July 21, 2003

Railways, social goods and compulsory purchase

Patrick Crozier | Compulsory Purchase

In response to my posting on "What is this blog for?" and in response to my question about why the free market couldn't produce underground railways as well as Mars Bars both David Sucher of City Comforts and Tim Hall of When Worlds Collide make a similar point. Their point is that while it is fairly easy for the manufacturers to capture the full benefit of Mars Bars it is fairly (perhaps extremely) difficult for railway companies to capture the full benefit of railway lines. The benefit tends to go to the owners of property close to the stations. Because, there are many owners and it is difficult to buy up all that property (not everyone wants to sell - especially if they know someone is going to build them a station for free) therefore, the state must intervene.

It's the "therefore" I baulk at.

For a number of reasons. Firstly, there are many examples of private railways being built. Japan's private railways spring to mind as do Britain's (historically speaking that is. Japan's railways are most interesting because it seems that right from the beginning they were aware of the benefits of property development and have been quick to exploit them. How did they do it?

Secondly, if it is actually impossible to build these railways without some element of compulsory purchase is that really so bad? Are there alternatives in terms of better use of existing roads and railways and (while we're thinking about it), rivers and airspace? I think we should at least find out. Were the state make it plain that it would not intervene that would also force railway companies into exploring the true limits of the free market. You never know they could just be bluffing.

Thirdly, I am not happy with the assumption that state intervention would be better. Brian has made the point in another place (do you have the link, Brian?) that if there is one thing worse than bad state intervention it's good state intervention. Why's that? Because, the politicians get one success and then try to repeat it well past the point at which it continues to succeed. To my mind a classic example of this is the Japanese Shinkansen (Bullet trains). The original Tokyo to Osaka Tokaido Shinkansen was a massive success. (Well, for the sake of argument let's assume it was. I think it was). But, flushed with this success the Japanese government started building them everywhere. Result: financial collapse for the Japanese railway. The debt is still on the books (of the state now) and is owed by all sorts of people who did not benefit from the Shinkansens. Which is unfair.

I would also like to draw a distinction between the situation faced by an overland railway operator and an underground railway operator. To build an overland railway you have to acquire all the land on that route. To build an underground railway (and make it pay) you don't have to buy all of it (ie land around stations - the route being fairly easy to acquire) but you do have to buy a lot of it.

Now, all this is tentative. If it can be proved in pretty stark terms that a country without compulsory purchase is going to go into economic decline with the ultimate threat of invasion (and therefore the implentation of state intervention anyway) well we may as well have it. Which brings up an entirely new debate as to what sort of intervention is required.

Being a state-o-sceptic, if there has to be intervention ie force, I would rather it was as light, limited and of as short a duration as possible. And the minimum possible force should be applied. I suppose it ought to be in the form of the forcible acquisition of land at a rate substantially above the market rate with that land being immediately sold on to the developer. But it's still rather messy.

Trackbacks

Comments

I am not a libertarian simply because libertarianism 'works', although I do believe it does. I also believe in objective rights, i.e., I believe that individuals ought to have freedom from violence.

Thus, I also balk at the "therefore". The "therefore" is no mere conjunction. It represents the crossing of a big chasm. It means using coercion on certain individuals to achieve ends that certain other individuals (perhaps a majority?) find appealing. Thus, I hope that the "therefore" is no off-the-cuff answer, but rather, a solution of last resort after thorough deliberation - and even then, it would leave a bad taste in my mouth.

The main reasons usually given for state intervention in transportation are the problems of externalities and the public-goods problems.

I have never been comfortable with the entire concept of externalities, although I understand that they are taught in every basic college economics class. Externalities are a vague concept. You can't feel them; you can't touch them; you can't see them. (Although you might be able to smell them.) Their definition is not bounded by limits. Virtually anything can be defined as an externality.

