My topic is privatization, and before I get into some of the radical privatizations such as oceans, education, bodies of water,
I thought I would rehearse the reasons why we would want to privatize anything at all.
And it seems to me that there are two reasons for privatizing anything. One is morality, ethics. The idea is when I trade my pen, my pen for your tie, we have a voluntary exchange. I own the pen, you own the tie, we agree to exchange.
There's no coercion whatsoever involved.
Imagine if ties and pens and things like that were not privatized.
Then the way we would engage in tie and pen creation and transfer
would be we would get the government to collect money from us all
and then give back the ties and the pens.
And the problem with that is that it's coercive.
People would then be forced to pay money for a tie or a pen that they may or may not have wanted.
So just on basis of morality apart from efficiency, we know that there are benefits to markets and markets are predicated on privatization.
So we have one argument for privatization of anything.
The second one is economic efficiency.
Now, if you trade your pen for my tie, it must mean that you value this tie more than the pen you're giving up.
And it must mean that I value the pen that I'm getting more than the tie.
So we each gain a profit.
We exploit each other if you want to say it that way.
That would be the leftist way of saying it.
But the more rational way of saying it is that we each gain the profit of the difference to us between these two objects.
But, if it's done through the government, no such conclusion follows, because you are forced to pay money to get a tie, we can't deduce that you benefited from it, because if you would have benefited from it, you would have been willing to do it voluntarily, but it was done under coercion, so the same economic implications do not follow.
Now, there is some discipline in the political system. With democracy we get some benefits. We have some control over our masters.
Nothing like what we have over private enterprises. The reason that we have no crisis in pens or pizza or ties or shirts
is because if somebody is producing badly we just don't go to them we don't buy
from them we don't patronize them and if enough people don't then they go then
they go broke. When FEMA came to help in quotes my problem with FEMA was not so
So much that they screwed up royally, it's that there was no market mechanism to get rid of them.
I mean, look, in the private enterprise, it's conducted by human beings and human beings err.
And this is the reality. We're on the wrong side of the Garden of Eden if we want perfection.
So there's always going to be error.
The benefit of the market system vis-a-vis the political system is that when you make an error,
there are automatic feedback mechanisms that reduce your scope, you earn less profits,
and eventually you have to go broke.
Now, if FEMA were a private enterprise, they wouldn't be around anymore.
The Army Corps of Engineers.
Again, I don't blame them for making mistakes.
Private people make mistakes too.
But when private people make mistakes, they lose money and they go broke.
When the Army Corps of Engineers makes mistakes, they get more money.
So how do you expect economic rationality from a system where you reward incompetence
Incompetence and visa via system where you retard incompetence by making them go bankrupt.
Let's compare the dollar vote and the political vote. The dollar vote occurs every day. The
dollar vote is narrow. You can buy pizza or salad. The political vote, you might have
candidate A whose policies 1, 3, 5 and 7 you like and candidate B whose policies 2, 4,
and you have no way of narrowly focusing your vote on Policy 2 or Policy 3, it's a package deal, it occurs every four years.
So the control that we have as voters is very much less than the control, voters over politicians is very much less than the control we have over market participants, entrepreneurs.
Okay, with this very, very brief introduction to why privatize things, let me move into a discussion of oceans, education and private roads.
Why do I pick these? Well, it's sort of like shooting fish in a barrel to say, let's privatize the post office.
Office. I mean, I'm all in favor of it. And I think that the people who focus on that are doing good work. And indeed, I have been known upon occasion to write articles and even speak about that. And I favor that. But it doesn't really grab you. It's not challenging enough. And my own perverse mind works in weird directions. So I have to go in that direction. OK, let's start with perhaps the most radical thing. And that would be privatizing.
Can you see that? What I've got here is just a rough estimate of what the surface of the Earth
is composed of and it's composed of roughly 25% land and 75% oceans and then I have an estimate of the GDP that is produced in these two places and it's just right off the back of the envelope estimate on my part because it's very difficult to get data as to what proportion of the GDP is created on the land versus on the oceans.
Nobody's interested in this question, nobody gathers information on it.
My next project will perhaps be this and then I'll be digging and perhaps get better data for you.
But the answer is that there's a disproportionate amount of productivity on the land than on the ocean.
Now you might say, well, possibly because most people live on the land and very few people live in the ocean.
Okay, that might account for some of it.
And I don't doubt that it does account for some of it.
So my claim, my hypothesis is that that doesn't tell the whole story. That is more to it.
