The Department of Transportation in my home state of Minnesota is starting a major rebuild of a state highway in the southwest corner of the state that I call home. This is not a major artery, just a north-south link running 80 miles north from the Iowa border halfway between U.S. Highway 75 and U.S Highway 59. But there are a lot of economics in this and other infrastructure projects, and this was worth reflecting on during a trip there a few days ago.
Providing necessary goods or services that inherently would not be produced in a purely free-market economy is one of the most basic functions of government. Economists call such things “public goods.” These include public safety, public health, national defense and basic education. Transportation infrastructure also is in this category and often is the one most fundamental to an efficient economy. Telecommunications and other “public utilities” may be in this category also, but different nations handle these in varied ways.
Any actions by government to supply such public goods are shaped by history and geography as well as by political culture and need. The United States and most European countries handle roads and water transport in quite similar ways, but they handle rail transport differently. Similarly, though telecommunications and other “utilities” also have aspects of public goods, many are provided privately, and how nations regulate meeting these needs varies.
And not all transportation infrastructure is of a type where none would exist if not for government. As long as someone can charge for a service, and the administrative costs of so charging are low, private markets provide incentives to build things. So ferries and bridges across rivers could be built and paid for without much government action. River crossings are choke points where travelers can be forced to pony up tolls. English and American town names which end in “ford” or “bridge” reflect that. Think Haverford, Hartford, Cambridge, Mobridge, etc.
One could also try to limit access to roads, so we all learned about the Pennsylvania Turnpike in elementary school history. But, just as overweight truckers know how to detour around weighing stations, so people driving hogs to an Ohio river town knew how to skirt the pikes across the road at which tolls had to be paid. As with modern toll roads, the administrative costs of charging at numerous entry points limited the profitability of the investment.
When the 13 Colonies were established, there was little infrastructure beyond rudimentary city streets. Colonies built a few things, such as the “rude bridge that arched the flood” from Longfellow’s "Concord Hymn." Such early U.S. history shows the influence of geography. Settlement took place along the coast. The Appalachian Mountains barred easy access to the interior of the continent. Travel from, say, Boston to Philadelphia, was easiest by ship. That stunted land transport improvements.
But as populations grew, people moved west, following “water gaps” of rivers through the mountains. The Mohawk River Valley of New York was one. The Delaware Water Gap on the New Jersey-Pennsylvania border was another. Interstate 80 follows it today.
Property developers know that convenient transportation raises the value of land. George Washington was an enterprising land speculator and so worked to develop canal and road access to his land in western Pennsylvania before and after commanding the Continental Army and serving as president. But canals trying to link the Chesapeake and other Atlantic-flowing rivers to the Ohio River faced difficult engineering. With much boosterism and a mix of public and private funding, New York State pushed its Erie Canal from the Hudson River to Buffalo, on the Great Lakes, opening up the interior of a vast continent.
This spawned a speculative frenzy of canal enterprises that ended up in widespread bankruptcies and the harshest depression the country had ever experienced.
Here technology appears. Railroads were much less challenged by mountains than canal boats. Steamboats could go up the Mississippi and Ohio nearly as easily as down.
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Canals all had some state and even local funding. Railroads and steamboats were almost entirely private. But private companies always want to use government to create monopolies for themselves. Steamboat owners tried to limit rail growth by getting laws limiting the ability of railroads to bridge navigable rivers. We think of Abe Lincoln as a lawyer on the circuit representing hick farmers, but he also gained considerable wealth representing railroads in lawsuits over such bridging rights.
Many European countries had government-operated railroads. In the U.S. they were private, but states and the federal government subsidized them with grants of land taken from Native Americans.
When the telegraph was invented, it facilitated train control, and so many telegraph poles were built along rail lines. Western Union and other firms wove these into a national net. In Europe, telegraphy largely was added to postal operations as a government responsibility. When telephony came along decades later, it followed the same pattern, private in the United States and largely public elsewhere.
Iron and steel technology facilitated longer bridge spans, such as the Eads Bridge across the Mississippi at St Louis, still in service after 145 years. Concrete, poured into forms on site, took far less skilled labor than stone masonry. Even before that, the scarcity of labor in our country and the availability of cheap trees meant that many smaller rail bridges here still are timber, while virtually all European ones were stone.
Technological change continues. Virtually all older bridges or box culverts on roads, such as the state highway past my hometown, were built with poured-in-place concrete. But this is a time- and labor-consuming method. In redoing it, these will be replaced by boxes precast in a yard and hauled to the site. Less labor is needed in the yard, forms are reused, steel placed more accurately and the concrete is cured better. But this is all much easier with the versatile and ubiquitous tracked hydraulic backhoe that can switch from moving earth to placing an enormous concrete box in just minutes. Traditional cranes with clamshell or dragline buckets could do many things also, but not nearly as efficiently as a modern trackhoe.
Sometimes technology forces hard choices. The Land Ordinance of 1785, enacted even before implementation of the Constitution, was one of those laws, like the Land Grant Act for universities or the GI Bill, that worked enormous and unexpected economic benefits. It largely did so as the basis for a uniform system of land measurement in mile-square sections grouped into townships. Anyone who has lived in a country without any such system knows the vast amounts of resources that are spent on adjudicating land disputes.
But mile-square sections initiated what economists call “path dependency.” Once this was the basis for surveys and settlement, townships built roads on section lines. With four or more farms per section, and families with four to 10 or more children, population densities were high. But now one person with a big tractor can crop where 10 or 15 farms were before. Do we need the small roads? If not, which ones do we keep? Do we decide on the basis of kids going to school, dairy farms that need milk picked up, or what? And, as climate changes and culverts wash out frequently, who will pay for their replacement? Millionaire landowners think it unfair that they bear the burden.
Similarly, while land grants fomented extensive rail networks, paved roads and diesel trucks made small branch lines uneconomic. Yet every little town did not want its elevator to lose access. So Midwestern states fought for decades over branch line abandonment. Driving from here to home, an old geezer like me can pick out traces of a rail line here and there that all had trains when I was an undergraduate 48 years ago.
The system of state and national roads merits a column in itself. Adjoining jurisdictions often don’t agree on priorities. My home county long wanted to pave the road through our farm, linking metropolises of 376 and 1,300 people. But for decades the adjoining county did not want to do the 3 miles in its borders. There was little point in paving 6 miles of the route but leaving 3 miles as gravel. For years, when we drove 60 miles to visit friends in northwest Iowa, we knew exactly where the state line was. Iowa had poorer roads and bridges. Now if you go south on Highway 60 or west on Highway 14, it is clear you have crossed from Minnesota into Iowa or South Dakota because the roads get much better. And if not for soldier Dwight Eisenhower, we might not have the interstate system that we do.
We understand that infrastructure is crucial. But we really don’t want to tax ourselves for what we need.