Libertarian blogger LibertyScott ‘kindly’ did a post about this blog last week. LibertyScott has been a regular commenter on this blog over the past few months, and actually is one of the commenters I value most – because he really makes me think and doesn’t simply agree with everything I have to say (not that I don’t like people agreeing with what I say, it’s just good to have your thoughts challenged intelligently).

Clearly, we come from very different ideological views. I’ve never quite got my head around how libertarianism could be practical (the thought of “what about the poor?” seems to kill it off pretty easily), but it’s interesting to see how that ideological difference has an effect on something like transport. While his summary of my perspective is perhaps a little over-simplified, it’s accurate – more public transport is generally a good thing, more use of cars is generally a bad thing, in my opinion.

He then outlines his perspective of transport, which makes for interesting reading really:

I take a different view. I don’t really care how you get yourself around (or your business’s goods around). What primarily matters is that you pay for it.

That means, as far as public transport is concerned, the private sector investing in infrastructure and vehicles based on future projected fare revenue collected from users. As far as roads are concerned, the same basically.

It’s an interesting difference to explore, and I will take a bit of time to explain why (of course) I think my perspective makes more sense. To clearly illustrate my point, I think we’re going to need a few examples that have nothing to do with transport, but put simply my point is: ‘just because one transport system is more user-pays, that doesn’t necessarily mean it’s more economically effective.’ Furthermore, when one adds in environmental, social and other – particularly effects on land-use patterns – matters, I think simply ‘leaving it to the market’ when it comes to transport doesn’t make good sense.

So, now for those examples. The first one I am going to look at is healthcare. Most people are aware of the difference between New Zealand’s health system and that in the USA – basically that here we get the government to look after health while in the USA it’s sorted out through private providers. Generally, the ‘health outcomes’ of NZ are a bit above those of the USA (I can’t quite be bothered referencing that at the moment, but generally what I have read backs that up), even though the USA spends significantly more of its GDP on healthcare than New Zealand does. That tells me we’ve got things quite a bit more right in NZ than they do in the USA – even though their system is definitely more ‘user-pays’ than ours.

Now my point here isn’t that more government control over something is good and less government control over something is bad – but rather my point is that just because something is more ‘privatised’ and ‘free-market’ doesn’t necessarily mean that it’s a better system. What we need to focus on are the outcomes. To prove that point, I actually think that our health system could learn a lot from what France and Germany do – even though their hospitals are actually generally privately owned and operated (although under strict regulation). Such a shift is probably seen as too ‘right-wing’ for most New Zealanders to comprehend, but in my opinion if it would lead to better health outcomes (as seems reasonably likely as France & Germany have two of the best health systems in the world) then it’s certainly something we should look at.

So, once again, the focus should be on the outcomes – not on the ideology. And, bringing it back to transport, if we start to look at outcomes we see that adopting a full ‘user-pays’ system, like that promoted by LibertyScott, which would probably destroy public transport and lead to immense urban sprawl, doesn’t really make that much sense. Putting aside social, environmental and land-use pattern outcomes for a minute, perhaps the best way to illustrate why auto-dependent sprawling cities aren’t the best outcome (even if they’re the result of a more ‘user-pays’ system) is to focus on the percentage of a city’s wealth that is spent on the transport system. This is well detailed in the three Auckland, City of Cars videos.

Effectively, because of Auckland’s auto-dependency we spend up to three or four times as much of our wealth on transport than someone in Japan or Denmark does. In terms of outcomes, I don’t necessarily think that we have a ‘superior’ transport outcome to any of those other cities that spend far less of their wealth on transport. Auckland is still beset by congestion, and perhaps due to our lack of alternatives, we could argue that our transport outcome is even worse.

So, a similar or worse outcome for three or four times the cost? I certainly think that’s the killer blow for those not wanting to combat our auto-dependency.

To be fair on LibertyScott, his position is hardly one in favour of the kind of roads-centric development that we’ve seen over the past 50 years. One thing that he strongly promotes (in almost every comment he makes on this blog actually) is the need for congestion pricing. The argument is that if road space was ‘priced’ then we would value it much more and think carefully about whether we took a trip or not – especially at peak times. Perhaps if roads were properly priced (which would include the removal of minimum parking requirements) then un-subsidised public transport would become viable and the natural efficiencies of public transport (in terms of taking up less space per person than a car) would shine through. Congestion charging in places like London, Stockholm and Singapore has generally been considered quite a success – although the obvious argument when it’s proposed here in Auckland is our lack of good alternatives. It’s obvious that we need a proper public transport system before we even consider imposing something similar. There are also arguments about whether it’s socially equitable to charge people to travel – as the point of pricing roadspace is to price people off the road, and those most likely to be priced off the road are the poor.

