Internalizing the Externalized: The Case of Roads

My most recent post at‘s blog Interchange has stirred a really interesting discussion on road finance and externalities. I believe the quality of the discussion is among the highest in my three years of posting on the blog. My main point was the following:

So, are road users externalizing their costs? Road investments have historically predated the widespread use of the automobile and modern-day urbanization in concept if not scale. The grid street pattern pre-dated the automobile as well as the system of roads knitting rural villages and towns to urban areas.

I don’t believe road users externalized the costs of roads as much as governments recognized their social benefits (for commercial purposes as well as passengers) and the practical inability of the private sector to provide those facilities and services. As a consequence, governments dedicated funds to building what was considered social infrastructure that served rural and urban purposes.

Now, the rationale for non-user based public expenditures on roads and highways is weakening, and weaker by the decade with each new spurt in technology. While we can expect intense lobbying by current users to retain the subsidies they have, that’s not the same as arguing that the reason we subsidize public infrastructure is because of special-interest lobbying for a redistribution of funds away from non-users to support their own narrow projects. The more productive discussion, I believe, is over whether the rationale for public funding of roads exists any longer and how to phase it out.

But, the discussion has been wide ranging and thought provoking, ranging from road finance, to land use, to European urban history. Of course, I don’t come through unscathed, but this exchange I believe has moved an interesting debate within the planning profession forward.

Samuel R. Staley, Ph.D. is a senior research fellow at Reason Foundation and managing director of the DeVoe L. Moore Center at Florida State University in Tallahassee where he teaches graduate and undergraduate courses in urban planning, regulation, and urban economics. Prior to joining Florida State, Staley was director of urban growth and land-use policy for Reason Foundation where he helped establish its urban policy program in 1997.