Air pollution and loud parties are commonly used to illustrate negative externalities. Do I accept state intervention against those examples? Yes, but not because they are negative externalities, but rather because they are violations of property rights. Other negative externalities I have seen mentioned are people having the same name (resulting in costs due to mix-ups), atheism (resulting in costs due to immorality), and black home ownership (resulting in a decrease in property values). Should we "therefore" tax common names, atheists, and blacks in order to internalize these externalities? And smelly people too? Does ethics get thrown out the window?

Further, what some consider negative externalities, I consider positive externalities, and vice-versa. Many consider public education a positive externality. I consider it a negative externality. Many also consider charity a positive externality. Many times, I've seen charity act as a negative externality. Scientific research is sometimes considered a positive externality. After working closely with scientists and partaking in scientific research, I consider government funding of scientific research a negative externality. (Perhaps government itself is a negative externality?)

Does that mean that I do not 'believe' in externalities? No, they are simply a way by which to frame the world. And many times they frame the world poorly.

The public goods problem is another such way to frame the world. Conventional wisdom states that public goods (those goods which the producer cannot limit their benefits to) will either not be produced, or will be 'underproduced'. The question rarely asked is - relative to what? Relative to private goods? Well, maybe, but the production of every good is partly determined by its very nature; that is praxeologically true. Relative to how much one group of individuals desire? I can see that. But that does not make a greater amount of production the 'proper' amount of production.

Further, many goods can also be framed as public goods. Consider television broadcast signals. Prior to the days of cable and dish networks, anyone could buy a television set and receive signals. Once the station is producing the signal, anyone can tune in for free. The television station could not limit who accessed its signals. Should TV stations tax these "free-riders"?

Ronald Coase showed that lighthouses, the quintessential public good, were historically built privately in England.

Patriotism is itself a public good. A patriotic might shed his own blood, and perhaps his life to benefit all his countrymen. Surely, there should be no patriots around.

And of course the most obvious example of the public goods problem is that of media. Surely, nobody would spend their own money and time to host a website and analyze media, perhaps become another part of the media, or hold a discussion forum on the subject of transportation, for free.

Er, wait a minute, you mean there are 400,000 "blogs" out there that do exactly that??? And they don't charge fees? And most don't even accept donations? Surely, you must have missed the "therefore" on the way here.

The public goods problem, externalities, and the free-rider problem are a fact of life. They pervade every nook and cranny of our lives. They are omnipresent, whether they be smelly people, broadcast television, courage, aesthetic architecture, or sunk costs.

Unfortunately, most people are too easily willing to cross the rubicon of the "therefore" at largely arbitrarily chosen externalities/public goods/free riders. If the "therefore" represents coercion, then I am not satisfied with haphazard answers of, "It obvious, without initiating violence, it will never work." Hopefully this blog will try to explore this very important question before jumping to too quick conclusions.

Posted by Jonathan Wilde on July 22, 2003

So many interesting questions from this post. (I am trying to finish a project but "they keep dragging me back in.")

The key factual one as I see it is whether there are any societies anywhere which have developed public _systems_ (which require crossing private property) without some sort of public hammer. I don't know. The fact that there are private Japanese railways is one thing; but were they built without someone having the ability to condemn property to allow the line to proceed along a particular path.

Pipelines are, I believe, generally built without condemnation; but they go through rural areas where the builder does not face a monopolistic property owner who can hold up the show.

But I think that the big elephant in the room is that NO ONE tries to build private systems. No one sees them as potentially profitable. No?

Rest assured, I think, there are virtually no situation in which the raw economics are such that the private sector can make a profit and yet the public prevents it from doing so. The government is the "actor of last resort" --- doing things which no one else can do profitably. No?

Are there any examples of major industry sectors in which there is a government monopoly which prevents private operators from entering? There are indeed legal bars to entry in many industries --- ferries on Puget Sound, for example, or a street-car systems in Seattle (i.e. you are simply NOT allowed to start a company to do either) --- but I believe that those came about when private ownerhsip failed. Though I admit my history is shallow.

Posted by David on July 22, 2003

What _is_ does not define what _could be._ But it is always instructive.

