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The Voluntary Provision of Public Goods? The Turnpike Companies of Early America

  • Author(s): Klein, Daniel
  • et al.
Abstract

The heroic role of the agent called "government" in the simple public-goods model is clear enough, but the relevance of the model is still in dispute. A long history of doubters have challenged the premises that the government has the needed information, acts efficiently, and acts in the public interest. Also, doubters have contended that the free-rider problem of many public goods is not as ineluctable as others often seem to suggest. Historical studies have shown the potency of voluntary association in such fields as lighthouse provision [Coase 1974], education [Ellig & High 1988], bee pollination [Cheung, 1973], law and order [Anderson & Hill, 1979; Benson, forthcoming], neighborhood infrastructure [Beito, forthcoming], agricultural research [Majewski, 1989], among others [see Cowen, 1988; Wooldridgge, 1970].

To help weigh the relevance of the simple public-goods model I discuss the American experience of private turnpike roads. Extreme publicness marked the turnpikes, both in jointness of consumption and in nonexcludability. The excludability problem was partly the result of legal restrictions on toll collection. These restrictions caused in part turnpike unprofitability, which was discovered quickly. The turnpikes afforded enormous indirect and external benefits, however, to the nearby farms, landholdings, and businesses. Since unprofitability was usually foreseen, stock subscription -- necessary to construct the road -- was essentially a means of paying for road benefits. There were two excludability problems: people could use the road without paying a toll, and people could indirectly benefit from the road without buying stock. Though related, the latter is the crux of the public-goods problem at hand. The turnpike companies got started in the 1790s and were in sharp decline in the 1830s, though many turnpikes were operating at the turn of our century. I treat turnpikes in New England, New York, Pennsylvania, New Jersey, and Maryland (the last four I call the "Middle Atlantic states"). Except in Pennsylvania, the turnpikes were almost entirely financed by private subscription to stock, while those in most other states were mixed enterprises. Various facets of toll-road history are being explored by a co-researcher and myself, but here the discussion is confined to the public-goods aspect of the turnpikes.

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