Every April 22 celebrations of Earth Day take place around the world. This can serve as a reminder to reflect on the status of our planet. Some believe the earth is in great peril and that stringent measures to restrain economic development and technology are necessary to avoid a horrible fate. These measures are guided by three key concepts.

One concept is “sustainable development.” The idea here is to minimize the use of nonrenewable natural resources so there will be more left for future generations. While the idea sounds good, there are some problems with trying to enforce it through government restrictions.

There is no such thing as a “natural resource.” Nature doesn’t determine what is a resource. Human wants and ingenuity determine this. In this sense, all resources are manmade. Nonsense, you say. Man didn’t make the petroleum in the ground. Nature did.

It isn’t the substance of petroleum that makes it a resource. It is the use to which it can be put that makes it so. Time was when finding oil on your property was a bad thing. It could poison livestock and ruin prime cropland. Between then and now, human brainpower has figured out how to put this substance to good use as a fuel for motor vehicles and an ingredient in plastics, among other things. So today petroleum is a resource.

Whether petroleum will be as crucial in the future as it is now is unknown. It is likely that it will not be. The history of technology indicates that new methods continually replace old methods. For tens of thousands of years humans traveled on foot. For thousands of years humans used animals to ride or to pull vehicles. For the last 100 years humans have ridden in gasoline-powered vehicles. The efficiency with which this gasoline has been used has continuously increased, netting more person-miles and ton-miles to the gallon.

Alternatives to gasoline-powered vehicles are being developed. At some point, gasoline may go the way of the horse and drop out of contention as the main transportation power source. So saving petroleum or other substances that may be critical resources now in anticipation that they will be needed in the future may be unwarranted.

Conserving resources for the future may impose unnecessary constraints on progress. The long-term trend since the Industrial Revolution some 200 years ago has been one of increasing prosperity. Succeeding generations have been wealthier than preceding generations. Chances appear pretty good that later generations will be able to afford a higher standard of living than we now enjoy.

Consequently, requiring the poorer current generation to save more so that wealthier following generations will have more seems inequitable. The inequity is especially egregious when it comes to those currently living in poverty. “Sustaining” subsistence is far less tolerable than sustaining a life lived in the relative comfort of your typical American environmental activist. Many inhabitants of Third World countries depend on selling raw materials like petroleum. They depend on affordable fuel to help grow their economies. Measures that reduce the availability or increase the price of resources will be a lot harder on these poor people than on the affluent in the West.

A second key concept of environmental alarmists is the so-called “precautionary principle.” The idea here is that anything that entails any amount of risk is to be shunned or prevented from happening. According to this way of thinking, only when it is proven beyond a reasonable doubt to be safe should such a product or activity be permitted.

An example of the precautionary principle in action is the environmental alarmists’ protest against genetically modified foods. Scientists can now use gene-splicing to engineer more favorable traits into food. “Golden rice” is one of the products developed by this technique. This genetically modified rice incorporates more vitamin A into the plant. The benefit of this is that it enables people whose diets are over-dependent on rice (as is the case in many Third World countries) to obtain sufficient amounts of this vitamin to ward off blindness. This is not to say that everyone who eats plain rice will go blind. However, a distressingly large portion of the children in Third World countries do go blind from insufficient quantities of vitamin A in their diets.

Despite the beneficial attributes of golden rice, it is still a genetically modified “Frankenfood” to many environmental alarmists. The gene-splicing necessary to create golden rice is unnatural. It could have unforeseen consequences. It would be better, argue advocates of the precautionary principle, to wait until it can be proven to be totally safe before its widespread introduction into the food supply.

It is easy for the affluent and well fed, who can supplement abundant food supplies with vitamins, minerals, and herbal nutrients, to be cautious about new, untried, genetically modified foods. No one is saying these people must eat these innovations. But it is not so easy for people living in constant danger of malnutrition to wait for more evidence that genetically modified foods are perfectly safe.

Further, the notion that genetically modified foods are a recent innovation ignores the thousands of years of human genetic “tampering” with nature that has produced many agricultural products we take for granted. There was never a time when the type of cows that produce our milk ran free and wild. Modern milk cows are the outcome of thousands of years of selective breeding that has modified the genetic make up of these creatures.

Hybrid Corn

A similar story can be told about the corn-on-the-cob we chow down on at picnics. American Indians nurtured this hybrid through cross-fertilization of carefully selected weeds. Or how about that pet Chihuahua at the end of your leash? Ever see a pack of them run down prey on one of those nature shows?

The fact is, people have been genetically modifying other living creatures for thousands of years. It’s just that earlier methods were less predictable and more time-consuming than modern gene-splicing methods. We are doing what we have always done—change the world to make it more to our liking.

If the precautionary-principle zealots had walked among our cave-dwelling ancestors, they probably would have tried to prevent the use of fire. It’s dangerous and polluting. It has killed far more people than nuclear energy—a modern substitute in many uses. Yet, even today, environmental alarmists oppose replacing coal-fired electricity with nuclear-generated electricity.

The precautionary principle takes a healthy skepticism about the new and untried (after all, most new ideas are a flop; only a minority ultimately succeed) and turns it into a stultifying phobia. Progress requires that we take calculated risks in the effort to make things better. The track record of science and technology in this regard should be a source of confidence. The human mind is an amazing tool. It ought not to be tied down by irrational fears.

A third key concept of the environmental lobby is that there must be “stakeholder participation” in important decisions. Transactions between buyers and sellers are deemed insufficiently participatory. Third parties would like to butt in and dictate different terms for the transactions.

In the marketplace buyers and sellers find each other and voluntarily enter into agreements to trade money for products or services. No one forces either party to trade. Either is free to refuse or back out of a transaction before it is consummated. Often buyers can return merchandise and get their money back if they are dissatisfied.