This morning's NYT had an article on private ferry service in NNYC.

http://www.nytimes.com/2003/07/22/nyregion/22FERR.html?hp

Posted by David on July 22, 2003

David,

The key factual one as I see it is whether there are any societies anywhere which have developed public _systems_ (which require crossing private property) without some sort of public hammer. I don't know. The fact that there are private Japanese railways is one thing; but were they built without someone having the ability to condemn property to allow the line to proceed along a particular path.

Another option is for the private railway builder to buy the property along the path. Then you get into the negative externality arguments, but again, as I said before, I don't necessarily agree that these are devastating nor insurmountable.

Also, what if the "public system" as you put it, is owned privately? When lighthouses were privately funded in England, all the ships (the public) that passed by the lighthouse benefited from something built privately. Isn't what's important the public function of the system, rather than the notion that it has to be on public property?

Posted by Jonathan Wilde on July 22, 2003

Oh no question that it is irrelvant who _owns_ the systems. The key issue at hand (I though) is whether it is possible for a private system to be built without the powers of condemnation, which must of course, be a state power. I do not see how the "holdout problem" can be resolved, in theory or practice, without coercive power. No?

Btw, as to underground railways, in theory and I am sure it would be in practice if there was much money at stake, private property is usually thought to go from the "heavens above to the center of the earth." So even to tunnel a thousand feet below my house would require, I believe, my permission.

Posted by David on July 22, 2003

I do not see how the "holdout problem" can be resolved, in theory or practice, without coercive power. No?

I'm not so sure about the practice, but Dr Bruce Benson of Florida State University has written an interesting paper about this, entitled "Do Holdout Problems Justify Compulsory Right-of-Way Purchase and Public Provision of Roads?"

That, and lots of other papers with interesting titles can be found here.

So even to tunnel a thousand feet below my house would require, I believe, my permission.

Does a mining company require the permission of every property owner under whose land it is mining?

Posted by Andy Wood on July 23, 2003

Thanks for the reference to Benson.

"Does a mining company require the permission of every property owner under whose land it is mining?"

As to permission for mining, yes, absolutely so. If a miner does not have the explicit property right to mine beneath your house, then he would be tresspassing and essentially, stealing. One of the "bundle of rights" which are presumed to come with fee simple ownership (this is Anglo-American law, of course) are the rights to whatever is in the ground below your property. You may sell these below-grade rights separately from surface rights (putting practical issues of access aside or making them a part of the deal such as a promise to restore) or decline to sell them, (except under condemnation.)

Posted by David on July 23, 2003

David,

I'm not sure if the holdout problem (which I've also seen called the negative externality problem) has a solution. I've heard of various strategies that involve using multiple 3rd party proxies to act as buyers in secret to make purchases so that the price is not bid up as high; I'm not sure how well these would work.

As far as underground property rights, I think they ought not to exist from the heavens to the center of the Earth. If they do, IMO that is a mistake of the common law. What if a plane crosses the air above your house at 30,000 feet? Is that a violation of your rights? I would think not. Nor should it be. If the underground could be 'homesteaded' below a certain depth, then that might be a way to avoid using coercion on the holdout. (Of course sooner or later there would be another holdout problem.)

Posted by Jonathan Wilde on July 23, 2003

I am pretty sure that in the UK these days that your rights do not extend very far underground. It used to be the case that underground railways were built underneath the streets - for fear of collapsing the buildings above but that has long since been abandoned.

Posted by Patrick Crozier on July 23, 2003

Andy,

You've mentioned Benson before and I have read him - although I do wish he'd stick to plain old boring HTML. I was meaning to write something but never quite got round to it. And now I've forgotten what it was, precisely, that he said.

One day. Unless you'd like to write something yourself that is... hint, hint!

Posted by Patrick Crozier on July 23, 2003

The law does bend and when airplanes came along it was obvious that they would have to be accomodated, "reasonably."

But "reasonable" air rights are still something that go with the property, unless sold off.

Likewise for subterranean rights. Digging into your property even 100' below the surface (to be more realistic) requires your permission. In oil country it is considered a bad thing to drill slant ways into a neighbors oil field.

***

As to non-existence of free market solution to the holdout problem, I agree. I would suggest that that's why society developed "condemnation."

