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Home | Blog | Chicago vs. Austrian view of Property Rights and Capitalism (lecture 17 of 32)

Chicago vs. Austrian view of Property Rights and Capitalism (lecture 17 of 32)


These notes are from the lecture Chicago vs. Austrian view of Property Rights and Capitalism, given at the Mises University. Any errors are mine, feel free to point them out so that I can correct them. This lecture was given by Prof. Block.

General Argument for Privitization


  • Moral:


    • Private = voluntary.
    • Public = involuntary.


  • Practical:


    • The State is not as responsive to people's needs as is the free market.
    • Voting every transaction has more effect htan voting every four years.

Road Privitization


  • Why should we have road privitization?


  • If we apply libertarian principles to the hard cases, it strengthens libertarianism.


  • This is an offensive, not defensive, strategy.


  • 40,000 people are killed on public streets, roads, and highways.


  • MADD -- Mothers Against Drunk Driving: can't demonstrate their preference.

Road Socialism


  • Congestion is indicative of Russian-style road socialism.


  • The first roads were private, as was the whole system:


    • System:
      • Less for very fat wheels.
      • More for very thin wheels.
      • Less for walkers.
    • Collapsed because of the State


  • Chicagoeans argue that roads are public goods.


    • Non-exludeable? Non-sense, can exclude privately.
    • Non-rivalrous? Non-sense.


  • Consider the economists role under road socialism, vs under the free market roads. Under road socialism, economists function as "road consultants", so they profit.

Deaths on Public Roads


  • Mainstream economists argue there is a whole slew of reasons why there are so many deaths:


    • Speeding.
    • Drinking.
    • Wrecklessness.
    • And many other things.


  • These arguments confuse proximate causes with ultimate causes:


    • Those examples are just proximate causes.
    • The ultimate cause is the incompetence of road management.
    • Road managers didn't orchestrate things to prevent such proximate causes.

How Would Privitized Roads Work


  • Like most businesses, private roads would probably operate for a profit.


  • Go to the market:


    • Go to the market, get funding (IPO) or loans.
    • Buy land.
    • Buy trucks and cement.
    • Build the road.
    • Charge rates.


  • How would private road entrepreneurs increase safety?

    Competition to find the best ways to produce safe roads. Various ideas include:


    • "Crazy roads" for crazy people.
    • Staked cars which are squished.
    • Crosses to indicate where people died.
    • Minimum speed limits.
    • Different speed ranges in different lanes.
    • Clear cats eyes and white line.
    • Speed monitoring by satellite to make sure you drive good.


  • The point is that only the free market -- voluntary interactions -- can determine which arrangements are best, and produce safe roads.



  • You'd have to pay a penny every so often, because each house owns a bit of the road.


    • One person would own the road.
    • You'd probably pay per how much you drove on the road.


  • Blockade: trapped in your house by road owners.


    • Insurance company would insure you -- access insurance.
    • Road owners want to entice you to buy land by the road: you'd buy it on the condition that they let you out.


  • Who decides what the rules of the road are?


    • It is in the interest of road owners to have compatable rules.
    • Road owners might even agree on a voluntary committee to set guidelines.
    • If one roads rules are too far out, the corresponding road-owner will go broke.
    • Hayekian discovery process.


  • You would have traffic-congestion.


    • On public roads, there is massive congestion because you don't pay for the roads on a rational basis.
    • You pay a gasoline tax, but that is the same whether you drive at rush hour or not.
    • Privitized roads would charge such that you pay higher prices for roads at peaks times, to eaven out demand and eliminate congestion.


  • Who gets the green light? It is in the interest of each street-owner to only have the green light.


    • Road owners would own blocks of raods.
    • Also, various road-owners would cooperate for profits.
    • It is in the interest of road-owners that their roads smoothly interact with other roads.


  • Why pay anything, roads are already free?


    • Roads are not free, you pay taxes.
    • The free market rates would be cheaper, because they always are (the free market is always more efficient, serving the consumer via a profits-losses test, while States have a calculation problem).


  • Emminent domain. What about hold-outs?


    • If X doesn't want to sell his road, that's his right.
    • Options: contract with a number of people to pay them for the option to buy their land at a later date. Then, you can confront the holdout with that, and he might be more reasonable.
    • If no other routes? Build a bridge above or a tunnel below the hold-outs house:
      • Objection: ad coelum -- you own a cone to the center of the Earth and going up into the heavens.
      • This objection is absurd -- you don't own that property, as you haven't homesteaded it.
      • Can't tunnel under so shallow as to collapse the land above.
      • Bridge -- there are some restrictions:
        • the hold-out may have already homesteaded:
          • Sunlight.
          • Rain.
          • Right to transport.
        • In that case, the road-builder can build a draw-bridge that is clear and has a mesh.
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