, and depends solely upon, market forces.

In one sense, privatizing roads is like attempting to unscramble an egg; it is very, very complicated, because what we are trying to do in effect is bring about a situation today, which would have ensued had streets always been private. Our goal is to determine how this market would have functioned in the past, and then to set up a situation, now, as close to what would have been, in this imaginary contrary to fact conditional.

The problem is that this is essentially an entrepreneurial, or managerial, not an economic or praxeological task. For economists, it is impossible to anticipate the market. Suppose, for example, that the shoe industry had always been run under government supervision, and that we were now contemplating moving it from the socialism to capitalism. A whole host of questions would quickly arise, the answers to which would lie outside the realm of economics. For example, how many shoe firms would there be? What color would be the footwear? What proportion would there be between black, brown, white, tan and other color shoes? Between shoes, runners, sneakers, slippers? How many lace holes would there be in a shoe? Who would stitch together the shoe and its sole? How many shoe stores would be located on each block? Would there be one in every mall? How would the poor afford shoes? Would someone like Michael Jordan become a pitchman for the product?

In like manner, it is difficult in the extreme to know, at this late date, the precise configurations of a private street and road industry, had one been allowed to be fully developed from day one. How much would the street vendors charge? Or would they provide road service for free, in a sort of super loss leader ploy, and earn their income through billboard advertising, or enhancement of real estate values (some companies are now giving away computers, gratis, which come replete with advertisements)? How would we obviate the possibility of surrounding a property owner with private roads, so that he had no means of access or egress? I speculated (Block, 1979) that no one in his right mind would ever purchase a property without clearly delineated access rights, spelled out for the present and the future, but what, precisely, would be specified in contracts intended to obviate this difficulty? If road providers did charge for their services, I articulated (Block, 1979) a scenario whereby this would be done by placing Universal Product Codes on the underbody of automobiles, so that their owners could be sent a monthly bill. This, of course, would set up privacy protection issues, which, in turn, have also been previously addressed (Block, 1979).

The point is though, that even if a contrary to fact conditional society such as ours but with continuous private road ownership, did indeed address and solve problems of this sort in this manner, it would still be a Herculean job to convert our present society into that one. Even worse, we have only our managerial-entrepreneurial speculation to buttress these suppositions, nothing more.

On the other hand, we need not be too pessimistic about this either. An imperfect privatization will be far preferable to none at all. Government streets are an administrative and safety nightmare.10 It is inconceivable that private initiatives could do worse. In any case, the same challenge faces the privatizer of all industries now in government hands. Even the post office and public education, the privatization of which are far easier on theoretical grounds (there are no linkages between them and virtually all other private property), present complicated problems of equity, transition, etc., as do streets.

Ordinarily, under laissez faire capitalism, the owner of a private enterprise could charge whatever price he wished for the goods or services he supplies. If you didn't like the pricing or any other policy of McDonalds, you are free to patronize Burger King or Wendy's, or any such other emporium, or buy your burgers from the supermarket and eat them at home. It would be a bit harsh, however, to allow the new private owners of the street to engage in such an exercise of "economic freedom." This is because in the world where all streets were privatized from day one, no one would have ever built a home or a business without first contractually preventing the road owner from such unilateral behavior. Rather, there would have been an agreement preventing this, either through contract, or by making the home or business owner a partner in the street enterprise. Were we now to allow the new road owners to impose their unilateral decisions on travelers, this would in effect make a gift of the entire economic value to them not only of the roads, but of virtually all property within a city. Some way must be found, then, to mimic the market in streets which would have existed under free enterprise from day one, but which did not.

One final caveat, whether for street privatization or any other: it is important to be thorough. In many of the Eastern European countries, even including Russia and other parts of the U.S.S.R., something along the lines advocated here has been followed. Shares of stock have been created for a number of properties, collectivized farms, factories, etc., and have been divided up widely among taxpayers, citizens, former employees, and other reasonable ownership candidates. Moreover, also much to the good, the law has allowed these shares to be traded on organized exchanges (Foreigners have been precluded from taking part, which is a shortcoming of the system), so that they naturally tend to flow toward those who value them the most. The problem is, in all too many cases, the direction in which they flow is right back toward the very people responsible for the communist debacle in the first place: ex apparitchiks, goons, thugs, banking authorities, former military officers, etc. As a result, Eastern European and former Soviet "capitalism" has come to resemble nothing so much as "free enterprise" mafia style.

It would be a shame and a pity were road privatization efforts in the U.S. to come to a similar sorry end. In order to obviate any such occurrence, steps must be taken to be thorough in the privatization effort, one, to ensure that vestiges of state control are eliminated, and, two, that those responsible for the present disarray do not succeed in taking any positions, let alone leadership ones, in the new regime. To wit, shares of road stock should not be given to those road managers responsible for our present astronomical level of traffic fatalities, nor should they be allowed to purchase any (in much the same manner that those convicted of certain crimes are not allowed to own gambling establishments). Indeed, the question should not be so much whether such persons should be allowed to regain control over street management as much as a debate over which criminal penalties should be imposed upon them.

As well, the state should keep its bloody hands off of the future private road, street and highway industry. Government police should be as scarce on traffic thoroughfares as they are now on the inside of Disneyland. In the latter case, if you act obstreperously, you are sooner rather than later surrounded by a group of mice and ducks, all packing heat, who will lead you away quietly from the scene of a confrontation. These private police are far better able to satisfy the requirements of consumer sovereignty than those in the public sector. After all, only the former, not the latter, can go bankrupt, because they are part of a market system. And the same holds true for bouncers in private drinking establishments. As for the "rent-a-cops" who serve on the Jerry Springer show, is there any doubt that they are far superior to any public alternatives when it comes to breaking up a fight at the exact point when the combatants are appropriately half undressed?

