Tuesday, March 13, 2007

Do we Need the Government? (9) - Building Roads?

Some people believe that we need the government to build roads.

Actually most new streets in cities are built by property developers. Most new roads and highways are built by private contractors. The government (local and central) only maintains roads and streets that they taken over after they have been built by others. Roads are often not maintained as well as they were built, so this does not inspire confidence in government.

Some argue that we need to government to pay for roads. The problems with government funded roading are evident in every large city. Whenever the price of a good or service is set to zero, demand escalates. People have to queue to get the good or service. In the Soviet Union the price of bread was set too low, so there was not enough bread available to supply needs. Queues for bread were common.

In most large cities, the price for travelling on many highways has been set to zero. The result is that many people are queuing to use the highway. We call this traffic congestion, but it is really just a queue for a government-provided service for which the price has been set to low. The economic phenomenon is no different to the bread queue in the Soviet Union.

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