Public goods have the following qualities: they are non-excludable (in the limit, producers and consumers can't stop third parties from obtaining the benefits from a good), they are non-rival (in the limit, one person's consumption does not decrease the amount that another person can consume), and a person cannot choose to consume the good. The free-rider problem is extreme with public goods, and private interests end up not providing these goods. The military and highways and interstates are frequently-cited examples of such goods. When private goods get mislabeled as public goods, the tragedy of the commons may well set in.
New technologies sometimes force us to rethink which goods we classify as public goods. Take the case of roads and highways. Technologies now exists that allows for cars and trucks to be identified if they are on roads and allows for occupants of those cars to be charged for the use of the roads. From the New York Times:
The freeway in places is no longer free. From the backed-up pools of frustration in Chicago's adjacent counties, to the farthest Virginia fringes of the commute to Washington, to Texas, where plans are under way to build a 4,000-mile network of toll roads, the United States has outgrown its highway system.
But state and federal governments, beset by deficits, say they have barely enough money to service the existing system, let alone build new roads. As a result, nearly two dozen states have passed legislation allowing their transportation systems to operate pay-as-you-go roads, and in many cases, letting the private sector build and run these roads.
Social engineering is merging with traffic engineering, creating new technologies that charge people a variable toll based on how many cars are on the road - known as congestion pricing - or reduce toll rates for high occupancy to encourage car-pooling. The White House wants to allow states to charge user fees for virtually any stretch of an interstate. ...
The new technologies now allow for drivers to be charged a fee for driving on certain stretches of road. Charging a fee provides incentive for drivers not to use the stretch, so the stretch will be less-travelled. Those who choose to drive on the stretch, are virtually assured of shorter drive times. Drivers have a choice of whether to drive on for-fee stretch of road. If the value of the time saved exceeds the fee, then the driver has an incentive to pay the fee and save the time. The fee also provides an incentive for people to carpool and thereby lower the per-person fee.
The tolls have also succeeded in doing what no amount of cajoling and public service announcements could do: get people to car-pool. The 91 now has the highest occupancy per vehicle of any major road in California, state officials said. The reason is that toll lanes here are still free for people who car-pool, offering an incentive to travel together - a savings in tolls of more than $50 a week.
The fees also provide funding for maintenance and improvement. The roads that drivers find most valuable will generate the most revenue at the margin. That revenue will go towards provision of that road, including keeping it maintained. The fee lanes have done well in many areas.
Charging tolls on the road's express lanes has been a big hit in this laboratory for congestion pricing. On the 91 Express, the prices vary from hour to hour in a system where traffic is constantly monitored and costs are adjusted accordingly. The car pool lanes, which are still free, are enforced by state patrol cars. But critics say it sets up a class system for motorists. Or that it amounts to a double charge, since state and federal gas taxes were levied to pay for road construction in the first place.
I don't buy the class system for motorists. Everyone has the choice of whether to pay the fee. There are no restrictions such as "if you are or a member of your immediate family is not a state legislator or directly related to the queen of England, then you may not use this road." The only restriction is internalized: is it worthwhile for me to pay the fee?
But people say they like the fact that there are no toll booths, and they can virtually guarantee being on time - for a child's soccer match, job appointment or doctor's visit. Average peak hour speeds on the 91 Express lanes were 60 to 65 miles an hour last year, versus 15 to 20 m.p.h. on the free lanes, according to federal officials.
"It's like everything else: you can fly coach, or you can fly first class," said Caleb Dillon, an X-ray technician in Riverside whose commute is an hour each way. "I'm not a rich guy, but I like having the option of saving time when I really need it."
It's not about classes. It's about choices.
There have been some problems in some areas:
But there are some cautionary stories, based on California's experience. The 91 Express was initially run by a private consortium, which agreed to operate it with a provision that the state could not add other competing lanes of traffic. This brought a lot of anger, worsened traffic and led to a regional government buyout of the lanes, which then threw out the clause about competing lanes. The buyout cost $207 million.
Another toll road in this region, the 73 in Orange County, is facing a potential default on its bonds because it is not meeting traffic or revenue projections. Commuters say they shun it because it does not save much time compared with nearby free roads.
The first example describes a government-granted monopoly. Allowing private companies to run the roads is not the problem. Shielding them from the invisible hand of competition is. The second example just describes one of the things associated with turning a road into a for-fee road: there are risks involved. We cannot expect every new invention to be a success, nor should we expect that. Allowing private entrepreneurship (which includes risk-taking) into the provision of roads is showing promising signs.