Market Urbanism

Liberalizing cities | From the bottom up

“Market Urbanism” refers to the synthesis of classical liberal economics and ethics (market), with an appreciation of the urban way of life and its benefits to society (urbanism). We advocate for the emergence of bottom up solutions to urban issues, as opposed to ones imposed from the top down.

Before there were stimulus projects

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In his new book, Railroaded: The Transcontinentals and the Making of Modern America, Richard White explores the financing of railroads in the American West and the political process behind it. In history books, this accomplishment is often looked on as a heroic feat of engineering and perseverance, but White offers a contrasting perspective of the abuse of tax dollars and manipulation of public opinion. I have not had a chance to read his book yet, but White offered a very interesting interview on Morning Edition. He explained:

Western railroads, particularly the transcontinental railroads, would not have been built without public subsidies, without the granting of land, and more important than that, loans from the federal government … because there is no business [in the West at that time], there is absolutely no reason to build [railroads] except for political reasons and the hope that business will come.

Unlike the railroads of the Northeast where Vanderbilt made his fortune, private financiers were uninterested in the West, where rails would not be making a foreseeable profit. If the expected benefits of an infrastructure project outweigh the expected costs, private financing will be available in the absence of public funding. Only when costs are expected to exceed benefits do infrastructure projects require subsidies. Historically, the argument that infrastructure is a public good that must be paid for by taxpayers has been proven false by private infrastructure projects ranging from highways to lighthouses, canals, and city streets.

The transcontinental railroad, the largest public works project of its time, marked a shift toward American policy of relying principally on federally funded infrastructure rather than on entrepreneurs to supply these goods. In the 20th century, the Federal Highway Act of course dwarfed the scale of the transcontinental railroad, and today publicly provided infrastructure is claimed to do everything from creating jobs to allowing for long run economic growth. Without a market mechanism to guide infrastructure construction, we are left with the clumsy political process to determine the amount and distribution of money spent on transportation.

Comments

  1. You’re right, but even the Eastern railroads had a lot of government involvement. They were granted eminent domain powers, because that was the only way to carve a right-of-way (in Britain, every railroad required an act of Parliament to be approved). Often they were built or encouraged by the states, to develop their own hinterlands: the Pennsylvania Railroad began its life as the Main Line of Public Works, and the New York Central exists partly because of the Erie Canal. Private entrepreneurs relying on no government support would’ve built lines somewhat differently – they’d have connected existing settlements first, e.g. NY-Philadelphia, and built railroads to the Niagara and Mississippi watersheds much later, to say nothing of railroads to the West.

  2. Eh, the eastern railroads had a ton of government involvement, it just typically came in the form of soft power rather than outright cash – eminent domain, especially. Can you imagine the cost of establishing a decent right of way if government power was not awarded? Every landowner would hold veto power over the entire route, or at least be able to extract gigantic amounts of hostage money.

    Aside from that, many prior transportation projects in this country involved substantial soft power along with substantial government money – the Erie Canal is a perfect example from the early 19th century before railroads existed anywhere in the US: http://en.wikipedia.org/wiki/Erie_Canal

    I’ve argued before that we should shift more towards government approving the soft power behind projects and then allowing private investment to fund it, but that isn’t something that we’ve seen much interest in. For example, CAHSR would likely be able to raise billions and billions in private investment if there was just a firm commitment from the state on eminent domain use for the route/stations/etc. Lacking firm legal standing to build the route, it’s never going to be able to attract private funding.

  3. While I agree that some if not most transportation is over-subsidized/built (especially autos), the existence of private infrastructure does not prove the lack of network effects that call for some govt. subsidy/intrusion/provision. Successful privately provided infrastructure often requires access to the dense publicly provided networks at each end to be successful.

    You also missed one of the truest provision of a private transport network in the Downtown Houston tunnel system.
    http://en.wikipedia.org/wiki/Houston_tunnel_system

    The only “successful” tunnel systems are located in Houston and the twin cities ( I don’t remember how Dr. Bean (one of my profs.) defined successful, but I also don’t feel like reskimming the paper right now.)
    http://www.springerlink.com/content/u0h842v57jl30528/

    The twin cities because walking outside is life threatening during a large part of the year, and Houston is the only “free market” city when it comes to downtown tunnel building.  But again the only reason the Houston tunnels are viable is because Downtown Houston is viable, which is because of the dense transportation networks that provide access to Downtown.