In the end, I do think there is scope for some form of congestion charging. However, I would do it differently. For public transport, I would make a distinction between peak-time fares and off-peak fares – encouraging people to travel more during off-peak times. This should allow patronage to grow without placing the system under quite so much strain – effectively allowing us to use existing tracks, bus lanes and rolling stock (both train and buses) more efficiently by ‘smoothing the peaks’. For roads, I would really push for a strategy that we should not be widening motorways or building new motorways simply for peak demand. At peak times the space efficiency of public transport can ‘come to the fore’, and by building bus lanes, busways, railway lines and turning some motorway lanes into T2 or T3 transit lanes, instead of simply widening motorways we can find a more effective way of dealing with that peak level of demand.

But once again, we must have the ‘outcome’ clearly in mind. Perhaps the economy benefits enormously from having everyone at work at the same time, and that benefit is worth the cost of having our transport system somewhat ‘over-built’ so that it can handle peak-level demand. This is the ‘bigger picture’ that LibertyScott’s user-pays ideology simply cannot measure.

Furthermore, one aspect of the transport argument that gets lost, but which is in my mind the ultimate argument in favour of reducing our auto-dependency, is the interaction between transport and land-use patterns. Or, more simply, the different kinds of cities that different transport systems help create. It is my strong opinion that the more you build a city around cars, the less you build it around people; the friendlier a city is to cars the less friendly it is to people. The vice-versa is obviously true – just look at Venice as an extreme example! Public transport does not suffer from this same inverse relationship, as good public transport tends to encourage higher-quality urban forms, more lively streets and town centres and so forth. Once again, if one simply focuses on a user-pays approach to transport we ignore the wider effects – and in the end everyone loses out.

So in the end, I think perhaps the big difference between LiberyScott and myself is that he focuses on the ‘process’ while I focus on the ‘outcome’. While he doesn’t care ‘how you get around, as long as you pay for it’, I don’t care how you pay for it, as long as what you get in the end are the best outcomes.

I am extremely happy to debate what the best outcomes are and should be, and ways in which to get there. However, I think the funding structure is far less relevant. We should build the project according to how much it is needed, not according to whether it fits into a particular funding mechanism or not.

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  1. The focus on “process” is because Libertarians are not interested that much in real world outcomes. What counts is the purity of the ideology.

  2. If the roads were privatised on the basis of their replacement costs (including land value!), and then the owners had to charge to make this back then public (privately owned in this hypothetical) transport would be a much more effective option – of course the owners would charge monopoly rents and thus you’d have duplicate systems (or worse one owner extracting monopoly rents), so you’d introduce inefficiencies again as people would pay considerably more than needed to satisfy their preferences.

  3. In theory it is as right as you can get, user pays for what they use. Totally Fair process and the ideas are sound. However it doesnt take into account the problems we have today. In particular roading has had a unfair allocation of funds to date, therefore giving it the advantage to attract customers and offer the lower cost alternative. So untill the odds are even, we would not be able to effectively give the people a true choice. I cannot see that happening anytime soon.

  4. One issue I have with the libertarian user-pays view is, as a user, what exactly am I paying for? Particularly, whose criteria? Which list of exterialities do I have to cover? Do I decide this, or does someone else decide it for me?

    So it is assumed that I pay my share of the construction, operational and maintenance costs of my transport (be it car, bus or whatever), but do we include the costs of my impact upon the environment? And what impacts, and how are they costed. What, for example, is the price of a species of dotterel rendered extinct by replacing their habitat with a motorway interchange. To some that is no cost, to others priceless.
    Am I responsible for the costs of the impact of my travel on other users? Am I required to pay for the delay I cause other travellers by choosing to travel myself? And again, at what price according to whose schedule?

    To me a total libertarian user pays system is impossible. It assumes that every cost and benefit can be expressed in financial terms, and these costs are tangible and predictable. I think also that it is fundamentally an individualistic, almost selfish philosophy that tries it’s hardest to ignore the fact human are social beings that operate in groups at a family, local and national level.

