Private Highways in America, 1792-1916; D. Klein

The inability of the federal government to contain its appetite for bad investments has been a disaster of major proportions. The competitiveness of U.S. businesses, the standard of livingof the population, even the health, safety, and welfare of the American people have been enormously harmed by the inferior investment choices policymak ers have made over the last generation. When we see what could have been and compare it to what is, we are observing a government performance worthy of shame, not repetition. Unless we want to repeat and intensify this shame, it is clear that more government investment is exactly what we don't need. D PRIVATE HIGHWAYS IN AMERICA, 1792-1916 by Daniel B. Klein F ifteen years ago only technology aficio nados and laissez-faire idealists en tertained the notion of private highways. Today, however, public officials and entre preneurs are struggling to make the notion a reality. Four private highway projects are underway in California and many other states are following suit.

The notion of private highways, which Dr. Klein is an assistant professor of economics at the University of California, Irvine. would seem fantastic to our parents, was commonplace to our great-great-grandpar ents. Initiated in the 1790s in the growing Republic, these roads stimulated com merce, settlement, and population. During the nineteenth century more than 2,000 private companies financed, built, and op erated toll roads. States turned to private initiative for much the same reason they are doing so today: fiscal constraints and insufficient administrative manpower. Knowledge of our toll-road heritage may 76 THE FREEMAN • FEBRUARY 1994 Table 1 TurnpikeIncorporation,1792·1845 State 1792-1800 1801-10 1811-20 1821-30 1831-40 1841-45 Total New Hampshire 4 45 5 1 4 0 59 Vermont 9 19 15 7 4 3 57 Massachusetts 9 80 8 16 1 1 115 Rhode Island 3 13 8 13 3 1 41 Connecticut 23 37 16 24 13 0 113 New York 13 126 133 75 83 27 457 Pennsylvania 5 39 101 59 101 37 342 New Jersey 0 22 22 3 3 0 50 Virginia 0 6 7 8 25 0 46 Maryland 3 9 33 12 14 7 78 Ohio 0 2 14 12 114 62 204 Total 69 398 362 230 365 138 1552 Source: Klein & Fielding, Transportation Quarterly (1992) help encourage today's budding toll-road movement.

The Turnpike Heyday, 1800-1825 Once the state of Pennsylvania chartered a private company in 1792 to build a road connecting Philadelphia and Lancaster, ri val states felt impelled to follow. Private initiative was the only effective means of providing new highways, because state and county finances were almost nonexistent and town resources were meager. Private control and user fees were bold steps, but once taken, states could only continue to move forward. In an age before the canal and railroad, legislators were willing to test community and political custom to get high ways built. The turnpikes were financed by private stock subscription and set up to pay divi dends. Built with a surface of gravel and earth, turnpikes were usually 15 to 40 miles in length, and cost $2,000 per mile to build. They were massive undertakings and relied on widespread investment from the commu nity. Stock purchased was more like a contribution to community improvement rather than a business investment. Some travelers objected to the idea of paying tolls, particularly to a corporate monopoly. Leg islators, often suspicious of corporate motives, wrote extensive (and economically debilitating) restrictions into company char ters, specifying conditions for construction, maintenance, and toll rates, and toll collec tion.

The progress of turnpike incorporation is shown in Table 1. Only Pennsylvania, Vir ginia, and Ohio subsidized their turnpike companies; New York chartered the most turnpikes. The opening decade of the nine teenth century saw the most charter activ ity, though roughly one-third of the compa nies chartered failed to construct a single mile of roadway. The unprofitability of turnpikes soon be came obvious. The vast majority of turn pikes paid only very small dividends or none at all. First, toll evasion was rampant, as people would circumvent tollgates-a prac tice known as "shunpiking." Second, many roads were built in advance of settlement and. travel demand was low. Third, legal restrictions and regulations, limiting both toll rates and countermeasures to shunpik ing, hamstrung the turnpikes' abilities to improve their financial situation. But poor financial returns did not neces sarily mean unfruitfulness. Even an unprof itable turnpike stimulated commerce, raised land values, and aided expansion. There fore, community leaders resorted to a fas cinating array of tactics to boost the turn pike cause despite the sad prospects for PRIVATE HIGHWAYS IN AMERICA, 1792-1916 77 ,/ OGDENSBURGH " "J/ -"'V""-r/ , /' \ // ~ \ f ~ \) V~ k....

WATERTOWN CARTHAGE BUFFALO AIIGELICA __ TURIIPlKES EXTAIIT - - - - TURIIPIJ:ES AIlAIlllONED Figure 1 TURNPIKES OF NEW YORK (as of 1830) COMPILED AND DRAWN BY C. T. BAER, 1991 dividends. Supporters used newspaper ap peals, town meetings, door-to-door solici tations, and correspondence to apply social pressure. In this way as in others, American communities relied on voluntarism, as so elegantly described by Alexis de Tocque ville, to meet local needs. The result in terms of turnpike construction in New York is shown in Figure 1. Canals, Railroads, and Spur Turnpikes, 1826-1845 In the late 1820s canals began competing with many of the major turnpikes. Railroads joined in a bit later. Between 1825 and 1845 turnpike mileage dropped considerably. At the same time, however, the canals and railroads changed the patterns of trade and development, and stimulated new demands for shorter toll roads that would serve as feeders. Table 1shows that turnpike activity by no means ceased with the advent of canals and rails.