While it is legitimate to insist that the voluntary participants in market transactions not leave a mess for others to clean up (for example, smoke from the coal-fired power plant that sells electricity to business and residential customers), it does not necessarily follow that these others be given an equal or dominant voice in the terms of the transaction.

Consider the case of the pesticide DDT. There are many places in the Third World where DDT could save lives if it were used to combat malaria-carrying mosquitoes. An estimated two million deaths per year are attributed to malaria. Public-health workers in these afflicted areas are willing to buy DDT. There are companies willing to manufacture it. However, “stakeholders” from the environmental quarter have prevailed on governments to ban the trade in this product.

DDT was banned on the basis of its suspected contribution to thinning eggshells among wild birds. The forecast was for massive die-offs among birds leading to what the originator of this concern—Rachel Carson—said would be a “silent spring.” There is no evidence that DDT is harmful to humans.

Saving wild birds is a worthy goal. If it can be done without endangering people, few would object. Saving wild birds at the cost of human lives, though, is much less defensible. From the security of an America that is largely safe from the ravages of malaria, the risk/reward trade-off from banning DDT might look acceptable. The trade-off is far less acceptable in regions where malaria is a major killer. The people living in these regions ought to be free to use DDT to save their lives. The intervention of the environmental “stakeholders” interferes with this freedom. (Fortunately, some attitudes have changed and the World Health Organization now sanctions some uses of DDT.)

Getting It Backwards

The environmental alarmists have it backwards. If anything imperils the earth it is ignorant obstruction of science and progress. People living on the edge of subsistence cannot afford to conserve the environment. Their energies must go into surviving. People who are prosperous can afford to think about conserving the environment. So to the extent that the measures demanded by environmental alarmists retard progress, they also endanger the environment.

That technology provides the best option for serving human wants and conserving the environment should be evident in the progress made in environmental improvement in the United States. Virtually every measure shows that pollution is headed downward and that nature is making a comeback.

A few years ago I visited the historical site of “the shot heard round the world”—Lexington, Concord, and Battle Road in Massachusetts. The area is lush with trees and greenery. Park Rangers explain that in 1775 the area was void of this greenery. The trees were chopped down to make way for farming. In those days farming was so much less efficient than today that 80 percent of the population had to engage in it to provide enough food to feed the nation. Vast swaths of countryside had to be leveled for the low-yielding crops of that era.

Technology has changed all that. Pesticides and genetically modified crops have allowed more of the fruits and vegetables to escape being eaten by insects. Better transportation has enabled more food to get to market before spoiling. Refrigeration has allowed food to stay edible longer. As a result, the portion of the workforce needed for agriculture has dropped to 2 percent. Massachusetts farmland has been allowed to revert to forest.

This is the model for saving the rest of the planet: let freedom to think and trade make use of the genius of humanity for a better world.

For most Americans, driving is the most dangerous activity they undertake on a regular basis. We ought to try to make the roads as safe as is humanly possible. Unfortunately, government ownership of the roads and the vehicle-registration/driver-licensing process undermine safety. In “Highways: Public Problems and Private Solutions” (The Freeman, March 1985), I wrote about privatizing the roads. Now I will examine the possibility of privatizing registration and licensing.

One approach governments have adopted to deal with the hazards of driving is mandatory insurance. In 44 states plus the District of Columbia, liability insurance is a requirement for vehicle registration. Still, many vehicles lack insurance. The Insurance Research Council has estimated that about 14 percent of motorists in the nation operate uninsured vehicles.

Uninsured vehicles, of course, are only half the problem. Other vehicles are grossly underinsured. Most states that require insurance allow absurdly low minimum amounts of coverage. Arizona, for example, permits vehicles to be operated with liability coverage as low as $15,000 for bodily injury to a single victim, $30,000 for multiple victims, and $10,000 for property damage. It doesn’t take much of a wreck to “total” a car. Replacing one “totaled” car could easily cost more than $10,000. Considering that, according to the National Highway Traffic Safety Administration, about 85 percent of the traffic accidents in the United States involve more than one vehicle, it should be readily apparent that many crashes will produce property damage in excess of the minimum mandated coverage. As it is, the average cost of a “property damage only” accident is in the thousands of dollars. Minor-injury accidents result in costs averaging nearly $18,000 per accident. Major-injury accidents generate an average cost of $55,000. Fatal accidents produce damages in the million-dollar range. Next to this, the typical $15,000 to $30,000 coverage for injuring or killing someone is hopelessly inadequate.

So “mandatory” insurance creates a false sense of security.

There are two models useful in analyzing this situation. On the one hand, we could view roads through the “ballpark” model. In the ballpark customers are warned that the management assumes no responsibility for any injuries or damages in the normal course of the game. If this model were applied to roads, anyone who purchased the necessary licenses and vehicle registrations would have access. Drivers venturing onto the roads would do so at their own risk and with the explicit warning that they might be harmed by others who were unable to pay compensation. Road users would determine whether to buy insurance or not.

The chief advantage of the “ballpark” model is that it would remove the ambiguity regarding who should bear the responsibility for insurance. No one could claim that the government has guaranteed that other drivers are insured. Knowing there are no insurance requirements would inspire those who want to be indemnified against damages to purchase their own adequate levels of coverage.

The chief disadvantage of the “ballpark” model is that driving might become more financially risky. Those without insurance could easily sustain losses that could bankrupt them. Those who do purchase insurance might well have to buy substantially larger amounts of coverage since there may be more uninsured drivers. So even though the total number of vehicle crashes and the social cost of traffic accidents would likely be lower, the increased incidence of bankruptcy among the uninsured and the subsequent redistribution of financial burdens to those who are risk-averse might be viewed as undesirable.

