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"There is no need for me to give additional reasons because the reason I have mentioned 'declining cost industries' several times is that it is the key feature of roads that differentiates it from icecream vending, petrol supply and medical work and leads to economists treating these industries in different ways." This is unrealistic. Repairs need to be made. New bypasses and turnoffs can be made. Road signange (or data if we leave it up to car producers) needs to be updated [but they need it to be collected and either trasnfered or sold to them]. What do you mean by medical work anyway? Does that include pharma? When industries get large enough, they become constant marginal and average cost industries. Interest payments to bondholders need to be paid, and wages of repairmen need to be spent. The debt burden is taken on before all other costs. The marginal costs of such an operation do not fall to zero because the quantity produced initially is set (changing this is a marginal cost), they merely become set. As the marginal cost for labour is derived from the demand for the road, marginal costs can only do that if the project is abandoned or has no users. The properietors must pay pre arranged debt on the stuck marginal costs, at LEAST. - And most likely, private construction and banking will see that it becomes a industry with constant returns to scale. "As noted in my previous example, in some cases it maybe profitable for a new investor to build a new road and split the monopoly rents with an incumbent, but such an action would involve wasteful duplication of infrastructure and would reduce social welfare overall." So if someone builds a turnoff from Parramatta Road directly to either a housiong establishment they clear and prepare themselves, or directly to Baulkam Hills, this is wasteful? Wouldn't this be "maybe profitable for a new investor to build a new road and split the monopoly rents with an incumbent" What is a duplication of infrastrucutre.....you don't say it is the creation of more nodes in a network which bring about more opportunity in other multiplicative ways, but building a dual carriageway isn't either, nor is building more direct routes or new roads shooting off pre existing roads. What is it, and what does it look like? Why can't the older, less efficient road be broken up, concreted over and used for office space, housing, parks or factories? THAT is a big assumption. If both of these capital projects have a positive NPV, how can society be less well off? I take this is an argument about productive efficiency, not allocation, given the choice that Soviet "consumers" had. Also note many Govenrment projects do not fall in line with a commercially viable model of "feasible".
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