Free Markets, Free-ways, and Falling Bridges

Several years ago, when my son was taking the undergraduate economics course at university, I asked him how his textbook defined the "free market." Without skipping a beat he replied, "it doesn't." "Surely," I thought to myself, "he must be mistaken; a text-book would surely define its subject." So I read his textbook, a popular college text written by prominent Austrian economists and staunch defenders of the free market. Or so they claim. But my son was right; nowhere did the text define the object of its study, surely a methodological failure of the first order.

And yet, it is not so surprising. Much ink is spilled and much rhetoric expended on the "free market," yet it is an extinct form of life, so that discussions about the life of markets have even less certainty than discussions about the life of dinosaurs. The actual economy we life in is a combination of corporate power and government intervention, both of which are enemies of a free market. Now, this combination may or may not be good, but in no sense does it constitute a "free" market. Indeed, we are so used to government subsidies to one group or another that they have become invisible; we no longer even see even the largest subsidies as subsidies. To take but one example, let us speak of the so-called "freeways."

At this point, some readers will be thinking, "What? Of course the government should build the roads; that's what governments do." Yet, gentle reader, would you not be surprized if we shifted the focus just slightly, and spoke of "free railways" or free airlines"? Any yet, why should one form of transportation be so privileged over these others? The point here is not that the government shouldn't be involved in the road-building business; that may be the most convenient way to do it. Rather the point is to determine who should pay for them, and how. Three-fourths of all "social justice" issues are simply a matter of accurate cost-accounting; that is, of allocating costs back to those who cause the costs. For example, the cost of pollution clean-up should be allocated back to those who caused the pollution, while the cost of roads (rail or automobile) should be allocated to those who actually use them.

While this principle would seem self-evident, I have an economist friend who insists that freeways create wealth. I beg to differ. Roadways create wealth; freeways reallocate wealth. They are a complex system of subsidies which reallocate wealth to one group from another, and to the current generation from future generations.

In the first place, in order to use the freeways, one must first have the large capital and operating budget for a car. So the non-owners are taxed to the benefit of owners. Second, freeways subsidize the suburbs over the central cities, and thus determine the very shape and economic vitality (or lack thereof) of cities. Third, freeways compete with trolleys and buses, putting them at a disadvantage. We should remember that before the advent of the freeway system, most trips were taken by electric trolleys, a service provided by over 1200 companies in this country, most of which were private enterprises. (By the way, the story of how the automobile came to dominate transportation is rather an interesting one. See Bradford Snell's The Streetcar Conspiracy.) Fourth, the freeway constitutes a subsidy to remote landowners; when a new road goes near their property, the value increases dramatically. But the value of inner-city parcels suffers. City folk are taxed for the privilege of seeing their property values decline or fail to rise as fast as they would. Fifth, the freeway is a subsidy to a certain kind of business. Wal-mart would not be possible without the subsidies provided by freeways, while other large companies often move facilities to remote areas where the land is cheap, knowing that they have the political clout to get the govmint to build them a new road in the name of "job creation." The upshot of all of this is that the single-mother, working as a waitress and forced, by lack of adequate transportation, to live in a shack near her work, is taxed to help another person move to the suburbs and buy a McMansion. Wealth is transferred from one group to another.

But there is another and even more insidious transfer: from one generation to the next. The current users did not pay the depreciation costs; that was left to the next generation. Hence we have a vast infrastructure that is aging and in need of repair, but without the funds to accomplish those repairs. So who do you think will pay for them? My generation profited greatly, but at the expense of our children; they will have to pick up the tab. Surely, this is immoral.

A bridge collapsed in Minnesota. I do not know why it collapsed, but surely it is a warning. The papers and the airwaves are filled with grim statistics about the numbers of bridges, roadways, and other infrastructure items that need, or shortly will need, replacement. And there simply isn't the money to accomplish this. Its been spent in Iraq, its been spent on other subsidies, its committed to social security, its needed to pay our foreign debts. But it isn't where it should be. I won't repeat the statistics, because I have no idea how reliable they are, and I doubt that anyone else does either. After all, even the engineers who recently inspected this bridge had no inkling that it was about to collapse. But I have no doubt that roads and bridges, being physical things, deteriorate over time and need to be repaired.

The freeways were financed by robbing one group to pay another. Of course, there is a simple solution. Simply put a toll-booth at the entrance to the freeways and bridges, and insure that the toll is high enough to pay all the costs of the building, maintenance, and rebuilding. This allocates costs to users, which is part and parcel of social justice. I have no objection to people wishing to move to remote areas; in fact I encourage it. But those who do so ought to pay their own costs, and not rely on a subsidy. They may have to reduce the size of their McMansion in order to have funds to pay the toll, but this is only justice. With the toll-booth, there are always funds to properly maintain the assets, and the public is spared the spectacle of the governor and the legislature arguing about who's at fault for not allocating the funds; with a toll, the funds allocate themselves.

Of course like all simple solutions, it is devilishly difficult to implement. People first have to see the roadway as a cost and their use of it as consumption for which they should pay. This is a difficult cultural change, since people have already made a host of personal and business decisions based on the current system of subsidies, and a change in the system is likely to cause them some grief. However, since the current system can't continue anyway, it is just a matter of when, not of "if." Then there will come a shock at the size of the tolls, as people find out just how expensive it is to build, maintain, and replace such massive infrastructures. And there will be any number of powerful business and corporate interests who will oppose such a change, even as they will not be able to give us a viable alternative.

As it turns out, nothing is quite as expensive as a freeway. But on the other hand, nothing is more conducive to self-respect than paying your own way. One measure of a free market is that each person pays for what he or she consumes. But we are so unfamiliar with this beast that we no longer recognize this simple fact. After all, everybody talks about the free market, but nobody really defines it. And if even the Austrians can't tell us what it is, no wonder the general public is confused on the subject.