John Schwenkler asks what I think about highway privatization. Truthfully, I’m not a fan. For a couple of reasons. First, privatization isn’t necessary to do market road pricing. All that’s necessary is the technology to vary tolls based on traffic, which we have. Second, with this kind of thing it’s all too easy to privatize gains and socialize losses. You sell off a highway and the buyer happily collects tolls but maybe doesn’t maintain the roads like it should. Ultimately, the government can’t credibly allow the road to fall into total disrepair. If a major highway is becoming undrivable and the private firm says the government has to help fix it up, then the government can’t refuse. But good luck trying to get back the toll money that’s been pocketed along the way.

Finally, it’s important to note that transportation infrastructure is a network. What happens on one road or one rail line affects everyone else throughout the system. There are network externalities, suggesting that private owners or managers will underinvest in the system. And a system with divided ownership might not have the best interest of the economy as a whole in mind. One example–you give an exurban highway to a private company, and that private company won’t waste any time lobbying for as much development as it can get alongside that exurban highway.

Now it is true that public investments in transportation infrastructure have been poor. It’s not impossible to imagine that privatization might yield better results than the status quo, and I’m always open to evidence-based arguments. But I have high hopes for a national infrastructure development bank, which might depoliticize (as much as possible) infrastructure development, and I have high hopes that we’re about to reverse years of neglect of our infrastructure systems.

One thing that’s clear to me is this–governments, and especially local governments, should get better at facilitating private involvement in local transit projects. When an urban corridor sees major redevelopments, all the associated infrastructure gets upgraded. These upgrades should include transit, and the local government should help coordinate investments in that transit, since it will increase the value of the development.

Think about the many large projects going up along North Capitol in Washington. There is insufficient transit access along that corridor, which is pretty much constantly bogged down by traffic. Residents are unhappy about this, and those limitations will affect the return to development of projects along the street. This is a solvable problem; the District should simply designate the corridor for transit–make that a part of the infrastructure upgrades, like water and power, that would be happening anyway. With the understanding that a streetcar line, for instance, would boost revenue and rents along its path, the city should create a special tax district to help pay for the line.

This is what infrastructure investment is largely about, after all. Marshalling private resources to build needed public goods private groups can’t build on their own.