Friedman and Roads

I’m currently podcast-less, due to the continued incompetence of PlusNet, and so am reading Milton Friedman’s Capitalism and Freedom (at Richard’s suggestion). So far it’s an excellent book, and everything I expected.

It’s interesting how the power of the market might surprise even Friedman himself, however - given that the book was originally written in 1962. On page 30 Friedman discusses the use of tolls on roads, and how they are ineffective in the general case, because of the high costs of administering them on most roads. This is an example of a ’neighborhood effect’, one of only two types of market failure he identifies. From this, the implication is that a petrol tax is an effective solution.

However, it seems obvious that a technological solution to this problem is not too far away, despite probably being unforeseeable in 1962: it will soon be possible to track people’s exact road usage for a reasonable cost, probably using some radio-based system. Such systems already exist in some restricted areas.

This still doesn’t overcome the local monopoly problem that Friedman also identifies (what happens when there is only one reasonable route from A to B?), but it could certainly shift the balance in favour of some road-use charging, which interestingly even the sluggish UK goverment is investigating.