    I don’t necessarily mean to be arguing that because govt. did provide the dense networks, that that is the only or best way it could have been done.  It is just not as easily clear cut as you are saying.

  4. “Only when costs are expected to exceed benefits do infrastructure projects require subsidies.”

    Only when PRIVATE costs are expected to exceed PRIVATE benefits do projects require subsidies to be undertaken by private individuals. 
    Only when SOCIAL BENEFITS are expected to be GREATER THAN PRIVATE BENEFITS is there an economic argument for the provision of subsidies.

  5. I agree with you and Alon below that in an imaginary urban free market, the acquisition of land for large infrastructure projects is difficult to imagine. Does anyone know of historical or theoretical work on land acquisition by private corporations that does not rely on political force?

  6. That’s a good question – I don’t even really have an idea of how that would be done.

    There are plenty of examples of privately-financed roads and railways around the world, but I’ve never heard of one that was built without eminent domain (or similar) powers, aside from remote areas where deals were made with just one or two landowners OR areas where private military force was used to “encourage” folks to sell. Plenty of historical examples of the latter.

  7. I believe the http://en.wikipedia.org/wiki/Long_Island_Motor_Parkway was built privately without any eminent domain powers, taking a meandering route with a lot of unreasonably sharp turns as a result.  There may also be projects that involved land reclamation or deep-bore tunneling to leverage land rights that had never been granted to private owners to begin with.

  8. Walter Block has discussed ideas on how it could work – tunneling,
    overpasses, etc. But, this is something that I don’t think a perfect answer
    exists, when compared with governments ability to take land against people’s
    will.

  9. Interesting, I’ll have to try and look up some of his ideas. I can’t imagine how that would work in most areas of the US without substantial alteration in current property rights.  In most places you can’t simply dig below or build over someone’s property without their consent (read: paying them), which would give them the same leverage as selling the land itself.

  10. I’d say that even if it was built without eminent domain then, it couldn’t be now. Most information is just much more transparent and readily accessible now, so it would be ridiculously more difficult to acquire properties one by one without many folks figuring out what you were up to and quickly jacking up their prices.

    A large part of the reason that eminent domain is needed now is simply that individual property rights are MORE respected now than they were in the past. It was much easier to threaten or trick people into selling when less overall information was out and free in the marketplace.

    Deep boring under folks because those land rights “were never granted” sounds like a lawyer’s dream, UNLESS there was some type of law passed beforehand making it clear that underground land rights (below a certain level) do not exist prior to X date, or something to that effect, and then sell them from there. You’re going to have to start from somewhere – in other words, the underground rights will have to belong to someone to begin with, even if it’s the government itself.

  11. Block tries to apply a strict Rothbardian homesteading approach, where you
    can technically homestead anything that hasn’t been put to use. Thus
    property rights do not extend from the core of the earth to the sky…

    I think it gets tricky when you start talking about building above someone’s
    land because technically, that light from the sun is been used by the owner
    of the ground property. Then, what about homesteading views of the skyline,
    etc. It seems that concept could actually be used to justify extreme
    NIMBYism. I wouldn’t doubt that Block has addressed some of my concerns,
    but I haven’t encountered those.

  12. I’m reminded of history, which seems to have been forgotten: the private water purveyors in SFO ran away to hide in the great San Francisco quake, leaving many without water. 100 years later, we are reminded that Bechtel tried to gouge poor people while providing a public good.

    So it depends. We must be careful when genuflecting before private companies providing public goods.

    Best,

    D

  13. I’d love to find out who is going to invest in a deep-bore tunnel. Murdoch?

    Best,

    D

  14. Current US property law extends down to everything below your land; for example, if you discover oil under your house, it’s yours (i.e. oil companies will pay you handsomely to move and give them the land so that they can drill). So changing the law now is a property taking.

  15. Light rail is the wave of the future, money well spent. Creating jobs plus removing vehicles from over crowded roads. Myself and hundreds of workers worked on a large infrastructure projects (highway maintenance project) that was funded by the feds, but when it’s all said and done the money would have been better spent on light rail.

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