THE ROAD TO ECONOMIC RUIN.

The user pays. Is anything more basic to a market economy? What could be fairer or more efficient? Who else should pay, if not the user? Should I pay for your consumption? How does that make sense?

Sure, if, eccentrically, you buy a CF-18 and defend the skies over your house, which is near my house, so you can’t help but defend my skies, too, then I’m probably morally obliged to chip in. The way we run our society, I’m also legally obliged to chip in. In fact, all of us get together and tax each other to hire people to fly CF-18s overhead, when they’re not in the repair hangar, that is.

But most of what you consume mostly benefits you, not me. So why should I pay for it? You get the benefit, you should pay the cost. Plus, if you do pay the cost, you have every incentive to economize on your consumption. Economize doesn’t mean minimize. It means weigh the costs against the benefits, which is exactly what we want people to do with their competing needs. The user pays. It’s both fair and efficient. So it was disappointing last week to see the Canadian Taxpayers Federation, ordinarily so sensible, come out within a matter of hours with separate press releases against both toll roads and carbon taxes. There are serious problems with each of course (I’ll get to those shortly) but it seems a backward step to simply give up on using the price system — one of our species’ greatest achievements — to try to make people pay for what they consume.

People have two main reasons for opposing user charges, one legitimate, one bogus. The bogus one is that payers prefer free. Well, who doesn’t? People who use the Don Valley Parkway in Toronto, which Toronto’s mayor wanted to toll, just don’t want to pay. But that’s no reason to ditch prices. I’d like my lunch free every day, too, but restaurants and grocery stories don’t work that way. Unfortunately, the way we’ve traditionally operated highways, I can get my increasingly valuable spot on the highway for free, even though we now have the technology to no longer operate roads so unfairly and inefficiently.

Everyone feels entitled to their entitlements. But how is drivers’ opposition to tolls different from dairy farmers’ opposition to free markets for milk? They’re each defending their boondoggle.

The legitimate reason for opposing user charges is that we don’t trust the government to get them right — or even to try to get them right. Getting them right wouldn’t be easy even if angels ran governments. The road toll should reflect the cost I inflict both on the road itself as well as on other drivers by slowing down traffic. If we charge a carbon toll, it should reflect the cost of the environmental damage I cause through my consumption of carbon (not counting by exhaling, which I won’t actually ask people to pay for). Both costs are very hard to calculate.

Needless to say, governments aren’t run by angels. (Anyone out there disagree?) So governments will use tolls and taxes as revenue-raisers rather than fairness and efficiency enforcers.

But let’s say that again: governments aren’t run by angels. If we don’t implement user charges, who decides how many roads and bridges to build and how much and what kinds of carbon discouragement in which to engage? Non-angelic governments. If we are sure they’re going to screw up choosing the right tax or toll, why assume they won’t also screw up on road-, bridge- or transit-building or on subsidies and regulations for various carbon initiatives? Will it always be true that the screw-up from the direct, and maybe less obvious, less visible interventions will be less damaging than the screw-up from tolls and taxes?

Could we maybe tilt the balance toward the price-system solution to these problems by changing our institutions? Could we set up independent agencies to calculate and set tolls and carbon charges? Could we insist on revenue neutrality or maybe even revenue negativity (i.e., a net reduction in revenues) from user charges? Could we avoid opposition from vested interests by moving all new bridges and highways to tolls, but leaving old ones untouched or only very gradually transitioning them to tolls? Could we privatize more infrastructure so private agents are responsible for user charges, not ministers who have to answer for them in question period? Could we work on better ways to discourage the capture of regulatory bodies by groups with vested interests?

Friedrich Hayek argued that without the price system we wouldn’t have modern or maybe even any civilization. It seems strange not to try to use such a marvellous device to reduce obvious unfairnesses and inefficiencies.

IF GOVERNMENTS CAN SCREW UP ROAD FEES, THEY WILL CERTAINLY SCREW UP ROAD SUBSIDIES.