Plank Road Fever, 1847-1853 High hopes for a new kind of short feeder road were placed in the idea of plank roads, organized like turnpikes but surfaced with wooden planks. Plank surfacing promised a smooth, inexpensive alternative to turn pikes, which sometimes resembled a river of mud. Plank road fever struck in the late 1840sand thousands of miles of plank roads were constructed. Civil engineers and enthusiasts predicted that plank roads would last eight years before needing to be resurfaced. Beginning in 1847, rural Americans financed and con structed plank roads in massive numbers. Table 2 shows total incorporation for sev78 THE FREEMAN • FEBRUARY 1994 --- ERIF. RAILROAD SlSTEI1 ------ ERIE AND CHAHPLAIN CANALS Figure 2 Plank Roads of New York 1845 - 1860 COMPILED AND DRAWN BY C. T. BAER, 1991 eral states. Figure 2 shows the plank road system in New York. But the planks wore out twice as fast as predicted-usually within four years. The movement ended as suddenly as it had begun. Most plank road companies folded, while others converted their operations to gravel turnpikes.

Toll Roads in the Far West, 1850-1890 The toll road idea endured to the end of the century. Discoveries of gold, silver, copper, and other minerals in California, Colorado, and Nevada sparked rushes of newcomers. Even before statehood for Col orado and Nevada entrepreneurs organized their own toll road enterprises to serve the mining communities, and some got rich in the process. Well over 360 toll roads were constructed in California, Colorado, and Nevada alone. This experience indicates that private initiative can provide infrastruc ture for economic development-so long as government respects people's liberty to do so. The Good Roads Movement and the End of the Toll Road, 1890-1916 By the end of the nineteenth century, state and county governments had grown in capabilities and new agencies began setting goals for centralized highway management. Independent private toll roads were not thought appropriate in the era of progressive governance, and most of those remaining were bought out or shut down. Observed a county board in New York in 1906: The ownership and operation of this road by a private corporation is contrary to public sentiment in this county, and [the] cause of good roads, which has received PRIVATE HIGHWAYS IN AMERICA, 1792-1916 79 Table 2 Plank Road Incorporation by State State No. State No.

New York 350 Georgia 16 Pennsylvania 315 Iowa 14 Ohio 205 Vermont 14 Wisconsin 130 Maryland 13 Michigan 122 Connecticut 7 Illinois 88 Massachusetts 1 North Carolina 54 Rhode Island 0 Missouri 49 Maine 0 New Jersey 25 Notes:Ohio is through 1852; Pennsylvania,New Jersey, and Marylandare through 1857. Few plank roads were chartered after 1857. Source: Majewski,Saer & Klein, Journalof EconomicHistory (1993). so much attention in this state in recent years, requires that this antiquated sys tem should be abolished.... That public opinion throughout the state is strongly in favor of the abolition of toll roads is indi cated by the fact that since the passage of the act of 1899, which permits counties to acquire these roads, the boards of super visors of most of the counties where such roads have existed have availed them selves of its provisions and have practi cally abolished the toll road.

Conclusion In 1991 Congress passed the Intermodal Surface Transportation Efficiency Act (ISTEA), which changed the 75-year policy against toll roads. It permits the use of federal funds on toll roads, including ones designed, constructed, and operated by pri vate groups. It sheds the old requirement that states repay federal funds if the facility is transferred to private control. Although highway financingshould be strictly private, ISTEA greatly improves the present sys tem, which relies on unpriced highways built and operated by government. Under ISTEA, America might begin to rediscover the effectiveness of private management and the economic virtue of user charges. With new electronic technologies of toll collec tion, toll roads make more sense than ever. As we enter the potentially new era of privately managed highways, the historical experience with toll roads offers some im portant lessons. First, private operation is more flexible, creative, and motivated to serve than government control. In the nine teenth century, private road companies con sistently outperformed their public-sector alternatives. Second, private roads will not be constructed without the prospect of pri vate gain. If governments overregulate or renege on their promises, private road de velopment will not occur. Finally, infra structure is an economic good best left to private action.

Private roadways have always made philosophical sense. Now even many public officials understand that they make eco nomic sense as well. D If Men Were Free to Try H ow could roads be built and operated privately? I do not know. This is a subject to which none of us directs his creative attention. We never do think creatively on any activity pre-empted by government. It is not until an activity has been freed from monopoly that creative thought comes into play. . . . -JOHN C. SPARKS (1954) IDEAS ON LIBERTY $ THEFREEMAN IDEASON LIBERTY HUMAN RIGHTS AROUND THE GLOBE by Tibor R. Machan I t is interesting that so many people find the humanities, especially philosophy, irrelevant. People have always resisted phi losophy. In our time it is often the so-called practical professionals who regard thinking about the great questions a waste of time and would rather handle problems piece"meal,on the spur of the moment, with no consider ation of the big picture.