Posted by David on July 24, 2003

As to non-existence of free market solution to the holdout problem, I agree. I would suggest that that's why society developed "condemnation."

Excellent!

Posted by Jonathan Wilde on July 24, 2003

Permalink
 
 IN BRIEF

November 23, 2004

'Captain commuter' wins Sydney a free day on the trains ...link
PCCC | Comments (0)

Darling's saver ticket for slow-train Britain - he's going to do everything but close them ...link
PCCC | Comments (0)
November 21, 2004

Tollroads Jamaican style - worth it if only for the pic of the toll plaza ...link
PCCC | Comments (0)
November 20, 2004

Postive externalities come to DC - sort of ...link
PCCC | Comments (0)

Railways safer than ever - says Christian Wolmar ...link
PCCC | Comments (0)

Is graffiti art? - LFTTR think the question misses the point. FWIW I think many artists clearly have a lot of talent and it's a shame they don't have an appropriate, nay, legal outlet. ...link
PCCC | Comments (0)

Book review - Subterranean Railway by Christian Wolmar ...link
PCCC | Comments (0)

One airline, 4 crashes, 8 dead: the real price of sugar snap peas in November ...link
PCCC | Comments (0)
November 17, 2004

British Transport Films Collection DVD Volume One - Surely a must for any transport afficionado. It will be released just in time for Christmas. ...link
MH | Comments (0)
November 15, 2004

Crossrail website ...link
MH | Comments (0)
November 11, 2004

Brake fault forces Virgin to cut speed on flagship tilting trains - you know, just for once it sounds as if the HSE could be right ...link
PCCC | Comments (0)
November 08, 2004

TV Alert "When trains crash", 1930 Channel 5 tonight. Talk about timing ...link
PCCC | Comments (1)
November 07, 2004

Ufton Nervet crash - 6 now confirmed dead ...link
PCCC | Comments (4)
November 06, 2004

One person dead as train derails ...link
PCCC | Comments (0)
November 04, 2004

FirstGroup wants to add the tracks to its trains - that's brave ...link
PCCC | Comments (0)
November 02, 2004

Car charge to rise to £6 ...link
PCCC | Comments (0)
October 30, 2004

Psst wanna buy a railway station? ...link
MH | Comments (0)
October 26, 2004

'Kart Vader' - He tears around Quebec City at 100mph. In a go kart. At night. Wearing black. And he films it. Spotted by Jay Jardine. ...link
MH | Comments (0)
October 24, 2004

The downside of auto-mobile bans - drivers text instead ...link
PCCC | Comments (0)

Councils ban shrines to road crash victims - a story that neatly combines both transport and the issue of the day: mawkish sentimentality ...link
PCCC | Comments (0)
October 20, 2004

The air hostess, the long hair and the sun roof - one of the more imaginative ways of staying awake at the wheel. ...link
PCCC | Comments (0)

Wheelchair-using MP travelled in 'cattle truck' - so, that's just the same as the rest of us then ...link
PCCC | Comments (1)

23 escape from burning train ...link
PCCC | Comments (3)

Wikipedia accuracy under fire - so, it's back on with the Glossary? ...link
PCCC | Comments (0)
October 19, 2004

Rail chief quits after four months - walking away from £130,000. Golly ...link
PCCC | Comments (0)
October 14, 2004

New comment on old posting - Tim Hall explains the story of the Highland Railway, its new locos and its soon-to-be-ex-Chief Mechanical engineer ...link
PCCC | Comments (0)

Out now: DVD version of leaves on the line ...link
PCCC | Comments (0)
October 13, 2004

New link - Transport Watch UK. Lots of facts, lot of comparisons. Doesn't look good for rail ...link
PCCC | Comments (4)
October 11, 2004

Take the car and save the planet - walking kills, apparently ...link
PCCC | Comments (0)

Hybrids better than the real thing - golly ...link
PCCC | Comments (0)

Don't invest in mega-projects - says Peter Gordon ...link
PCCC | Comments (0)
October 05, 2004