An alternative to the “ballpark” model is the “Disneyland” model. In Disneyland, customers are covered by the business’s liability insurance. Consequently, the management sets its own risk-reducing restrictions, such as barring some customers from some rides and attractions. Since the business is held strictly liable for any damages suffered by those entering the park, management will strictly enforce its rules.

Like the “ballpark” model, the “Disneyland” model applied to roads would also reduce the ambiguity concerning who will be responsible for damages. Enforcement of the insurance requirement would be best achieved by having insurers issue the licenses and vehicle registrations. This differs from the current system in which the mandatory insurance is sold by private vendors, but is enforced by a state agency. The government charged with enforcing mandatory-insurance laws assumes no liability for damage done by drivers who fail to comply. Thus there is no significant financial consequence for not enforcing the mandate.

If the current weakly enforced laws were to be replaced by a fully privatized system based on the “Disneyland” model, there would be a much stronger incentive to see that all vehicles had adequate insurance coverage. This would also help to keep the worst drivers off the roads. If insurance companies had to accept full liability for whomever they issued a driver’s license and vehicle registration, the problem of “underinsureds” would vanish. Bad drivers would not have the option of buying a woefully inadequate policy. They would be required to pay the full cost of their actuarial risk in order to obtain a driver’s license and vehicle registration. The insurance company would see to this as a matter of business survival.

Given the significant uncompensated costs inflicted on victims of underinsured and uninsured drivers, a coherent solution is needed. The contrasting “ballpark” and “Disneyland” models offer this. While each model is likely to make the roads safer, the “ballpark” model does this by imposing more of the burden on the cautious drivers. The “Disneyland” model would make the roads safer by removing more of the high-risk drivers.

Disneyland in Detail

Let’s look in detail at how this model might work. If insurers issued licenses and registrations it would be absolutely clear who was legally responsible for a particular vehicle being on the road. Insurers would have a strong incentive to make sure that every vehicle and driver they insured had adequate coverage. They would also have a strong incentive to keep uninsured vehicles and drivers off the roadways.

To clarify financial responsibility for potential damages, the privatization law would state that as long as a vehicle bore the license plate of an insurer, that insurer would be held liable for any damages caused by that vehicle. With this kind of provision it is likely that insurers would only issue plates after thoroughly testing the skills and investigating the driving records of customers. If an insurer was not satisfied that a prospective customer is truthful or a good risk, it could refuse to issue a policy. Under privatization, suspect applicants would not be able to use the roads legally until they found an insurer willing to issue a policy and its verifying license plates.

Since issuing an auto insurance policy and license plates would be simultaneous, the uninsured would be easier to spot than at present. Indeed, given the greater degree of responsibility placed on each insurer, it seems likely that steps to improve the visibility of license plates would be taken. For example, the much-tested, but little-deployed electronic license plate would likely be a widespread innovation, permitting plateless vehicles to be detected by automated means.

The dodge of buying insurance just to obtain a registration tag and then canceling the insurance once the tags were received would become much more difficult. Since the insurer would be responsible for damages, it would have a strong incentive to require a substantial payment or deposit refundable only when the plates are returned. Given the many insurance-sales locations and computer networks, obtaining or returning plates ought to be a lot more convenient than dealing with the DMV.

Individuals would be free to shop for the best license, registration, and insurance deal they could find. Each insurer would be free to establish its own criteria for issuing policies and license plates. Some insurers may cover only low-risk drivers. Others may cover high-risk drivers at correspondingly higher premiums. Some insurers may wish to give written and/or road tests to prospective customers. Some insurers may want to conduct regular safety inspections of their customers’ vehicles. Others may wish to encourage or require some or all the vehicles they insure to be equipped with safety-enhancing devices (for example, an ignition that can only be activated after the driver passes an automated, on-board breathalyzer test). Customers may choose to accept some limitations on driving in exchange for lower premiums (for example, driving only during daylight hours). Others may prefer to pay more to escape restrictions. In short, there is likely to be a wide variety of payment/license/registration options available. Nevertheless, those who could not meet the minimum requirements of any insurer would not be issued vehicle plates. The streets would be safer.

Potential Benefits

The potential benefits would occur in two areas. Privatizing vehicle registrations would shift costs from innocent victims of bad driving to those who cause the accidents. As the perpetrators of damage were forced to bear a larger share of the consequences of their actions, we could expect some modifications in their behavior. To remain profitable, insurers would have to be good at matching premiums to risk. This would motivate them to reduce risk. A price structure that accurately reflected risk would push drivers toward safer behavior. So over the long run, not only would uncompensated losses be shifted back to those at fault, total losses also would likely be reduced.

The other source of potential benefits would come from eliminating functions of the state departments of transportation. If we privatized the registration and driver’s license functions, we could probably reduce government spending by about $3 billion per year.

The potential for “one-stop-shopping” convenience under full privatization is substantial. One could buy a car and get it registered and insured all at one location. The insurers and auto dealers would have an incentive to make the process as expeditious as possible. In fact, competition among insurers and dealers would help promote efficiency and convenience.

Consider a typical transaction with the current DMV. It’s your lunch hour. You have chosen this opportunity to take care of some business down at the department. Your first task is to find the nearest branch office. They’re not always conveniently located. They’re certainly scarcer than any other auto-related business location. As your search for the nearest office drags on, you pass numerous gas stations, a half-dozen auto-parts stores, several auto-insurance offices, and a few auto dealerships.

Finally, you locate the DMV office. You walk in and get in line. But your advance to the head of the line is slowed because many employees have chosen this time to take lunch. When your turn finally arrives you are greeted by an employee whose occupation has ranked last in a survey of civility. You think the service could be more convenient, expeditious, and courteous, but it isn’t and won’t be likely to get that way. The monopoly position of the state agency pretty much assures that it won’t. It is not as if you could take your “business” elsewhere.