  5. Hi Joshua; I can’t agree that a completely user-pays system would destroy transit services. Completely user-pays private vehicle systems involve leasing half the city’s footprint for motorways and arterial routes, involves no free parking anywhere, no minimum-parking requirements, involves paying policing, involves paying for air pollution and so on… the current system represents massive government interference in the transport aspect of our lives. It only pays for itself because there is a state-driven monopoly forcing us to “participate or leave town”. This is what I can’t understand about conservatives promoting the status-quo with Auckland transport; usually such folk are obsessed with market-driven systems being used for everything, but in this case they seem quite happy for that not to be the case.

  6. Particularly, whose criteria? Which list of exterialities do I have to cover? Do I decide this, or does someone else decide it for me?

    If someone imposes an externality on you, you just sue them, apparently. Transaction costs don’t exist in this imaginary world.

  7. I’m right wing when it comes to financial matters but I include trnasport as a public good (given it’s contribution to the economy) and as such my support for PT comes from the fact that PT is the most effective financially, environmentally, health-wise…

    Also I think it is a matter of democracy, the NZ public wants a transport system paid for mainly through relatively even taxation, no politican has convinced them otherwise or has been voted in on the basis of a user pays system…

    Finally libertarianism appeals to the fit, young, strong and successful… Could it work in practice, possibly but I highly doubt it… Voluntary taxes is a huge flaw I see as studies show for 97% of the population expenses will always expand to meet income, also the system requires you to be an expert in almost every facet of life and if you are defrauded to take the other person to court, imagine a country where every part of your life had been stuffed up like the leaky homes debacle and you then had to sue the other party all being processed by a court system supported by voluntary taxes… It doesn’t take too long to see a libertarian society would probably have little chance of sucess and crumble within a generation…

  8. Libertarianisim seems to me to be just another black and white ideology that does not actually mesh with real life which is full of grey areas. I can’t understand how anyone would take it seriously. Actually judging by the amount of votes Libertarianz gets each election, nobody really does.

  9. Ty Jarbury, I think it is good to discuss the implications for transport policy. The US is far from having a free market healthcare system, as over half of the spending is by government through Medicare and Medicaid, and the tax incentives are on employers to get insurance not individuals. However, this isn’t the place to discuss healthcare. I have never advocated the US approach, it is a more complicated debate that most of those on both sides of that argument care to engage in.

    Railways and buses were all privately run for many years, as were the first tram lines. Governments pouring money into roads no doubt undermined them. Remember almost all long distance transport is market oriented, why are cities different? Intercity public transport has no shortage of companies providing it.

    I’d argue that the proportion of wealth spent on transport can only be fairly used as a comparator if you look at what is spent on other things, like housing, for example. A profile of all spending may teach us all more, and I am saying that without actually knowing what the outcome would be, but I am always wary of just looking at transport (which a focus on emissions from vehicles in cities like Christchurch where they are not the main problem, may do).

    Having said that, I largely agree with you on peak/off peak pricing, which may also encourage telecommuting and the takeup of broadband if more worked different hours and more at home. The wider economic benefits of agglomeration (people working together in different companies) is something that some have tried to get a handle on, and it is something that is worth considering. Which means you DON’T price at peaks to eliminate congestion, just relieve it, nor do you price public transport to eliminate people standing on trains and buses, just overcrowding.

    In conclusion, we will debate more no doubt, but thanks for allowing me to debate these issues. I try first and foremost to apply economics, and in this field people make choices based on direct prices and generalised costs. I firmly believe the trend towards more car usage and ownership wont ever be reversed, people want the freedom, flexibility, comfort and convenience, the key is that there are limits to how much of this can be done at certain times and places – and that means managing it.

