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Homesteading City Streets: An Exercise In Managerial Theory1

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


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.

Print VersionCONTENTS

  1. Introduction

  2. Privatization

  3. Transactions Costs

  4. Conclusions



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.

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