And we have this thing called the tragedy of the commons. And what is the tragedy of
the commons? The tragedy of the commons is that when something is unowned or, well, unowned
If you are commonly owned, we tend to treat it in a different way than when it is privately owned.
For example, suppose you all have a cup of coffee in front of you.
And suppose you don't drink it with spoons, but I give you a straw.
Maybe I should use orange juice as a better example.
I give you a straw, and in the straw, unbeknownst to you, is a monitoring device
picking up how quickly you slurp up your orange juice.
That's one scenario and you slurp it up at a certain rate.
The second scenario I give you is I give you very long straws
and I give you a gigantic big bowl, maybe a swimming pool full of orange juice with long straws
and we ignore the health effects of this.
And we ask, what then will be your rate of sipping the orange juice?
And the answer is you'll probably sip it a lot quicker if it's communally owned
because you'll each reason that if I don't sip it now, the other guy is going to get my share.
So I better slurp away at a furious clip, whereas if it's privately owned, you have it under your control, you can take it in at your leisure.
The alternative cost of a SIP now, in the private case, is you lose that amount that you SIPed when you did SIP.
The alternative cost in the case of the public is virtually zero because someone also get it anyway.
One of the reasons, let me give you another chart here.
One of the reasons that collectivized forms in the Soviet Union were very inefficient and here the data is much better.
The Soviet Union land was 3% of it was private, 97% of it was public, and on the 3% that was private, they'd give each of the farm workers a little front yard or backyard where they could grow crops, they produced 25% of the crops, and on the public, it was 75% of the crop.
and on the public it was 75% of the crop think of it in this terms if you own a cow a private cow and the cow is having a calf at 3 in the morning where are you going to be if you're a farmer you're going to be out with that cow making sure that the cow does well because you're a big part of your income your wealth your position depends upon a healthy cow and a healthy calf on the other hand if it's a collectivized
The cow, and there are 10,000 of them, and there are 10,000 workers, the indication is you'll just sort of turn over and go back to sleep because you own very little of it, and the benefits that accrue to you are very small.
So here we have two examples of the tragedy of the commons. Let me just give you one more, and that is the cow and the buffalo.
The cow never came within a million miles of being extinct because people own private cows.
Nobody ever went into their lower 40 with a machine gun and started shooting all their cows.
It's just silly because the alternative costs of doing that are very high.
If you shoot your cow today, you don't have the cow tomorrow.
Now, take the buffalo.
There was this movie, Dances with Wolves, where somehow the white man was evil because he shot all the buffalo.
Well, it's rational to shoot all the buffalo, even if all you benefited from them was their tongue or something or their hide,
because they were running around like crazy men, they weren't fenced in, and if you didn't shoot one, someone else would get it.
So the cost to you of shooting one was nothing.
So of course they were overused just as you sip your orange juice more quickly under common or non-ownership.
Okay, well, it's the same thing on the oceans.
The tragedy of the commons is the key with the oceans.
The reason we have dissipating fish stocks, cod, mackerel and other fish is because if
I don't get it, you'll get it, so I'll grab it all and I have no incentive to save it.
What we have to do if we want to have a non-species extinction or protect species is we have to
privatize the buffalo.
As far as I'm concerned, the elephant is just a cow with big ears and a funny-looking nose,
the same with the rhino.
If you want to preserve these species, you have to privatize them.
Yes, you might have to have a bigger barnyard for the elephant than the cow, but so what?
And maybe you'd have to have a thicker fence or a, what do you call it, an electrified fence.
There was this movie, Star Trek, I forget which one it was, I get confused, but this
This was a very remarkable movie. What happened was we were in the 25th century or something like that,
and our boys were in trouble. There were these super beasts or these super creatures that were kicking the butt out of our boys.
Why were they so upset with our boys? Because there were no more whales. The whales had been gone.
Don't ask. It's true. I'm not making this up.
So our boys had to come back to the 20th century to get a whale and then bring the whale back to the 25th century
Well, why don't we have any whales in this scenario? Or why are we on the verge of losing the whales? And that's because the whales are unowned. They run around like, you know, like free fish or something. We're not in favor of freedom for fish. We're only in favor of freedom for human beings. And if there were a god of whales, the god of whales would probably want the whales to be privately owned because then they would be like cows and then they would be preserved.
The Federal Reserve, whereas under the present circumstances, it doesn't pay to save the wealth.
One way to save them is to make barnyards out of the oceans.
Different people get different parts of the ocean and we electrify it.
Right now, there is no incentive to do that because private property rights in the oceans will not be recognized.
It's not a technical problem, it's a legal problem, or an ethical private property rights problem.