Prescott backs plan to reopen branch rail lines - well, he says he does ...link
PCCC | Comments (1)
October 04, 2004

New Glossary Entry - the Advanced Passenger Train ...link
PCCC | Comments (0)
October 03, 2004

People are building their own speed cameras - One fellow is even selling fully functioning ones ...link
MH | Comments (0)

Pendolinos and Voyagers may prove to be one of privatisation's disasters - says Christian Wolmar ...link
PCCC | Comments (11)

Omedetō gozaimasu! - Tech Central Station on the 40th anniversary of the Shinkansen ...link
PCCC | Comments (0)
October 02, 2004

Compulsory purchase to go - in US? Johnathan Pearce has some musings ...link
PCCC | Comments (0)
October 01, 2004

Indian railway runs out of wheels - because it refuses to import ...link
PCCC | Comments (0)

All for sprawl - Tyler Cowen links to a couple of articles including one from the NY Times magazine which is attracting a lot of attention ...link
PCCC | Comments (1)

Underground maps as art - according to Brian ...link
PCCC | Comments (0)
September 30, 2004

Recent comment - Uncle Roger on the difficulty in working out accurate subsidy figures ...link
PCCC | Comments (0)

Europe by train - Tim Hall on Stephen Karlson's adventures ...link
PCCC | Comments (0)

Carpool lanes = communist gulags - Tim Hall is beginning to get it, possibly ...link
PCCC | Comments (0)
September 29, 2004

P&O axes 1,200 jobs as ferry travel sails into past ...link
PCCC | Comments (1)
September 27, 2004

Hurtling towards a £7.6bn bill at full tilt - Alistair Osborne on the WCRM fiasco. Actually, I thought £7.6bn was on the low side ...link
PCCC | Comments (2)
September 26, 2004

A double-decked shame - RJ3 laments the passing of the Routemaster. It's those EU bastards, I tell you ...link
PCCC | Comments (0)

Tilting trains are rubbish - according to Ross Clark. Now he tells us ...link
PCCC | Comments (2)

Delays plummet by 28% - says Network Rail ...link
PCCC | Comments (0)
September 25, 2004

New glossary item - the Health and Safety Executive - in which I demonstrate my almost complete ignorance of this institution ...link
PCCC | Comments (0)

Scant improvement in train times - according to latest figures ...link
PCCC | Comments (0)
September 22, 2004

EU plan will hit safe women drivers - and it's all in the name of sex equality ...link
PCCC | Comments (0)

Unions gang up to demand railway renationalisation - they mean it isn't already? ...link
PCCC | Comments (1)
September 21, 2004

Top car makers support road-jam charging - Ford, GM, Honda, Daimler ...link
PCCC | Comments (0)

Journey times cut as 125mph tilting train sets record - after £8bn and the odd bankruptcy tilting trains that actually tilt are finally here ...link
PCCC | Comments (0)
September 18, 2004

ABD calls for environmental audit of public transport - all those particulates ...link
PCCC | Comments (2)

Camera Partnerships must come clean on real causes of accidents - says ABD ...link
PCCC | Comments (0)
September 16, 2004

The Green Quadratic - ASI paper on planning from 1988. Now available on-line ...link
PCCC | Comments (0)
September 14, 2004

Up with conductors - they're really good, you know ...link
PCCC | Comments (1)

Speeding Britons fined in car race to Spain - "Among the cars were Ferraris, Porsches and Rolls-Royces." ...link
PCCC | Comments (0)

MPs to lose free airport parking - oh, how my heart bleeds ...link
PCCC | Comments (0)

The case against driving licences - Paul Clark in Lew Rockwell ...link
PCCC | Comments (0)
September 10, 2004

Drivers trade privacy for insurance discounts ...link
PCCC | Comments (0)
September 08, 2004

Free mints infuriate delayed commuters - some even threw them away, ingrates ...link
PCCC | Comments (1)

Privatize the roads! Liberate the streets! All we have to lose are our parking tickets! - Anthony Gregory in Lew Rockwell ...link
PCCC | Comments (0)

