Save the infrastructure -- by auctioning it off
''Infrastructure'' has become the vogue word of late 1982. As popularized by Pat Choate, former director of economic research in the Economic Development Administration, the concept of a decaying infrastructure calls forth dire images of collapsing bridges, crumbling roads, overflowing sewers, defiled water; in short, the general deterioration of those capital facilities the services of which are shared in the course of virtually all other activities, ''productive'' and ''unproductive'' alike. Congress and the Reagan administration are considering a substantial increase in highway ''user fees,'' i.e., gasoline taxes, the proceeds of which are to be channeled into a massive program of ''investment'' in transportation infrastructure - an undertaking which can be more accurately portrayed as old-fashioned public works and employment.
But the fact that the services of a particular capital facility are used in the course of a great many other activities (which, ultimately, is all that is meant by the term infrastructure) does not logically imply that the facility must be publicly owned, operated, and maintained.
Thus, for example, telephone systems would certainly be classified as part of the infrastructure, but the United States has survived quite well with privately owned telephone companies and will probably continue to do so with the advance of deregulation and the weakening of public control.
If efficiency in infrastructure investment is to be improved, decisions concerning the level and allocation of that investment must be subjected to market tests, and this can be accomplished only by private ownership. Prices determined in free (almost by definition, private) markets represent the best user fees yet devised.
Hence, a modest proposal: Auction off the publicly owned infrastructure to private investors.
Those facilities for which there is a substantial economic justification will command relatively high prices, will be continued in their current uses and will be maintained. Those which are not economically justified will command prices equal to their value in their economically most efficient use and will, sooner or later, be converted.
For example, an economically unjustified segment of urban freeway might, after it reached a particular degree of decay, be converted to housing, factories, or a rail spur.
The end result can only be beneficial.
Thus, a failure to maintain every bridge on every interstate highway in the country will not mean that those bridges which have a justification will be permitted to collapse. Rather, those facilities which are justified will probably be better maintained and operated than they now are. Especially in light of the greater legal liability of private (compared to public) owners for the safety of their facilities, the overall quality of publicly used facilities would almost undoubtedly increase.
For example, one can well imagine that the courts might find a private toll-road operator legally liable for the injuries and deaths caused by a drunken user, encouraging a diligence at the entry gate which would be impossible if the gate weren't there and which might well be considered constitutionally intrusive were it imposed by a public authority. A governmental authority cannot legally require that a citizen take a breathalyzer test as a condition for entering a highway, while a private company can require this as a condition for access to its facilities.
Federal interstate highways in the more densely populated and congested regions may have made substantial economic sense. However, to induce the political support of senators and congressmen from less-congested rural regions, it was necessary to provide for many miles of highway which were not economically justified. In short, the allocation of public resources to highway investment was undoubtedly inefficient and, in the aggregate, probably excessive.
The interstate highway system also provides examples of unanticipated and undesirable consequences. At least in part because the system was excessively large, it served to induce a radical shift of freight transport from railroads to trucks, thus contributing significantly to the economic decline of the railroad industry (and hence to the need for such additional public infrastructure investments as those undertaken by Conrail). In major metropolitan areas the economically inefficient local components of the interstate system induced an accleration in the shift from mass transit (public and private) to the private automobile, creating the economic difficulties of the transit systems (now largely public) which are to be the ''beneficiaries'' of one-fifth of the proposed gasoline-tax-cum-user's fee (while they are likely simultaneously to be further victimized by the four-fifths to be allocated to highways).
A decision to remove government from the ownership and operation of infrastructure facilities would be opposed from a number of quarters. Many private interests (road construction companies, automobile manufacturers, certain labor unions, etc.) benefit from the inefficiencies of the current system. Many more private parties have rationally adapted their behavior to the irrationalities of the existing system of infrastructure resource allocation (by buying suburban homes, automobiles, etc.). Thus, there would be inevitable transitional costs.
But, whatever the transitional costs, the long-run benefits would be substantially greater. Thus, it would be socially preferable to compensate those whose interests, in the short run, are damaged (using a fraction of the proceeds of the infrastructure auction to finance the compensatory payments) and then to reap the long-term gains.
With reference to the employment-generating effect of infrastructure investment (read: public works) programs, whatever increase in employment such programs may generate can be obtained by other means. Investment and investment-related employment should be increased, in infrastructure and in other productive capital. But other appropriate changes in fiscal and monetary policies can induce as large an increase in this employment as a public works program, and that increase will be more efficiently allocated to alternative investment activities by private parties subject to market discipline.
To reiterate, in the interests of efficiency in the rate and composition of capital formation (infrastructure and other), replace public infrastructure monopoly and inefficiency with a rational system of private responsibility accountable to the market.