Even nowadays, the first ways before they had barbed wire to keep cows, to keep track of cows, was branding.
Those were the fences, or the way to determine who owned which cow.
Well, we could do that now by shooting little radio wave kind of things into the whale,
and that would establish who owns the whale.
Would there be poaching? Yes.
but we have, we have our vays of dealing with poachers.
But better to have private property rights with poaching
than total, I wouldn't say anarchy,
but total chaos with regard to whales.
Okay, so much for oceans.
Let me now talk a little bit about education.
Why should we privatize education?
Well, if we privatized education,
Probably the proportion of money that we spend on education compared to the GDP would be lower than it is.
In the days before public education, and public education only came in in the 1890s, 1910s,
a lot of education was on-the-job training, apprenticeships, things like that.
You didn't have the situation where such a high proportion of the numbers of people went to get education.
Education. Part of this move was an attack on the Catholics by the Protestants. What happened was in the turn of the century, the last century, there were people who came from Italy and Ireland who were Catholic and they set up their own private schools and the powers that be at the time, Protestants, didn't like this promotion of papacy
or potpourri or whatever it was, and they were good economists.
They figured if you have to pay more for education, then you'll have less of it.
So what they decided to do is to make the Catholics pay twice for education if they sent their kids to private schools,
once for the private schools and then once for public schools for other people's children, namely their own.
So there's nothing intrinsically wonderful about public education, part of it came from
nefarious purposes, this religious kind of a thing.
What I'm trying to say is that the market allocates resources in a proportion that is
conducive to the ideals of the people.
Right now there is no crisis of misallocation between peas and carrots, or between forks
and Spoons. If there were, the market would operate in such a way as to undo the misallocation.
In other words, if there were too many peas and not enough carrots, the profits in peas
would fall and we'd have fewer peas, the profits in carrots would rise and we'd get more carrots
until we achieve some sort of balance. We never reach the perfect balance, we're always
changing our minds on these things, but we have a rough conformity of the resource allocation
Education on the one hand and our desires on the other. But with education, we don't
have that. Namely, we are forced to pay for education whether we want to or not, for other
people, for ourselves, what have you. And so we have less control of the allocation
of resources. And allocation of resources, some sort of thing that economists, it cuts
to the quick of economists. For example, one of the worst things for an economist is misallocation
of Human Body Parts, the idea we have no markets in body parts, so on the one hand
you have livers and kidneys and hearts going to the grave, young people die on motorcycles
which are called donor mobiles sometimes, on the other hand you have other people going
to the grave for lack of these things because they need a kidney or a heart or a liver or
a spleen or whatever it is, and it's sort of a horror because you don't have an allocation
of Resources, you don't have cooperation, and what economics is really is the study of human cooperation.
And one way to cooperate with each other is to make sure that extra people don't go to the grave before their time
because they can't get other stuff from other people, and yet the government in its infinite wisdom makes it impossible for this to work.
They do the same sort of a thing with regard to education.
Now, with regard to education, the way this thing goes is you have a supply and demand curve.
Can this be seen in the back? How are we doing? It's okay? Okay, we have a supply and demand curve for education, we have the price of education, the quantity of education, and we have an actual amount of education, and the argument from the people who say we should have subsidies for education is that the demand curve
only encompasses private benefits. In other words, you go to school, you get more learning, you get a better job, and you'll only go that far, you'll only get that much education, the actual amount of education, as behooves your own personal interest, as satisfies your own need for education, whether it's to get a better job or psychic values or whatever.
But the economists say, well, this is part and parcel of market failure.
What's going on with market failure?
What's going on with market failure is that education is an instance of external economies or positive externalities.
Namely, when you become educated, not only do you benefit yourself, but you benefit everyone else.
You'll vote more wisely.
You'll engage in less crime.
You'll be a better citizen.
And all sorts of wonderful things will happen.
So when we take that into account, the demand curve shifts to the right
and the optimal amount of education then becomes
more.
You get it? The argument is
that we have a market failure, we're only considering our narrow selfish personal interests.
If we consider the public good,
You would realize that when we become educated we help everyone else and therefore the benefits
are greater than the private benefits we see.
Well, there are problems with this view.
One problem is that it's very subjective.
A lot of education, at least at the college level nowadays, consists of multiculturalism,
feminism, black studies, queer studies, relativism, egalitarianism.
I'm not sure that I like that stuff.
It seems to me that that stuff is a negative externality if I buy into this whole externality
argument to begin with.
Mainly, maybe what we ought to do is tax education, maybe we have too much of this
sort of education.