M6 Toll hits 10m journey mark - er, about a month ago ...link
PCCC | Comments (0)
September 07, 2004

California high-speed rail plan - all sorts of claims being made but Peter Gordon doesn't like the precedents ...link
PCCC | Comments (0)
September 06, 2004

Swedish farmer fined 1,211 kronor for illegally parking a snowmobile in Warwick - Krister Nylander lives 205 north of Stockholm and has never been to Warwick. "They can wait till Hell freezes over and I can get to Britain on my snowmobile to pay the fine.” ...link
MH | Comments (0)
September 05, 2004

"Obsession is not too strong a word to describe how railway enthusiasts feel about railways" - Matthew Parris goes to Peru and meets some trainspotters ...link
PCCC | Comments (0)
September 03, 2004

Hidden costs do not justify the level of tax on petrol in Britain - says Graham Seargeant ...link
PCCC | Comments (0)

Shovelling cash - utilities to pay for digging up roads ...link
PCCC | Comments (0)

Alistair Morton, builder of the Channel Tunnel, is dead ...link
PCCC | Comments (0)

Government 'willed' Railtrack to fail - says Corbett ...link
PCCC | Comments (0)

Cyclists saddled with seafront speed trap - in Bournemouth ...link
PCCC | Comments (1)

Historic Amsterdam tram photos Aaaah. Where's amg going to pitch up next? ...link
PCCC | Comments (0)

Why so little US electrification? - Tim Hall ponders the answer ...link
PCCC | Comments (0)
September 02, 2004

London Underground Map - as it really is. ...link
PCCC | Comments (0)

Electric v steam - in 1923. But who won ...link
PCCC | Comments (0)

Freight or passenger in the US? - they're in conflict. Stephen Karlson considers the options ...link
PCCC | Comments (0)
September 01, 2004

Fares and charge up in London - says Livingstone ...link
PCCC | Comments (0)

'Fair fines' planned for speeding drivers ...link
PCCC | Comments (0)

Railtrack is cleared over Hatfield crash ...link
PCCC | Comments (0)
August 31, 2004

Thousands 'ready to quit Aslef' - where would we be without brotherly love ...link
PCCC | Comments (0)
August 30, 2004

Rural watchdog attacks road sign blight - See it's not just me who can't abide the avalanche of street furniture. ...link
MH | Comments (0)

What the traffic will bear - Bob Poole discusses the merits of tolling ...link
PCCC | Comments (0)

Prague trams - photos. Aaah ...link
PCCC | Comments (0)
August 24, 2004

What if you can't drive? - Catallarchy's Sean Lynch considers the options ...link
PCCC | Comments (0)

97% of accidents within speed limit - according to the ABD ...link
PCCC | Comments (1)
August 22, 2004

Prosecute motorway lane hogs - says RAC ...link
PCCC | Comments (3)
August 20, 2004

Radio tags for congestion charge? ...link
PCCC | Comments (0)

World's longest road opens - in Russia ...link
PCCC | Comments (0)

Sprawl is cheap - says Iain Murray ...link
PCCC | Comments (1)
August 19, 2004

Strike threat to BA and Eurostar ...link
PCCC | Comments (0)

Toll roads are safer - at least according to my reading of this Marginal Revolution post ...link
PCCC | Comments (0)

Peking metro to hit 1000km mark - I'm not sure even London's is that long ...link
PCCC | Comments (0)
August 15, 2004

Squander Two calmly talks about speed cameras ...link
MH | Comments (1)

Parking anarchy in St Albans - Police withdraw traffic wardens, Herts council won't have any until October, it's bedlam! ...link
MH | Comments (0)

The future of transport - as seen from the past ...link
PCCC | Comments (0)

Trains less efficient than cars - yes, I know, it's old news ...link
PCCC | Comments (0)

Ferry solution, please - Eamonn Butler wonders how you could introduce competition to a subsidised ferry service in the Western Isles ...link
PCCC | Comments (0)
August 14, 2004

Drink less, speed less, save on insurance - Marginal Revolution has the story ...link
PCCC | Comments (0)