Shifting the vehicle registrations and driver’s licenses to the private sector would require legislation. This proposal would likely be resisted by the DMV bureaucracy. After all, if the agency is no longer needed to register motor vehicles or issue driver’s licenses, we may well question whether it is needed at all. At the very least, we may be talking about a 50 percent cutback in its budget. Hundreds of people would see their government jobs eliminated. These prospective consequences would inspire objections.

We may also expect some initial opposition from the auto-insurance industry. At the outset the increased responsibility would provoke uncertainty. New means of coping with this uncertainty would have to be learned. However, once the insurers understood that they would be compensated by their customers for the costs of issuing registrations and licenses, and that privatization would not require them to provide subsidies to high-risk drivers, they should be more receptive to the idea. The opportunity to play a more direct role in controlling the risk of the roadway should be perceived as a means of reducing underwriting losses over the long term. As the roads become safer, insurers’ losses would fall. (Ultimately, premiums would be expected to fall as well, but not as rapidly as underwriting losses.) In addition, many of those currently evading the insurance mandate would become the reluctant customers of the insurance industry. Lastly, many of those currently underinsuring their vehicles would be required by insurers to buy adequate coverage. All this should improve insurer profitability.

The general public may be apprehensive about letting private-sector insurers decide who gets on the roads. But it seems odd to prefer having that determination made by a bureaucracy with no responsibility for its decisions. We have grown accustomed to allowing businesses to decide who obtains credit, and we expect the decisions to be made on rational criteria. And they are. Reflection on how the private sector has handled this vital segment of contemporary life should help to alleviate some of the public’s apprehension.

Of course, that segment of the population that is currently flouting the insurance mandate or exploiting it by underinsuring their vehicles would be expected to raise quite a fuss. While we should not be persuaded by the objections of those who wish to continue passing the burdens of their own risky driving on to others, we can envision some means of addressing their legitimate concerns.

The case most deserving of sympathy is that of the individual whose past driving has taught him a lesson. It is unfortunate for such individuals that many more proclaim to have learned lessons than actually have. Consequently, individuals with bad driving records would undoubtedly have trouble obtaining insurance and permission to use the roads. We should expect insurers to establish methods of serving this market niche. One method would be to require the vehicle of such a person to be equipped with devices that enhance safe operation. We already mentioned the possibility of a breathalyzer-ignition link. Other options could include vehicles that could only run during daylight hours (perhaps having a solar-collector connection to the engine or transmission) or vehicles whose maximum speed could not exceed a low setting (perhaps having “speed governors” placed on the engine). Insurers might want to require periodic safety inspections of the vehicle as a condition of issuing a registration. They might see fit to require regular driving tests for those whose driving behavior has been demonstrated to be more hazardous than average.

Some high-risk but repentant drivers could work toward a full reinstatement of driving privileges by demonstrating meritorious performance under limited driving privileges. For others, though, the outlook will be less sanguine. There are some people who should not be behind the wheel. Stopping them from driving not only helps to preserve the health and lives of others, but also may save the driving-deprived individual from injuring or killing himself. Incompetent drivers must find other means of meeting their transportation needs.

Editor’s note: As we went to press, and as if to illustrate the point of the following article, Fortune released its 2006 list of largest corporations, showing Exxon Mobil, not Wal-Mart, on top.

For all the gnashing of teeth over the current dominant position of Wal-Mart in the standings among America’s largest corporations, one might think that it has held the top ranking forever. It hasn’t. Wal-Mart has been the top-ranked firm in the Fortune 500 only since 2002. It has been in the top 500 only since 1995. Other corporations have held the top ranking for most of the last 50 years.

Back in 1955 Fortune Magazine published its first Fortune 500 listing of the biggest businesses in America. General Motors topped that list. At the time some people believed that General Motors was “too big.” More than half the cars sold in America in 1955 were manufactured by GM. Congress launched investigations of GM’s purported attempts to monopolize the American automobile industry.

GM was simultaneously accused of pricing its cars too high for many working Americans to afford and so low that they threatened to run their competitors out of business. Sensible people might marvel at the reasoning behind this type of accusation. The notion that prices could be both too high and too low defies logic. Nevertheless, our lawmakers have crafted antitrust rules designed to fight such practices. In fact, the antitrust code is fairly comprehensive in terms of the type of pricing schemes that are deemed to be in violation of the law.

Prices that are too low are considered “predatory.” That is, these low prices are perceived to be aimed at forcing rivals out of business so the “predatory” firm can monopolize the industry. Prices too high are considered evidence that the offending firm already must have monopoly power—how else could it enforce such a high-price policy? Prices that match those of competitors are viewed as evidence of conspiracy—how else could supposedly independent firms post the exact same prices?¹

Since there is no pricing option left uncovered by antitrust laws, every business in America is potentially subject to investigation and prosecution.

Under badgering from Senate inquisitors in 1953, Charlie Wilson, the chairman of General Motors, asserted, “I thought that what was good for the country was good for General Motors, and what’s good for General Motors is good for the country.”² While it may have been a bit presumptuous for Wilson to conflate the good of GM with the good of the nation, it is hardly evidence of evil. Yet the statement inspired demands for government action to humble this corporate giant. Legend has it that a chastened Wilson decided that his company would never sell more than 50 percent of the cars in America.

Exxon has been GM’s longtime rival for the top spot in the Fortune 500. By 1975 Exxon became the largest American business. Political events in the Middle East drove the price of oil up. As a vendor of this now scarcer commodity, Exxon vaulted to the top of the rankings. By 1978, though, GM was back on top. GM and Exxon took turns sharing the top spot until 2002, when Wal-Mart took over the lead.

The alternative to success is failure. This is the ultimate fate of most businesses. Three out of every five business starts end in bankruptcy within five years. Only a tiny minority of new businesses grows into the huge corporations that make up the Fortune 500. Once a business makes the list, there is no guarantee it will stay there.