There have been studies in various departments at universities like sociology, history, political
science, anthropology, religion, philosophy, and there what they do is they ask for pro
pro and anti-market sentiment. Sometimes the proxy variable is Democrat versus Republican.
That's not a perfect proxy, but it's better than nothing. And what they'll find is by
a ratio of 30 to 1, these departments are populated by lefty queer studies, feminists,
multiculturalists, whatever. God knows what they're teaching our kids. When my A students
in economics go over and take one of these courses, they're always getting Ds and Cs
and they're really bright kids.
So I don't know what they're doing over there
and whatever they're doing I don't think is good.
It's no accident that rent control is most popular
in cities like Boston, Santa Monica,
New York City and Ann Arbor.
Now what have Boston, Santa Monica,
New York City and Ann Arbor got in common?
A lot of university students being taught
that capitalism is evil and we need rent control,
we need minimum wage.
So it seems to me that if there's any case for government intervention in education,
it would be in the exact opposite direction, namely, we ought to tax it.
Not that I'm favoring that, but I'm just trying to get the logical implications of the argument.
Given this subjectivism, which is an Austrian insight,
it's by no means clear that we ought to be subsidizing this stuff.
But let's suppose, arguing though, that subsidies are justified.
Don't ask me how, but let's just assume the argument for argument's sake.
Well, the way we deal with food
for the poor or, I mean, food also has external economies. You know, if you don't eat, you can't produce.
If you can't produce, the whole economy goes bankrupt. I mean, so you could use this
externality argument for anything.
I mean, I take a shower once a month, whether I need it or not,
and I benefit you people, especially in the front tables here, otherwise, you know, you'd be in trouble and maybe we should subsidize soap and, you know, once you let this particular cloven hoof under the tent, as Milton Friedman does, a so-called advocate of the free enterprise system, for him, neighborhood effects or externalities is a big thing, justifying government, you can justify pretty much anything, you know, it's sort of game over. So I don't buy into this but I'm just saying,
Let's suppose we did, you know, let's trace the implications.
Well, take food. We say that they're poor, we have to give them welfare.
But we don't give them public restaurants or public grocery stores.
So in other words, even if you think that there's a case for education subsidies,
it doesn't mean you have to have public education.
You can still have private education just like we have private restaurants and private grocery stores.
We can have a Walmart of Education, for example, similarly with clothing.
We give the poor money for clothing. We don't have government stores.
Usually you think of food, clothing and shelter.
We do have public shelter and it's called public housing and this is a horror.
They keep having to knock down perfectly good housing
because they become cesspools of crime and drugs and all sorts of bad things.
So when government get...
In other words, even if you buy into this argument, still we can preserve privatization.
You can distinguish privatization from subsidy.
Okay, let me now move into my third area, privatizing highways.
What's going on here?
Well, there is this guy, Michael Kinsley, who is a famous writer,
And he just wrote about libertarianism.
You know, I wrote my PhD dissertation on rent control.
And when I first started giving public speeches on rent control,
the way I envisioned the thing going would be,
the critics would say, well, how about your t-values?
How about your coefficients?
How about your econometrics?
How about your supply and demand?
You know, they would criticize me on substantive issues.
Instead, what they criticized me on was,
Am I a landlord? Am I in the pay of landlords? Do I know any landlords?
In other words, they didn't focus on the substance, they just used ad hominems on me,
and I think that's pretty much our experience. We study carefully the case for privatization,
and when we go public, our critics don't talk about the substance. What they talk about is,
In any case, here is this guy, Michael Kinsley, who finally condescends, he lowers himself,
magnificent of him, to discuss libertarianism. And here's what he says, quote,
Sometimes libertarians end up reinventing the wheel. My favorite example is an article
I read years ago, advocating privatization of highways.
This is a classic libertarian fantasy.
Government auctions off the land, private enterprise pays
for construction and maintenance, tolls cover the cost,
competition with other routes keep it all efficient.
And what about intersections?
The um is in there, I didn't make that up.
Well, markets would recognize that it is more efficient
for one company to own both roads at major intersections.
And when that happened, the company would have an incentive
to strike the right balance between customers on each highway.
And stoplights, ultimately the author had worked his way up
to a giant monopoly that would build, own
and maintain all the roads and charge an annual fee
to people who wanted to use them.
None dare call it government.
The implication is that if you had private roads
it would revert to government anyway.
So this whole thing is silly.
Well, I will hand it to Michael Kinsley.
He does us the honor to at least address a libertarian issue
and he doesn't confine himself to sneers and name calling as is the usual example.
