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Those start up costs are high due to capital market restrcitions, environmental regulation and high taxation of capital and labour.... The high up-front costs of roads are in fact due to the simple fact that it costs a lot of money to physically build a road. Further, consumers cannot use a road at all until a connection is completed, at which point the marginal cost of usage falls to zero.* Even so, insofar as you are correct that environmental regulations add to those costs, that is entirely as it should be if building the road would impose social costs via its effects on the environment. Likewise, to the extent that taxes add to those costs, that is also likely to be entirely appropriate given a certain requirement for taxation to fund government-provided services and the distorting effects of lowering the taxation of capital and labour inputs to roads relative to the taxation paid on capital and labour inputs into other outputs. Of course, you may prefer zero (or very low) taxation and zero (o.v.l.) government-provision of services. But even if such a position could be defended credibly, in the context of assessing the merits of allowing competition in the provision of roads in the real world, and in the context of debate about whether governments have a role in ensuring the provision of road signage, such an argument would be purely academic. It would also fail to address the point that there would be high start up costs for roads even in the absence of such taxes. They have much more to worry about than competitors in the transport industry who use the same capital and technology. Are you saying that Virgin is not competition to Ford or Caltex? ... But the road owners just don't compete with each other. The Airlines don't compete with just each other. It is correct that I did not bother to comment on intermodal competition. An economist once said that an overcoat and a trip to Spain are substitutes, but I didn't mention the effects of lower TCF tariffs on usage of the road system either. In fact, as well as planes, road transport also faces competition from trains, boats, phones, the internet and, in terms of recreational trips, maybe even dope. The question in the context of the current debate, however, is how much pressure competition from these imperfect substitutes would put on a private provider of roads to alter its price/quality (inc. signage) decision away from a monopoly offering and towards the social optimum. From my knowledge of the area^, for most routes the answer is "not much". _______
* For cars, and in the absence of congestion. For trucks, there is a positive marginal cost due to pavement damage effects. ^ I have worked in the road transport area and on studies dealing with intermodal substitution and transport consumers' decision variables.
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