If we look at just the top ten on the first Fortune 500 list from 1955 and compare it to the most recent list, we find only three holdovers. Seventy percent of the firms in the top ten in 1955 have been displaced by other firms. Famed economist Joseph Schumpeter likened the top ranks of business to a hotel where the guests are always changing.³

Human beings are lazy and greedy (or energy-conserving and ambitious—if you prefer less negative-sounding descriptions of the same phenomena). People can satisfy other people’s desires by providing products and services that cater to the inherent laziness of the species. In a true free market, to the extent that a business aptly discerns those desires and efficiently fulfills them, it will prosper. Firms in an unfettered marketplace become the biggest because they have effectively fulfilled more desires than their rivals.

Since no one firm can corner all the individuals within its organization, it will have to do constant battle to try to fend off those who have their eye on its current piece of the economic pie. If there is money to be made by serving human wants, firms will endeavor to serve them. Successful businesses spawn imitators and rivals aiming to cut themselves a piece of that pie. In the free market, the only way to cut oneself a bigger piece is by offering a better value.

Within the mixed economy Wal-Mart rose to the top by offering consumers better value—as perceived by freely choosing customers. How long Wal-Mart will stay on top is unknown. It possesses no patent on vending merchandise. Other businesses are free to copy its techniques, and several have. There are also innovations that threaten Wal-Mart’s main mode of business. More and more people are becoming comfortable with shopping on the Internet. Wal-Mart’s “big box” stores may be shunned as more shop from the convenience of their own homes.

As people become wealthier the lure of “always low prices, always” may dwindle. The attraction of “upscale” lifestyles may divert customers away from Wal-Mart. Target, a key Wal-Mart rival, has been accelerating its growth by offering trendy-but-affordable designer merchandise. That Target’s sales have been rising twice as fast as Wal-Mart’s in the last year has caught the attention of Wal-Mart’s management,⁴ and it is aiming more at upper-income shoppers.⁵ Whether this will be successful, though, is a big question. When you’ve created such a dominant position for yourself as a low-price vendor, it may be difficult to convince buyers that you can also offer upscale merchandise.

In the market the competition never ends. The race is never over. There is never a final winner. Any lead can be, and most probably will be, overtaken at some point in the future. Rather than fret over the current standings, people should take advantage of the products and services offered by competing business—rewarding those that serve them best as a spur to the improvement of all.

Notes

1. Edward W. Younkins, “Antitrust Laws Should Be Abolished,” Le Québécois Libre, February 19, 2000, www.quebecoislibre.org/000219-13.htm.
2. David Hartman, “What’s Good for General Motors . . .” Chronicles Magazine, May 2002, www.chroniclesmagazine.org/Chronicles/May2002/0502Hartman.html; also General Motors, Wikipedia, http://en.wikipedia.org/wiki/General_Motors.
3. Daniel Gross, “Who Needs Harvard?” Slate (Jan. 12, 2005), http://slate.msn.com/id/2112215/.
4. Wal-Mart Takes Aim at Target,” MSNBC, www.msnbc.msn.com/id/8244689/.
5. Parija Bhatnagar, “Walmart.com’s Going Upscale,” Money Magazine, November 18, 2004, http://money.cnn.com/2004/11/18/news/fortune500/walmart_online/

Travel as a passenger on public transportation is safer than travel by private cars. The fatality risk for a person traveling in a car is almost 100 times higher than that for a person traveling in a bus (American Public Transportation Association’s Public Transportation Fact Book). Passengers traveling in rail-transit vehicles probably face a similarly low risk.

However, the onboard risk is not the only safety issue of concern. Pedestrians face risks prior to boarding transit vehicles. Further, rail-transit vehicles operating on rights-of-way that intersect streets may collide with persons, vehicles, or objects that come into the path of the transit trains. Fatality rates by vehicle type (Table 1) were compiled from the National Highway Traffic Safety Administration’s Traffic Safety Facts 2000, the Federal Highway Administration’s Highway Statistics, and the American Public Transportation Association’s Public Transportation Fact Book. These statistics are revealing.

As can be seen from the data, rail transit has severe safety deficiencies when compared to other modes of urban travel. The aggregate fatality rate for auto travel is around 15 persons per billion vehicle-miles of travel. However, this includes rural travel, where the fatality rate per billion vehicle-miles is 23. The nationwide fatality rate per billion vehicle-miles of urban automobile travel is 11, and when passengers are included, it drops to 10. Thus we find that light rail’s 14 fatalities per billion passenger-miles of travel and commuter rail’s 12 fatalities per billion passenger-miles of travel are actually higher than the rate for privately operated automobiles.

Since rail transit has a worse safety record than automobiles, the notion that safety can be improved by spending tax dollars to lure some automobile users to switch to rail travel is not supported by the crash data. Auto drivers who support tax-subsidized rail on the assumption that their lives will be made better when others leave their cars to ride trains may want to reconsider their position. Light rail’s fatality rate of 359 per billion vehicle-miles of travel and commuter rail’s 391 per billion vehicle-miles of travel make rail trains extraordinarily dangerous to be near. Occupants of automobiles routinely get the worst of it in any collision with a train.

Traffic crashes are not the only safety issue in public transportation. Crime is also a matter that must be considered in evaluating decisions to implement transit systems. Many cities have been or are seeking to add light-rail lines to their transit mix. One of the arguments used for replacing bus service with light-rail service is the perceived potential for light-rail stations to attract real-estate development. This may well be true, but it is not an unmixed blessing. Light rail also appears to attract an unusually high number of criminals.