So let me use Michael Kinsley as a focal point and ask why do those of us who have worked
in these vineyards, why are we hopped up about private roads of all things?
To me there are two major, well one major and one minor reason.
The minor reason is congestion.
I don't know what it is here.
Probably it's worse because this is a bigger city than New Orleans.
I was once in California and I got up at five in the morning and I was in this hotel and
overlooking the highway and at five in the morning there was bumper-to-bumper traffic
in LA.
Here it's probably not that bad but pretty bad and in New Orleans it's very bad also.
I mean, the Long Island Expressway, when I used to live in New York,
the joke there was that it's the longest parking lot in the world.
It was 100 miles long, and you just, people bumper to bumper.
What's going on there? Well, what's going on there is,
at a zero price, demand exceeds supply during peak periods.
And in the market, the price would rise and we would have all sorts of beneficial effects.
People would naturally gravitate toward carpooling and manufacturers would stagger hours.
Not everyone would work nine to five, some people eight to four, some people seven to three, other people ten to six.
We would have all sorts of beneficial effects.
But instead, there is no price based on the time that you use the road.
And if anything, what the government does is it has anti-peak load pricing.
See, peak load pricing would, you know, if you have peaks and troughs,
the peak load pricing would be high at the peak and push down the peak and low at the trough, push up the trough,
so you have sort of a more evenly spaced use of the roads.
But what they do is they have these tollbooths, which is a whole other problem. I mean, it's just a very silly way to collect money, and what they do is they give you a month trip ticket, and if you buy the month trip ticket, you get a cheaper per unit price than if you just go one trip at a time.
But who is using the roads enough to justify a monthly trip ticket, namely the people using it during the peak loads?
So what they're doing is actually exacerbating the peaks by charging less if you use the roads during the peak.
So it's just totally perverse, but that's the minor reason.
It's just discomfort, although there is a little road rage and people are shooting each other,
Hey, you cut me off, you know, I could have got one inch closer to my job and you cut me off, so I'm going to kill you.
But that's just a... I see you people engage in that stuff.
But the major reason for my and I think our opposition to public roads is there are 40,000 people a year who die on the roads.
40,000 people.
To put this into some sort of context,
only 3,000 people died in 9-11?
Only 3,000 U.S. soldiers have so far died in Iraq?
40,000 people a year bite the dust on our nation's roads.
This is horrible.
We probably all know someone,
or know someone who knows someone,
who tragically had their life snuffed out
on the Public Highways.
It's just, and yet there's nothing in the news about this.
This isn't a crisis, this isn't a problem.
It's sort of like death and taxes it's seen as inevitable,
but it's not inevitable.
It comes from government ownership of roads.
Now, our critics won't tolerate that.
Our critics will not agree with this.
Our critics will say, no, no, no.
The real reason for the highway fatalities
This has got nothing to do with the government.
It's rather due to speed, drunken driving, weather, vehicle malfunction, driver error, things like that.
People who study this, the socialists at the University of Chicago, list...
That was an inside joke.
By the way, when an economist tries to tell a joke, you better damn well laugh.
It's sort of like when a bear plays the violin while riding a bicycle.
You don't ask, is he in tune?
You say, wow, a bear is playing the violin while riding a unicycle.
And you say, wow.
Well, when an economist tries to tell a joke, I mean, you say, wow.
So let me read a list of Sam Peltzman, a University of Chicago socialist economist, says here are the real reasons for the fatalities.
Vehicle speed, alcohol consumption, the number of young drivers, changes in drivers' income, the money cost of accidents, the average age of cars,
the ratio of new cars to all cars, because it has been suggested that while drivers familiarize themselves with their new cars, accident risk may increase,
traffic density, expenditures on traffic law enforcement by state highway patrols,
expenditures on roads, the ratio of imports of total cars, because there is evidence that small cars are more lethal than large ones,
education of the populace, the availability of hospital care, the National Highway Safety Traffic Administration,
the equivalent of the FEMA or the Army Corps of Engineers, they have 125 different reasons,
like how far you are away from the hospital, how fast the ambulance is, all of these things.
I agree are causally related to debts, but my claim is that they're only proximate causes.
Look, here we are in this restaurant. Menagio's restaurant? Okay, I can't pronounce it. You
guys know what it is. Suppose that this restaurant, God forbid, I don't want to say this here,
goes broke. And the reasons are lousy food, poor service, dirty conditions and bad location.
