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TRAFFIC RULES

OMG! Traffic would a disaster! Who would place traffic signs and design and agree to traffic rules? That would be a disaster! Well… rubbish!

Standardization and interconnection

There are many instances throughout the world where competing companies standardize to achieve mutual benefits. The same will happen with roads. There are two reasons why people would own roads: to access their property and to generate profits.

Those accessing their own properties would be happy to have standardized rules and signs because it makes for simple driving and it also lowers the price of ownership. This is so because many companies would compete to provide the very same signs, thus lowering the purchase price.

In for-profit roads, as the goal is to have profits, the only way to achieve this is by increasing traffic. This means standardization and interconnection. Potential customers will want to be able to go from A to B. If your road does not connect those points, they will simply travel through a different road. Furthermore, you will want to make their trip as simple (i.e. convenient) as possible, and hence adhere to standard rules.

Rules

How about traffic rules? Who would enforce them?

To begin with, standard property rules apply. If a driver causes damage to any other property, this person is fully responsible for all the damage. Road ownership is irrelevant.

How about specific traffic rules such as maximum speed? These will be enforced by whichever means the market decides. Some of the means will be automated and some manual (i.e. people monitoring traffic). Penalties will only be financial since traffic rules are nothing more than contractually agreed terms and conditions.

Driving licenses

There will be no more licensing required. Since every person is responsible for their behaviors, it would be up to every person to decide when and to what degree this person is ready to drive. Furthermore, the use of roads will be subject to contractual agreements, which will include terms and condition. Some of them may include standard (private) driver exams but other roads may not.

Discrimination

How about discrimination? Road owners will decide who they allow on their roads and who they will not. Some roads will only be allowed for small cars and some for cars and trucks. Some may discriminate by driver’s race or color and some may not. Some may discriminate by driver’s culture and some may not.

This concept seems horrible at first glance, but it is not. The very fundamental principle of ownership is that I have absolute rights over it. If I choose to discriminate who goes on my road based on the color of their cars, it is my right to do so. However, in economic terms, there is no free lunch. For roads only used to access properties, this may not make any difference. But for roads destined for traffic, this will invariably decrease profits, which will increase out-of-pocket maintenance expenses. Hence, there will be gigantic pressure not to discriminate, actually, to invite people through.

This will lead to a gradient of discriminative neighborhoods which will fully reflect the wishes and desires of their owners. On one end we will have something not unlike so-called “closed neighborhoods” but with an infinite variety. The other extreme of the scale will be represented by the pure entrepreneurial spirit whose goal is to make profits by providing goods and services to as many people as possible. This end of the scale will make sure that nobody is discriminated. For example, rich people may wish to live in highly segregated locations (again, not unlike they do today), while stores (e.g. supermarkets) will wish to attract as many people as possible regardless of any personal characteristic.

Furthermore, as road owner you are fully able to impose whichever rules you prefer. Would you prefer people not parking in front of your house? Done! Would you like to rent parking in front of your house? Done! No need to go on your knees to beg to the municipal bureaucrats just to be denied. You are in full control, not them!

FOR A PRICE

Markets operate on the basis of supply and demand. They tend to price so that they are both balanced. In a way it is a pay-as-you-go and pay-as-you-use. This is rational pricing. Demand equals peoples’ wishes. Things with low demand are not wanted as much as things with high demand. Consequently, things with low demand are manufactured in lower quantity (why waste resources?) while things in high demand are manufactured in higher quantities (to meet peoples’ wants).

Government pricing

Government pricing of roads is irrational. Neighborhood roads, main roads and highways are all maintained at roughly the same technical standard level while the maintenance cost is far higher for the latter than the former.

Identically, neighborhood roads, main roads and highways have different building costs. The cost is higher for the latter than the former.

This means the inhabitants or users of mostly neighborhood and main roads are subsidizing users of highways because they both pay the same tax. Actually, if we look at the gasoline tax, both groups are paying exactly the same amount of tax!

This means that the real cost of building and operating highways is far higher than the similar cost for neighborhood and main roads. Yet, all drivers “pay” the same price for their use (through taxes). This means that the price to use highways is far lower than it should be, while the price to use neighborhood roads and main roads is far higher than what it should be!

This means that driving through the highway is always a bargain. And what happens when you have a desirable product on sale? You guessed it! Everybody buys it. Hence, you have endless congestion. And how does the government deal with congestion? By building more highways! Please note the self-feeding mechanism and the lunacy of it all.

Market pricing

Market pricing is rational. If highways are more expensive, the price to use them will be higher. If there is a higher demand during certain times of the day (e.g. rush hour), pricing will be higher. In this manner, by highway owners seeking maximum profits, they will also solve congestion issues. It will simply become too expensive to use the highway at rush hour.

This will create incentives for people who must use highways to use alternate transportation systems such as train, buses, carpooling, or simply move into the city, negotiate different working hours or telecommute. Once the demand is set, new market solutions will appear. This means that bus and train frequency will increase. Again, this is not politico-economic science fiction. If you study the development of the means of public transportation, you will see that in the 1900s private bus services developed in this manner. As people created new demand, they created new bus lines. It worked every single time.

In the same manner, as highways would prove to be very profitable, new highways will be built operating on the market pricing principle. Hence, the real price of using highways will decrease, making them more accessible yet not so that congestion will return.

Parking pricing

This will also become very rational. Parking in highly desirable places will become extremely expensive while parking in low demand locations will be cheap, hence alleviating congestion.

Driving pricing

Driving through neighborhood roads, main roads and highways will become an automated affair. In the same manner in which today we have Express Toll Routes or Highways where transponders can be used, in the same manner all cars can be tracked and charged the appropriate fee as a service. Just like cable TV. Again, this is not economic science fiction, it is in place in Hong-Kong where driving and parking is at a premium.

Rebalancing

What would happen if all government intervention at any level for all transportation routes and means would be removed? There would be an instant re-balancing of means against needs. As usual, due to the gigantic waste already incurred by government in building massive highways, empty subways, insufficient streetcars and restricted bus routes, it is difficult to forecast the future. What is likely is that trains would see a relative revival while the use of plains may actually be reduced. Also, there would be a re-distribution of freight logistics which would probably be different from people transportation.

What we do know for sure, is that transportation would be revolutionized through rational pricing, which would in turn ensure maximum and optimum utilization of transport systems and above all, roads.

CONCLUSION

Roads are the most used transportation means, yet the government has managed to alter this system beyond recognition. Untold amounts of money are being spent on builds that continue to go against sound economic principles producing unsound economic results. It is government at its most classic: if it does not work, we need more of the same (at the taxpayer cost). The only solution to this problem is to unleash free market forces by privatizing mercilessly all transportation systems, particularly roads. This is a trip we are willing to make and were hoping you may want to keep us company. If not, that’s also OK, it’s your decision after all.

Note: please see the Glossary if you are unfamiliar with certain words.

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