Of all the transit modes, light rail has the worst crime rate (Table 2). Light rail’s violent-crimes-against-persons rate (murder, rape, robbery, and assault) of 284 per billion passenger-miles is almost 50 percent higher than heavy rail (195) and three times higher than the rate for bus transit (97). Light rail’s crimes-against-property rate (larceny, theft, burglary, and arson) of 779 per billion passenger-miles is 20 percent higher than heavy rail (641) and five times higher than the rate for bus transit (144). Consequently, it looks as though a decision to replace buses with light rail is very likely a decision that will bring more crime to an area.

There is nothing in the published literature that attempts to explain the higher crime rate for light rail. One can only speculate as to the possible causes. One hypothesis would be that since trains must stop at every station, criminals can be more assured of access to potential victims. In contrast, a bus driver may bypass a stop if he thinks it may be dangerous. Train stations may be more isolated, putting waiting victims in a known location that may not be easily visible to prospective witnesses. Rail also is more apt to involve so-called ” park-and-ride” trips. The parking lots may be convenient locations for robberies. Cars parked for the whole day may invite break-ins. The possible reasons for these higher crime rates cry out for more study.

Much of the energy put into transit has been to raise taxes in order to obtain more resources to implement more transit options. The focus has been on trying to provide the type of service that might attract drivers out of their cars and onto transit vehicles. Overlooked in this quest has been the potential negative impact on public safety. The data gleaned from published sources indicate that there are serious safety issues surrounding the operation of transit in our cities. Inasmuch as government is generally expected to promote public safety, the extraction of more tax dollars to build more rail-transit systems would appear to be undermining this key responsibility.

To get this big, Wal-Mart allegedly exploits its own employees by paying “poverty wages” and forcing them to work unpaid overtime. It also allegedly “squeezes” vendors, forcing them to lay off American workers and ship their jobs to foreign “sweatshops.” On top of this supposed economic rapacity is the charge that Wal-Mart disregards the concerns of small communities.⁴ While such charges fuel the passions of competitors who are losing customers to Wal-Mart, unions that have been unsuccessful in organizing the company’s employees, and ideologues who despise the free market, they are without merit.

The nature of competition is to produce winners and losers. Those who lose can be expected to bemoan their fate. The remedy is to improve one’s own competitive offering. The strategy and tactics of the leading competitor can be observed, analyzed, and, if warranted, imitated. Countermeasures can be devised. Since competition in the free market is continuous, today’s losers losers can be tomorrow’s winners. Instead of fomenting political opposition to Wal-Mart, its rivals should be improving their own game.

Unions in America have been granted ample privileges in their quest to enlist members. Under regulations established by the National Labor Relations Board, they can convert businesses to “union shops.” A union shop means the union speaks and bargains on behalf of all workers—even those who don’t belong. Non-members may even be compelled to pay fees to the union for unwanted bargaining “services.” The rules governing elections to determine whether a union will be instituted are slanted in favor of the union’s case. If Wal-Mart employees decline to form unions they are certainly within their rights to do so.

Ideologues who rant against Wal-Mart do not understand economics. In a market economy, success goes to those businesses that best and most efficiently serve consumer needs. Businesses must induce customers to hand over money in exchange for the merchandise. Customers are completely free to ignore the offerings of any business. Every business, Wal-Mart included, must win its customers’ patronage anew each day.

We all know that consumers like bargains. Getting something for less money is considered savvy shopping. Wal-Mart has opted to ensure that its prices are as low as can be. This focus has enabled the company to promise “always low prices, always.”

Low prices benefit both the consumers and the overall economy, besides being a winning strategy for Wal-Mart. Every dollar a consumer saves on a purchase enables him or her to buy other items. More of consumers’ needs and wants can be fulfilled when prices are lower than when prices are higher. Because a consumer’s dollars go further at lower prices, more merchandise can be manufactured and sold. All the businesses making and selling these other products and services are helped.

The sheer size of Wal-Mart attests to the success of its strategy and the benefits to the economy. Growing into the largest business on the planet indicates that it is accurately interpreting consumer needs and efficiently serving them. This is exactly what we want businesses to do. This is what the free market encourages them to do. It is estimated that Wal-Mart’s impact on prices accounted for 12 percent of the economy’s productivity gains in the 1990s.⁵ This also helped reduce the effect of the Federal Reserve’s inflation of the money supply.

But what about the methods Wal-Mart uses to achieve its goal of low prices? What about its exploitation of labor? The free market requires that transactions be carried out voluntarily between the parties. No one is forced to work for Wal-Mart. The wages it pays must be adequate to secure the services of its employees. Would Wal-Mart’s employees like to be paid more? Sure, everyone wants higher pay. If its employees could get higher pay elsewhere, Wal-Mart would lose its best workers to the businesses paying those higher wages.

The same goes for the alleged uncompensated overtime. Wal-Mart can’t force its employees to work overtime without compensation. Employees are not chained to their stations. They are free to leave and take other jobs if the pay or working conditions at Wal-Mart are less than satisfactory.

Neither can Wal-Mart “squeeze” vendors, compelling them to accept deals that they would prefer to refuse.Of course, sellers would like to get as high a price for their wares as they can. Likewise, buyers would like to get as low a price as they can. Both have to settle on a price that is mutually agreeable. Wal-Mart has a reputation for keeping its word and paying promptly.⁶ This enables its suppliers to plan their production and provides a reliable cash flow to help fund operations.

If some of Wal-Mart’s suppliers choose to manufacture their products overseas, that is because doing so lowers their costs. Sure, the costs may be lower because the wages demanded by foreign workers in places like Bangladesh are low and the workplaces may be “sweatshops” compared to conditions in U.S. factories. But this is hardly the cruel exploitation that Wal-Mart’s critics describe. The relevant comparison is not to the working conditions Americans have become accustomed to after two centuries of industrial progress and wealth beyond the wildest dreams of inhabitants of the less-developed countries. The relevant comparison is to the alternatives available in these less-developed economies.