Conditions and Bad Location. Would you for a moment believe that these were the
ultimate causes of the restaurant going broke? No, these are just approximate
causes. The ultimate causes are the management. The owner, entrepreneur of the
restaurant didn't get a good cook, didn't give someone a broom and say go sweep,
didn't get a waitress or a waiter to you know take care of business as we used to
Located on the wrong street. Do you get the point? Look, if I take a high-powered rifle and I shoot out into the street and I kill someone, and the cops and you guys all grab me and say, hey, Block, you're a murderer, and I say, tuk-tuk, wasn't me, it was the bullet. This would be silly, but in a sense, it was the bullet. I'm a hundred yards away from the guy that I just killed. I didn't do it, it was the bullet. That's just the proximity.
The ultimate cause is me. Well, the ultimate cause for highway fatalities is not all the speed, drunken driving, and yack, yack, yack. It's rather the fact that the managers can't manage their way out of a paper bag.
They can't stop the drunken driving. They can't stop the speeding. They can't stop the weather. By the way, the government is responsible for bad weather.
How does this work? Well, if they hadn't been sucking up half the GDP for the last hundred years,
the market probably would have found a way to solve the weather problem.
But no! They grabbed up all our money, so they're responsible for the bad weather.
Just take bad weather for a second. Where I live, part of my life, I live in Canada,
and Canada is a cool place, very cold.
And some of the driveways are on the side of a mountain in Vancouver where I live and they're very steep.
And in the icy conditions, these would be very dangerous.
So what the people do is they put these grids, these electronic thingies under the cement.
And when the snow or the ice comes, it warms it up and it's a little wet, but it's not slippery.
Well, if you had private roads, if I had a private road, and what's your name?
Bill had a private road competing with me, and I was in Canada or in Colorado or someplace where there was snow.
I would put a coil under it, and I would charge a little more, and I'd say,
come to my road, you go to Bill's road, you'll die like flies because he doesn't do that.
In other words, what I'm trying to do is to input the competition that gets us good pizza and good pens and good ties,
and just apply it to roads.
It's not that weird. It's not that crazy. In other words, we have this idea of privatization.
Weeding out of the inefficient, promoting those who do a good job, giving them more profits.
Why shouldn't we apply it to roads? What's so wholly about roads that roads are not to be applied to these basic economic principles?
By the way, the first roads in this country were all private roads. They were turnpike roads.
Somebody would get on his high horse
and get a road from here to there
and make a little, they would put boards,
they would clear the path of puddles.
They would charge based on how many horses,
how many axles, the width of the wheel.
If the wheel was very narrow, think ice skates,
they would charge more because the wheel
would rip up the road.
If the wheel was wide, think steamroller,
they would charge less because then the wheel
Mill would sort of damp down the pits in the road.
The first roads were private.
There's nothing intrinsic about roads that have to make them governmental roads.
At this point in my speech, I usually reach for John Stuart Mill, because when I do this
in front of hostile audiences, at this time, they're all booing in his ennemi, so I have
to give him a little John Stuart Mill about how, you know, you have to hear both sides
Okay, so how would they work? Well, just like any other business, for profit. You set up a road. I want to go from here to there. No big deal. I assemble some land. I start charging people. How might I charge people for this?
Well, when I first started writing, and as Lew said, my book on this will soon be coming out,
I started reading grocery journals and people said, why are you reading grocery journals?
The reason I was reading grocery journals is it was at that time that groceries were first putting in these bar chart things
so that you could slip, you know, you buy some cornflakes and they go blip and then they charge you and it registers.
And what I was saying is what we ought to do is put these little things on the underbodies of cars.
And as the car goes over a big machine to pick up the code, it registers where you were, and it registers where you started, where you ended, and at the end of the month, it sends you a bill for road use.
So that would be one way to charge. You don't have to – you see, when you think of private roads, our critics will – if they're not going to just resort to name-calling, our critics will say, well, you think that the traffic congestion is bad now.
Now, wait till you see it on the private roads, and I had this idea that every time you pass somebody's house, you have to put in one-tenth of a penny, and you know, this would be crazy, but the way you would have roads is you wouldn't have it, each little bit of road would be owned by the person whose house or factory was in front of the road, and you'd have to pay them each individually, rather the road would be owned by a road company, the I-10 company, or the I-45, I think those are roads around here, the company would own it.
How would it be given to people? Well, maybe everyone in use...
There was this thing called the BCRIC, British Columbia Resources Investment Corporation.
They had a bunch of mines and factories and cutting operations,
just various resources in British Columbia, and a government came in that wanted to privatize.
So what they did is they said, okay, here are all the resources.