Similarly, if the death rate is to be reduced to optimal levels, and traffic to be increased past horse-and-buggy levels, then road entrepreneurs must be able to control all aspects of highway travel, certainly including policing, pot hole repair, street construction, penalties, etc.11 Under the present proposal could a street owner impose the death penalty on those who drove green automobiles? Not any more than he could charge whatever price he wished.

IV. Conclusions

It is now time to draw this discussion to a close. I have no hard and fast conclusions as to the best way to privatize streets and highways. It is perhaps more important that they be privatized than how this task is accomplished. Once in the private sector, and these important elements of our economy will be managed in the same rational manner as all other goods and services subject to the consumer check of profits and loss.

This is not to say that there is no pattern we can use, even in broad brush strokes, to guide the privatization process: it is to imagine the contrary to fact conditional wherein city streets were always provided by private enterprise, and then to tailor the present situation to resemble that as much as possible. This, by its very nature, is difficult. Imaginary constructions cannot be relied upon without misgivings. And yet, as we have seen, there are rough shapes that may be discerned through the fog. One is that the people responsible for our present plight should be excluded from the process of privatization; another, is to as closely as possible approximate real world private road conditions. When a thoroughfare is very long, thin, and isolated, as in the case of a private railroad, adopt that as a model: one owner for the entire avenue; e.g., the one dimension model. When the public sector amenity resembles, instead, a relatively large land holding, e.g., Disneyland, then one owner might be more appropriate for an entire neighborhood of streets.

Endnotes

  1. The author benefited from discussions with Jeff Tucker while writing this article; he wishes, also, to acknowledge the benefit of some very helpful suggestions made to him by two referees of this Journal.

  2. I owe this point to an anonymous referee of this journal.

  3. Homesteading is the process of mixing human labor with land, by farming it, or using it, or, in our present case, building a road on it. The classical justification for this form of establishing ownership over virgin territory is Locke (1948). For improvements and refinements, see Rothbard (1978, 1998) and Hoppe (1982).

  4. Seized means commandeered, or taken over by eminent domain, whether or not this taking (Epstein, 1985) was in any way compensated. (If there were full compensation, presumably there would have been no need for the state to condemn the property. City governments purchase paper, pencils, etc., on free markets every day).

  5. Suppose, to complicate matters, that one or a few taxpayers from the 18th or 19th centuries can be identified (or, rather, their heirs), but that in total the payments owed to them were a very small proportion of the present total value of the streets. Would these few claimants be given the streets in their entirety? Not in my view. The money they paid which went toward to paving of the streets, the setting up of traffic lights, etc., is a very small percentage of the site value of these thoroughfares. A similar analysis applies to the case where only one heir of a slave can be found, and there is a plantation to be divided up amongst the children of the slaves and the children of the slaveholders. Does the heir of the single slave obtain the entire inheritance? Not unless it can be shown that the labor services stolen from his grandfather, plus interest, amount to all or more of the value of the plantation. If not, then the heir of the slave owns only the value that can be attributed to his ancestor. On this see Block and Yeatts (1999-2000), Raimondo (2001), Rothbard (1998, p. 75), and Block (forthcoming).

  6. According to this proposal, any two owners located opposite of each other could together convert their little patch of road into a park. This would very much diminish the ability of the street to convey traffic. This is not to say that streets ought never be converted to parks. Economic efficiency would require that this occur only when the value of the land as a park exceeds that used as a street. When one entity owns the entire length of a street it will be in a position to internalize the externalities that might otherwise come into play.

  7. We also eschew discussion of the monopoly problem: where the road owner jacks up the price so far as to in effect capture the property values of all adjacent property. For a discussion of this issue see Block (1979).

  8. Not of the sort that characterized the heavyweight title fight between Evander Holyfield and Lennox Lewis.

  9. The classical statement of the relationship between transactions costs and the nature of the firm is Coase (1937); see also Coase (1992). Why is it that firms arise in markets, but no one firm takes over the entire economy? For Coase this has to do with the minimization of costs within and between firms. For example, it is very expensive for the waitress to bargain with the cook, offering him a price for the meal he gives her; in order to economize on these sorts of transactions, firms are created within which markets do not occur, but rather commands; e.g., the owner of the restaurant "commands" the cook to give the waitress the meal without charging her for it. However, unless there is vertical integration between the restaurant and the supplier of vegetables, for example, the former purchases these factors of production from the latter.

  10. Road fatality statistics are as follows: In the year 2000, there were 41,804 motor vehicle deaths. See on this http://www.cdc.gov/nchs/fastats/acc-inj.htm; accessed on 7/18/02.

  11. Optimal levels, of course, need not be zero. The latter might be approached if the private owners imposed a 5 miles per hour speed limit, and required all autos to be of Hummer quality or above (e.g., tanks), but it is my entrepreneurial understanding that this set of rules would not maximize profits.

References

Ackerman, Alan T. 1994. "Federal Condemnation Framework," in A. T. Ackerman (ed.), Current Condemnation Law: Takings, Compensation and Benefits. Chicago: American Bar Association.

Bates, Regis J. and Donald Gregory. 1998. Voice and Data Communications Handbook. New York: McGraw Hill.

Bethell, Tom. 1998. The Noblest Triumph: Property and Prosperity Through the Ages. New York: St. Martin's Press.

Block, Walter. 1983. "Public Goods and Externalities: The Case of Roads," The Journal of Libertarian Studies, 7, 1-34.

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