Companies that employ people in factories in less developed economies must offer a compensation package sufficient to lure them from alternative occupations. So as bad as these “sweatshop” wages and working conditions may appear to Americans who have a fabulous array of lucrative employment opportunities, they are obviously superior to the alternatives that inhabitants of less-developed economies are offered. If the “sweatshop” jobs weren’t superior, people wouldn’t take them.

Wal-Mart and Small Communities

The claim that Wal-Mart “disregards the concerns of small communities” is also contradicted by the evidence. If Wal-Mart’s stores were not in tune with the concerns of shoppers in small communities, the stores wouldn’t make a profit and would eventually shut down. If Wal-Mart’s stores were not in tune with the concerns of job seekers in those communities, the stores wouldn’t be able to staff their operations. The concerns that Wal-Mart rightly disregards are those of local businesses that would prefer not to have to deal with new competition. The absence of rigorous competition leads to high prices in many small communities. While this may be good for the profit margins of established businesses, it is not necessarily a condition to be preferred over the benefits for the majority of the inhabitants of the community that result from robust competition.

Wal-Mart runs the largest corporate cash-giving foundation in America. In 2004 Wal-Mart donated over $170 million. More than 90 percent of these donations went to charities in the communities served by Wal-Mart stores.⁷

From an economic perspective, when all the claims are dispassionately evaluated it looks like Wal-Mart promotes prosperity. The company is helping consumers get more for their money. It is providing jobs for willing employees. It is stimulating its suppliers to achieve greater economies in manufacturing. It is encouraging trade with less-developed economies, helping the inhabitants of Third World nations to improve their standards of living. Far from “disregarding the concerns of small communities,” Wal-Mart offers an appealing place to shop and work.

Wal-Mart is doing all these good things and making a profit of around $9 billion a year.This is a profit margin of less than 4 percent.That’s mighty efficient. To call Wal-Mart a “corporate criminal” is slander. Wal-Mart is a model of how successful capitalism is supposed to work. It is a company that should be emulated, not reviled.

Notes

1. Liza Featherstone, “Down and Out in Discount America,” The Nation, January 3, 2005, p. 14.
2. Charles Burress, “Wal-Mart Foes Detail Costs to Community,” San Francisco Chronicle, February 17, 2004, www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2004/02/17/BAGLL5224G1. DTL.
3. Charles Fishman, “The Wal-Mart You Don’t Know,” Fast Company, December 2003.
4. Ann Woolner, “Let Me Count the Ways People Don’t Love Wal-Mart,” Bloomberg.com, February 13, 2004, http://quote.bloomberg.com/apps/news?pid=10000039&sid=aJqMefuSApSY&refer=columnist_woolner.
5. Fishman.
6. Ibid.
7. “Total 2004 Giving Exceeds $170 Million,” March, 11, 2005, www.walmartfoundation.org.

Advocates of government subsidies for public transit assert that this should help mitigate urban traffic congestion by replacing many automobile trips with a smaller number of high-occupancy-vehicle trips. In terms of carrying capacity, a bus can serve 15 times as many person-miles per vehicle-mile as a typical automobile. A light-rail train has a carrying capacity about 100 times larger. The prospect of reducing urban traffic congestion by luring would-be automobile drivers onto
public transit is thus tantalizing.

For a long time the assumption has been that offering more public transit service options would reduce traffic congestion. But despite the more than $300 billion in taxpayer money spent to expand the quantity and quality of public transit over the last four decades, its share of travel has declined. While the number of transit passenger-miles has risen slightly over this period, its share of urban travel has decreased (table 1).

In the last two decades, more and more cities have turned to light rail as a prospective savior in the battle against urban traffic congestion. A light-rail train in a three-car configuration can carry about six-to-seven times as many passengers as a standard bus. Light-rail tracks can also be built at-grade in city streets. This is considerably less costly than either an elevated or subway alignment. The high capacity compared to a bus and low cost compared to a subway or elevated track has great appeal to urban planners.

For light rail to reduce traffic congestion, though, the number of persons it diverts from driving must exceed the drawbacks of in-street alignment. When light-rail tracks are built in the street, they occupy space that could have been used by motor vehicles. The loss of two lanes of roadway for motor-vehicle travel (three where stations are located) squeezes the remaining traffic into a narrower facility. In addition, light-rail trains are typically granted the authority to preempt traffic signals. This further impedes the flow of motor vehicles.

The question of which effect is larger—the traffic-reduction impact of diverting drivers from their cars or the traffic-impeding impact of locating light-rail lines in city streets—has been addressed in a report by Valley Metro in Arizona.¹ Among other things, the report attempts to project the traffic and air quality in 2020 with and without a 20-mile minimum-operating segment of light rail.

Traffic congestion results when too many vehicles try to use the same roadway at the same time. Vehicles impede each other and slow down the movement of traffic. If enough of those who would otherwise drive could be induced to switch to public transit, the number of vehicles trying to use the roadway would be decreased. This could reduce traffic congestion if the number of diverted automobile trips is larger than any negative consequence caused by public-transit vehicles’ larger size and slower speeds.

The prospect of carrying up to 500 persons at once in a three-car light-rail train is the transit bureaucrats’ plan for reducing automobile trips. Of course, not all 500 light-rail passengers on a given train are diverted from driving an automobile. Some will be diverted bus riders. Others will be taking newly generated trips. So the gain in reduced automobile trips is not as large as the total passenger ridership. Nevertheless, adding light rail is bound to reduce the number of trips made in privately owned automobiles.

As noted, however, adding light rail in an in-street alignment will unavoidably reduce the carrying capacity of the roadway. Typically, two lanes that previously would have been accessible to motor vehicles are taken up by light-rail tracks. Unlike the temporary use of the roadway represented by bus transit (once a bus passes, the lanes are again available to other motor vehicles), light rail often permanently removes access to these lanes. Motor vehicles may be permitted to drive over light rail tracks only at a limited number of designated crossings.