Resources, everybody in British Columbia gets five shares of it and now it's a private company.
Well, you could do something like that. It would be better if we could figure out who
paid more taxes for the roads, then they would own more shares of the I-10. But these are
just technical problems. We could solve them. Can we solve them perfectly, justly, with
a God's eye view? No. But there are 40,000 people's lives at stake every year. It behooves
How might I try to save lives if I owned a road?
Well, one way, and this is stuff that I advocated very early in the 70s,
would be to put crosses or Jewish stars or whatever it is for the Muslims
right near where a death occurred, only real big ones.
Another one was that nowadays they do a little of this.
this every once in a while you see a few crosses and it shows there was a death
I but the crosses are just you know a foot by two feet or something I would put
big ones to get people you know there's that joke about the the mule trainer the
novice mule trainer was pushing and pulling the mule and you know the mule
wouldn't go anywhere and then they got the expert mule trainer and the extra
mule trainer got a big hammer and hit the mule over the head and practically
killed him and when he was asked why why'd you do that I said well I had to
Well, a big cross will get people's attention more than a small one. You know those cars
that are accordionized, sort of schmushed? You know, a 20-foot long car, now it's 3 feet
long because two other cars. Put one of those up on a big pole to show what can happen.
Another possibility is maybe it's not speed. Maybe it's the variation in speed. You know,
I used to have this Honda 90cc motorcycle, and it was capable of doing maybe 40 with
a tailwind and a downhill, uphill with a passenger and a headwind. I couldn't get up to 40, but
I was on the highway because the minimum speed was 40, and I sort of do 40. And the maximum
The speed is 70 and everyone's doing 85. You do 70 on the highway and you're like the nerd. Everyone's going right by you.
So the variation in speed is from 35 to 80. Maybe what we ought to have instead of a three-lane highway with all the same speed limit,
maybe what we ought to have is in the left lane, 80, in the middle lane, 65 and in the right lane, 50. I don't know. No one knows.
The point is that the rules of the road don't come to us from on high or from Washington DC, which is about the same thing, right?
They come from empirical experimentation. Bill has one set of rules on his road. I have a different set.
This time he had fewer people killed on his road and I sort of follow him the way we do all businesses.
We have competition. We have different policies. So maybe it's not speed. Maybe it's the variance of speed.
I don't know, no one knows if we could but have competitive private roads and
different people try different things and and there were private agencies
monitoring the the death rates on these highways see right now when a death
occurs a 15-car smack-up killing 30 people does anyone lose money who's in a
position to change anything no how do you expect to get a sensible policy in
in that way. Okay, let me consider a few objections to my modest proposal. One is, one time there was this, that's a map of the US, you can see Texas and Florida, and there's a little bit over there for Long Island, that's over here.
What happened is I was once at this conference with my then 14-year-old son and Gordon Tullock,
another supposed free enterprise, came to me. We were standing in this hall, it was in
Vancouver, so my wife said I have to take my son, otherwise, you know, I can't go,
so he was there. And Gordon Tullock taps me on the shoulder and says, Block, I hear you
Do you favor private roads? I said, yeah, that's true, I do.
Well, you can't have private roads because if there were a private road stretching from LA to Boston, you could cut the country in half.
I said, what? He said, well, they wouldn't let anyone go in a north-south direction.
And I said, well, you know, it's theoretically possible, maybe, but it wouldn't pay because the road wouldn't be worth much if you couldn't get off of it and on it.
and if you get off of it and on it then you know you get up and down or past it and also if if you couldn't if you could just go from Boston to LA and you couldn't get off the road wouldn't be worth as much as if you could I said tut-tut you're right it is true but it could be done if some maniac wanted it so for the next two years my son and I discussed nothing else but this and we wrote a series
There's a series of articles debating Gordon Tullock on this point, and the argument that we came up with is, even assuming a crazy person like this, and it's very unlikely that a person rich enough to get a road that big would act so foolishly, but suppose that some madman wanted to do that, still he couldn't get away with it, because we could tunnel under or bridge over. Now, the objection to that is this thing called ad-colum doctrine. The ad-colum doctrine, AD,
C-O-E-L-U-M, I think that's the way you spell it.
The Ad Colum Doctrine says that when you own a square mile
of the earth, when you own a square mile of the earth,
you own down to the core of the earth in a decreasing cone.
Think of an ice cream cone, right?
And you also own up into the air in an increasing cone.
This is Milton Friedman's interpretation
of libertarian property rights theory,
but it's got nothing to do with homesteading.
Nobody homesteaded stuff 50,000 feet up.
