In a libertarian world, the streets and highways would no longer be state-owned, but instead managed by private entities such as companies and cooperatives. Under this system, the state would have no role in street design, pricing, or public transport.
In what follows we will explore how a street company might approach optimal pricing strategies, efficient street design, and the integration of buses within its system, all while prioritizing profitability. To focus on these concerns, certain (though fascinating) topics will not be covered, such as why and how to privatize roads. Interested readers are encouraged to explore Walter Block’s book, The Privatization of Roads and Highways, available for free on the Mises Institute website.
Pricing
Usage of the roads will have to be paid since all kinds of costs need to be covered: maintenance, electricity bills for lighting, dealing with accidents, future expansions, etc. On top of this, the company wishes to make some profit for its shareholders. One could imagine the company demanding a flat rate to all its users per week or month. Such a system already exists. In Switzerland, for the use of its national road network (publicly-owned) all motorized vehicles up to 3.5 tons that wish to make use of them pay the yearly price of 40 Swiss francs.
This is, however, a very shortsighted way of charging demand. It would be like charging all airplane tickets the same, regardless of demand fluctuations, seasonality or time of day.
Applied in the case of roads, the avid reader sees a serious missed opportunity. The street company could charge its users in a dynamic way solving two problems at once: It would (potentially) generate more income, increase traffic flow, and increase the value of experience. Using unique dynamic pricing per vehicle type and per road, traffic flow can now be controlled. Making sure 18-wheelers do not use roads near elementary schools is now an easy job. Dynamic pricing should also be applied to on-street parking, making it simple to keep occupancy rate tangentially approaching 100 percent. One would only find one or two free parking spaces per block, but at prices that would respond to changes in demand.
Implementing a dynamic pricing method in practice is rather simple. For this we take inspiration from Belgium’s Kilometers charge for heavy vehicles. Here trucks are charged per kilometer on certain roads, predominantly highways and other major routes. In our city every vehicle ought to have an On-Board Unit (OBU), this instrument records the time and position of the vehicle. Based on this information, the road owner will be able to apply a higher price when traffic flow suffers due to high demand.
Connected to a central server, the company would have a goldmine of information knowing exactly when and where bottlenecks happen. This information comes in handy to create detailed traffic models indicating where building a new road might come in handy. This data is also an asset to others, like insurance companies, that could now better model driving behavior and maybe introduce differentiated schemes based on this.
An option not to have the company collect, process, or sell the data generated by one’s OBU would probably exist, but at a surcharge since this data would be less valuable. Maybe some companies would still offer a flat subscription-style scheme, where the need for an OBU is non-existent. By having all these different payment methods, the client can choose how much (private) information is handed over.
In an even more developed scenario, this OBU would be incorporated into an app available on the smartphone and connected to navigation services like Google Maps or Waze. Combining the best of two worlds, the user could now get a clear estimate of the toll cost for each possible route and choose according to its preferences.
Buses
A bus provides a smart way to compress dozens of individual car trips into a single vehicle that moves at the same speed as a car. The road footprint of a bus is much lower than the equivalent number of cars, making a nice argument to replace the number of vehicles in favor of buses to maintain higher traffic flow. On top of this, the passengers no longer require parking spaces for their cars, freeing these up for other, and more profitable business ventures.
Disadvantages are that a single bus generates more wear and tear to the roads than a single car. On busy narrow streets the frequent bus stops could significantly lower traffic flow. For passengers, the bus would only become an interesting alternative to cars if it is reliable and cheap enough and stops relatively close to their origin and destination.
The road company will take these factors into account to decide how much to charge a bus to use its road network. We expect this price to be higher than for a single car (because of the increased wear and tear and possible disruptions to traffic flow). The cost per passenger could, however, be multiple times cheaper if enough passengers are on board the bus.
We thus expect bus services to exist during rush hour, where parking is scarce and along long busy corridors (mostly occurring in densely populated areas) where demand far outweighs possible road capacity.
Parking, Greenery, or Restaurant Terrace?
As mentioned above, on-street parking would also experience dynamic pricing, in such a way that the occupancy rate could easily be kept the same across time. An important realization is to be made: the parking space can also be used for anything else since complete freedom lies in the owners of this space to decide what to do with it. If rational, they will choose whatever grants the biggest (long-term) profit. An adjacent restaurant may offer a deal with the company to rent the parking lot during the summer month to have an outdoor terrace. Or a bus company might rent a couple of spaces to have a designated bus stop during service hours. This might be interesting for the street company, since the bus would no longer halt all the traffic every time it stops.
The road company could instead also decide on something completely else. To convert some parking spaces into greenery, including some trees for shading, a couple of benches, and a nice water fountain. This opportunity cost could be covered by asking for a fee from the adjacent inhabitants and shops. The latter hopes that the increased foot traffic due to the nicer environment would increase sales.
Bicycle Infrastructure
In many European cities, biking to school or work is not considered weird or dangerous, thanks to all the dedicated infrastructure like protected bike paths and parking. In the world’s most bike-friendly city—Copenhagen—where 49 percent of trips to school or work are done by bike. But how can we make a case for bicycles in a libertarian city where roads are privately owned?
For starters, bikes use less space than cars, not only in movement but also when parked. Ten bikes fit in the same space needed for one car. The maintenance of lanes used by bikes is much lower than for cars. And accidents between two bicycles are less deadly than between two cars. Possibly, near schools in densely-populated areas our street company may opt to install a network of protected bicycle paths. The main reason being to alleviate traffic congestion and reduce the number of accidents.
To pay for all this infrastructure the company may opt for a subscription-style payment system instead of dynamic pricing. Each paid bicycle would be given a recognizable sticker. This could be a lot easier and more convenient than having an OBU for bikes like for cars.
Conclusion
A case has been made for the implementation of more “complete” streets under specific conditions. In areas with high population density, limited space, and frequent traffic congestion, prioritizing dynamic pricing, buses, and dedicated biking infrastructure is a logical and efficient approach.
However, what is not defendable is the idea that local governments should implement these solutions instead of private entities. Under the current system, commuters have no direct way to vote with their money, choosing the roads and policies they prefer. Instead, they are left with the slow and uncertain process of political elections—held only once every four years—placing their hopes in a mayor who may or may not fulfill their promises.
In a privatized model, competition and consumer choice would drive efficiency and innovation, ensuring that road networks evolve to meet real demand, offering the correct options at the right prices.
