TCS Daily

For Whom the Bill Tolls

By Benedikt Koehler - August 3, 2004 12:00 AM

Adam Smith was reluctant to concede to governments any legitimacy for interfering in the workings of free markets, but one of the few exceptions was building and maintaining roads. He would have enjoyed the chorus of disapproval which swept British media in response to news that in the near future it will become possible to monitor road use during peak hours by satellite, and to send drivers a bill. Road charging is on the front line of applying technology to monitoring markets, and of letting supply and demand discover where to set prices for public services. In this case, enjoying the use of a car on public infrastructure.

Have sympathy for Adam Smith's pro-government stance in transport economics. Smith had traveled extensively in the Low Countries and in France, where the public purse paid for roads, and the benefit of accessibility to promoting prosperity could not have escaped Smith's observant eye, especially when he compared continental travel with what he had to endure back home. The first regular coach service between London and Edinburgh had only been introduced in the early 1700s, and roads were so poor the trip took two weeks (one way). In fact, Britons had been arguing for centuries over who was responsible for building roads, and for paying for them.

In the 14th century King Edward III thought he settled the issue when he decreed roads should be paid for by collecting tolls from travelers. He must have heard persistent objections, since a few years later he issued a ruling that homeowners ought to contribute as well. After all, the value of their houses would go up if they were next to a busy thoroughfare ("location, location, location" presumably has an equivalent term somewhere in medieval dictionaries). However, homeowners were just as reluctant as travelers to pay their share, and eventually responsibility for road maintenance devolved on the biggest non-profit organization of the day, the church. This worked fine, until churches were expropriated in the Reformation and the money had to come from somewhere else.

Road building expanded in Britain when capital markets emerged. Private companies with franchises from Parliament raised money and laid toll roads across the British Isles. But their business model was highly contentious. Many felt that freedom of movement could not be restricted by official decree, and toll booths were attacked time and again. Toll riots, as they were called, were so difficult to root out that repeat offenders faced deportation. Even so, road building reached to the furthest corners of the realm.

The demise of privately held roads did not come about because opponents prevailed in the debate that toll roads infringed freedom of movement, or because the authorities were tired of repairing toll booths. The real causes were government red tape and technological progress. By the early 1800s toll companies had to pay increasing fees for renewing their franchises, whilst at the same time more and more travelers were switching to railroads. Toll companies defaulted on their bonds, and creditors lobbied Parliament the shortfall should be met by railroad companies. After all, it was their fault that revenues were declining. By the end of the 1800s Parliament agreed a bailout for road creditors and as part of the package took roads into the public sector.

Ever since, taxpayers have forked out the money needed to make sure car drivers have a free ride. Enter satellite tracking technology, and the stage is set for another chapter in the story.


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