What is so hard about pricing roads properly?

Blog, Transportation, David Seymour

A nice statement of the obvious-that-unfortunately-needs-to-be-stated-because-the-policy-environment-is-so-bad. Not written by me but by Frontier intern Dan Osborne:

If we want a smaller number of traffic jams, we need to allow entrepreneurs to enter the market for roads in Canada. Gridlock is simply minimal traffic flow due to an overabundance of demand for a small amount of space on the road. To use economic terms, demand for road space far outstrips supply. In a free market, the existence of a profit motive would mean that the price of the road would be raised, so that demand and supply were in equilibrium, or new roads would be built. The simple solution to fixing the morning rush hour is simply to encourage the growth of toll roads.

Cynics have suggested that there are no toll roads in the world today that are profitable solely through the collection of toll. The government has eliminated that possibility. Every single country in the world has subsidised government supplied roads. This means that there are less consumers of toll roads than in a truly free market without government roads. Furthermore, environmental impact assessments for different regions and municipalities mean that a project takes a prohibitively longer amount of time to be completed and at much greater expense, which further reduces the profitability and availability of toll roads.

Looking at both the past and the present, Canada has a wonderful example of private infrastructure investment: rail transport. Canada has a total of 49,422 kilometers of trackage, the vast majority of which was built by privately owned and operated firms. Expansion of the railways only slowed with the advent of the automobile on government subsidised roads. Just like the government killed rail expansion with subsidised automobile use, it has killed the toll road with free roads.

The victim of government policy has not just been the potential toll road owner, but every road user. Without a profit motive, there is no incentive for the government to expand road supply or constrict demand. So long as the government intervenes in the market for transport, there will always be traffic and gridlock.