    On the comments: I do give a damn about outcomes, but I don’t believe the ends justify the means.
    George D: Why would anyone privatise anything on the basis of replacement cost? Nobody buys land like that. Privatising roads is an interesting one, but there is a case for local roads being placed into a company owned by adjoining property owners. Such owners would value access first, and would charge for usage.
    Joshua: How has roading had an “unfair allocation” to date, when it has fully funded state highways and for many years the surplus revenue from petrol vehicle users in fuel tax has been directed into other government spending?
    Nick R: You can pay for roads much like RUC now, just more sophisticated. You pay for the marginal cost of your usage plus a share of fixed costs. Distance multiplied by vehicle type with a factor for location and time (to reflect particularly expensive to maintain roads or congestion). It isn’t hard, it has been written about for some years. You don’t pay for externalities for anything else you do, so until that is done across the board it is hardly useful (and possibly counterproductive) to only charge road transport. Of course if road companies (or anyone) had no rights to take over private property against the will of the owner, you and others could happily buy up habitats that you care about. In other words be the social being you say people are (which they are) You seem to be able to be a selfish individual when you buy food, clothes, electricity, flights, books and everything else you consume, but can’t figure out how you can treat roads as a utility as well?
    Apl: You might note that road users pay for policing of the road system already, in full. However, yes if road use and parking were user pays, public transport would thrive, as would walking and cycling.
    George D: Do you pay for positive externalities that others deliver to you? Like the ability to comment on this blog? You are enjoying the tragedy of the commons and how the environment doesn’t thrive under that though.
    Jezza: How is something a public good when the use one person makes of the resource denies the other use of it? Why aren’t international flights or road freight or shipping public goods? Why is urban public transport special? Libertarianism hardly demands you be an expert in every facet of life, but presumably you prefer other people to make decisions for others, and people not to have the choice to opt out of this. Noticed how well people who have no vested interest in you as a consumer don’t tend to act according to your interests? It would be easy to run a civil court system voluntarily, everyone entering into a contract includes a small part of that contract put aside in a fund to pay for access to the courts. It shouldn’t be difficult.
    Nick R: Yes play the man not the ball and accuse them of racism, shows your reasoning powers.

  10. Before the roaring network was able to get to the point where it could be funded mostly by a user pay method, there was a huge investment in the roading network to get it to that stage. An investment that hasn’t been equalized in the public transport network. My view Is that public transport has had been left behind from the funding of the roading network through initially tax payers money. Please correct me if neccassary but I believe (without extensive research) that there has been more rate/tax payers money spent on the roading network than public transport, without the equal funding for PT we are not giving people a fair choice as they don’t have equal quality of service due to the lesser extent of funding. You have to invest to retain a return.

    I do agree with providing funding for the roading and PT transport systems as long as they have an equal playing feild to retain the funding from. I believe in investing for a return, however the government or investorshould expect a return on the investment.

  11. Jezza: How is something a public good when the use one person makes of the resource denies the other use of it? Why aren’t international flights or road freight or shipping public goods? Why is urban public transport special? Libertarianism hardly demands you be an expert in every facet of life, but presumably you prefer other people to make decisions for others, and people not to have the choice to opt out of this. Noticed how well people who have no vested interest in you as a consumer don’t tend to act according to your interests? It would be easy to run a civil court system voluntarily, everyone entering into a contract includes a small part of that contract put aside in a fund to pay for access to the courts. It shouldn’t be difficult.

    @Liberty: Whenever any resource is used it is denied others, for example civil defence is the definition of a public good but when stores are used to say, save one person, they are not being used to save another… Is transport a “pure” public good..? Absolutely not, but in NZ it is provided as one and more importantly that is the will of the majority of the people…

    Libertarianism does demand an almost absolute expert knowledge due to the lack of almost any legislation under the libertarian model… I personally don’t want to become ridiculously knowledgable about the stock market, I’m too busy in other facets of my life, I’d rather give a percentage of my money to a broker I know has meet a standard set by government after a thorough legislative process… The leaky building process shows us that without a robust legislative process people will prey on others for profit, you then only have a messy, expensive court system to back you up…

    I don’t necessarily prefer other people to make decisions for others but I am a big believer in democracy and the public have made it pretty clear they want the government to handle the following 7 things:

    1). Infrastructure (transport, water, power)
    2). Education (primary, secondary)
    3). Healthcare
    4). Law Enforcement (Customs, MAF, Corrections, Police)
    5). Justice system
    6). Armed Forces
    7). Welfare (unemployment, pension)

    I think the government should focus on providing these things really well by copying the international best practice model and leave everything else to the market with a suitable legislative framework… Moreover this is what the public wants, I’m not really interesting in trying to give the public something it doesn’t really want (like a libertarian model)…

    We already have a voluntary civil court system in the disputes tribunal and guess what the court has to employ PAID Bailiff’s to enforce decisions, your voluntary court contract fee is not realistic it needs to be thoroughly legislated…

    I think Communism in black and Libertarianism is white and in this, as in all things in life, the truth is in the middle… I agree completely with some parts of Libertarianism such as freedom over ones body (short of hard drugs) it is in part where part where my social liberalism comes from but the free for all plan will just never work, I’m suprised someone as obviously intelligent as you can’t see that…

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