If you had this Ad Colum Doctrine,
you couldn't have airplanes flying around
because they would have to pay a toll
every time they flew over your house.
You see, with Ad Colum, you couldn't have slant drilling,
slant drilling as I drilled down
and then across and under your house.
But under libertarian property rights homesteading theory,
you could because as long as I don't cave in your buildings,
and I was there first.
So if you have a road stretching from Boston to LA and I want to go north-south,
all I have to do is go under and build a tunnel or a bridge.
Now it's true the bridge would block out your sunlight,
so I'd have to have a plastic see-through bridge,
and it might stop your rain, so I have to have mesh, I can't have a solid bridge.
But these were the sorts of things that we were thinking about.
So even under the most weird cases imaginable, we can still have a private road system.
Much more reasonably would be that, you know, you're not going to get anything like this.
Okay, another objection is you couldn't have a private road because you would need, what's
it called, expropriation, eminent domain.
You would need eminent domain because if I wanted to build a road from A to B, there'd
There could be some guy who owned a plot of land right in between A and B,
who would say that if you're going to get a road, you're going to have to go through my territory.
And if you go through my territory, I'm going to charge you a trillion dollars.
So, you know, you just can't do it. In other words, the holdout problem.
You know, in the U.S., there are some buildings that look like this.
See, a building that looks like that, namely, and you know what happened?
There was this little old lady in that house who said, no, I'm not selling it,
so they built all around it. In the Soviet Union, they don't have any of that.
Well, to me, this is the price we pay for freedom.
The point is that a little old lady valued her house more than the value of the high rise, and that's what you do.
Well, private property rights are very important to our civilized order, and this is one of the implications of private property rights.
But there are ways around the whole of that. What you could do is buy options to buy.
Namely, you go to people along a certain route, and you say, I'd like to buy your land, your farmland, which is worth, oh, a thousand an acre.
But I'm not sure I want to buy it, so I'll give you ten dollars an acre just as an option,
And I'll exercise it within a year, and if I don't, I lose my deposit.
And you try to get along one of those roads, say,
so there are five ways that you can get across.
And then if you get a holdout, you just go from three to two.
And if you get a real nasty holdout, you tunnel under them.
So you don't need eminent domain to do these things.
Then there's the problem of the blockade.
It's sort of like a tic-tac-toe thing, the blockade.
You go into your, you own your house
in the middle of the four streets,
and you try to get out onto the street,
and the street owner says,
sure, I'll let you out for a million dollars.
Each time you wanna come out, you have to pay a million.
The idea is that if you had private roads,
People would blockade each other in.
Right now, when you buy a house, you get your lawyer
and you go and you get yourself title insurance
to make sure that the person from whom you're buying
really has a clear title to the house.
Well, under a regime of private roads,
in addition to title insurance,
you would get a thing called access insurance.
Access insurance means you insure
just against a thing like that.
Look, the whole point of having a private road
is you want people to build houses and factories
in New Year Road so that the value of your road is enhanced.
Therefore, you would be willing to be contractually tied up
so you couldn't do this sort of a thing.
And what I'm doing now is going over objections
to the private roads, and I'm saying that
none of these objections hold any benefits.
Some speculations are, well, if you had private roads,
instead of 40,000 people a year dying,
you might have only 5,000 people a year dying.
And that was my best estimate,
based on public-private efficiency.
You know, how much does it cost for private sanitation
to remove a ton of garbage and public sanitation?
And you get two to one, three to one, five to one.
So I extrapolated with deaths.
And I said, well, if there are 40,000 deaths
on the public road after this competition,
we'll still have debts, right?
I mean, we're not perfect.
We're not in the Garden of Eden.
And let's say we have 5,000 deaths.
So should we then say that the government
is only responsible for 35,000 deaths?
No, they're responsible for 40,000 deaths.
Look, Hitler was supposed to have killed 6 million people.
Let's take that number as legitimate.
But suppose I tell you that 100,000 people
would have died anyway during the four years
or the five years of these concentration camps.
Would we then say that Hitler was only responsible
for 5.9 million deaths?
No, he's responsible for 6 million deaths.
So these bad guys are responsible for 40,000 deaths
even though the market wouldn't eradicate every death.
Well, I think it's time for me to conclude.
What I've tried to do is give a principled explanation
of why you would privatize anything
based on ethical considerations
and efficiency, economic considerations.
And I've tried to apply it to three areas
that are at the very least controversial.
Because if we take upon ourselves
the most challenging instances, then we can do well in defending ourselves on the easier cases.
Thanks for your attention.