The question is whether the reduced capacity is more than offset by the reduced number of automobile trips or whether the reverse is the case. In an effort to answer this question, the Phoenix region’s urban planning agency, the Maricopa Association of Governments (MAG), ran its “Travel Demand Model” comparing the traffic impacts for conditions without light rail (“no build” option) and with 20 miles of newly added light rail (“build” option) for the year 2020. The results are in table 2.

The most outstanding feature of the data is the extraordinarily small difference between the “build” and “no build” alternatives. With one exception, all the impacts are in fractions of 1 percent. The exception is an impact slightly higher than 1 percent. It is clear that adding light rail will not be a significant factor in addressing traffic congestion in the region.

According to the MAG model, light rail is expected to reduce vehicle-miles of travel (VMT) in the region by 0.04 percent. This is the equivalent of taking one car in 2,500 out of the stream of traffic. The results projected for the corridor to be served by light rail are somewhat larger. Corridor VMT is expected to be reduced by 0.13 percent. This is the equivalent of taking one car in 750 out of the traffic stream. These percentage reductions in traffic resulting from adding light rail are dwarfed by the region’s projected annual 3 percent growth in VMT. If eventual gridlock is the fate to be  averted, light rail’s impact on VMT would delay impending gridlock by about two weeks.

The reduction of VMT is normally expected to reduce delays for the remaining motor vehicles. However, since the roadway capacity is reduced by two lanes, the smaller VMT might be offset. The MAG model’s projected vehicle-hours of travel (VHT) indicate that the loss of capacity is a larger factor than the diversion of drivers from their cars. For the region, the addition of light rail is expected to increase VHT by 0.45 percent. For the corridor served by light rail, VHT are expected to increase by 1.23 percent. So even though fewer miles would be traveled, those trips would take longer if light rail is added to the traffic mix.

The expected increase in congestion from adding light rail is further illustrated by projected motor vehicle speeds. Under the “no build” option, speeds in the region are projected to average 22.4 miles per hour (MPH) by 2020. Under the “build” option, speeds are projected to average 22.3 MPH. Figures for the corridor to be served by light rail are similar. Under the “no build” option, speeds are projected to average 17.9 MPH. Under the “build” option, speeds are expected to average 17.7 MPH.

The effects are small, but the notion that building a light-rail track in the street will reduce future traffic congestion is confounded by these data.

Air Pollution

Although it may not be widely known, urban air quality has been improving over the last few decades despite a dramatic increase in VMT. Taking carbon monoxide as an example, in Phoenix, violations of the Environmental Protection Agency standards used to be common everyday events. Now violations are rare (figure 1.)

These gains were attained at a time when public transit never carried as much as 1 percent of the person-miles of travel in the region. Consequently, the bulk of the credit for any improvements in air quality must go to advances in automobiles and the fuels they use. Compared to automobiles built in the 1960s, cars today emit 97 percent less carbon monoxide.² With fleet turnover and existing employed technology, urban air quality should continue to improve despite an expected increase in vehicle-miles of travel. This, in fact, is what is projected in the Valley Metro environmental impact statement. According to that statement, regardless of whether light rail is built, future pollution levels are expected to decline. In Phoenix, air pollution is measured at a number of so-called “hot spots.” For the “build” option, pollution is expected to be lower at three sites and higher at eight sites than under the “no build” option. Overall, carbon-monoxide pollution is expected to be slightly higher under the “build” option.

Expectations for higher pollution as a result of adding light rail are confirmed by the statement’s acknowledgment that carbon-monoxide levels will increase, but not by enough to trigger any violations of EPA standards.³ This conclusion is consistent with the data showing projected increases in VHT if light rail is built.

Inasmuch as light-rail transit is often promoted as a means of improving air quality, the indication that it will actually increase pollution may strike many as counterintuitive. After all, aren’t we luring some people out of their cars? Don’t fewer cars mean less pollution? So far as it goes, the answer is yes. However, by placing the train tracks in the street, we reduce roadway capacity. The reduction in capacity more than offsets the reduction in numbers of vehicles using the roadway. The remaining vehicles take longer to travel through the narrower roadway. This leads to more fuel consumed and higher pollution.

Again, the effects are small, but the notion that building a light-rail track in the street will reduce air pollution, again, is confounded by these data.

Congestion Concerns

Concerns about the growth of motor-vehicle traffic and its impacts on air quality are warranted. We can’t expect to keep adding vehicles to an existing road network without severe reductions in travel speeds. Solutions to the demand for more mobility in the face of this growing crush of traffic are sorely needed.

Solutions, though, must be sensible options that do more good than harm. Given the data for the Phoenix case study, it would appear that one frequently suggested solution—adding light rail—is counterproductive. At best, the likely impacts would be minimal, leaving the problem of traffic congestion virtually untouched. Worse, though, is the prospect that adding in-street light rail will actually make traffic more congested than it would otherwise be.

Granted, Phoenix is only one city. Results might differ in other cities. However, given the relatively poor drawing power of public transit combined with the unavoidable loss of roadway capacity from in-street alignments, it seems probable that similar outcomes would be common in other cities.

The billions “invested” in money-losing light-rail systems have not made a significant contribution toward reducing traffic congestion or air pollution. Tax dollars have been wasted. We need more promising options—like opening markets to independent bus, jitney, and taxi operators.

Notes

1. “Central Phoenix/East Valley Light Rail Project: Final Environmental Impact Statement and Section 4(f) Evaluation,” Valley Metro, November 2002, www.valleymetro.org.
2. Joseph Bast, et al., Eco-Sanity (Lanham, Md.: Madison Books, 1994), p. 13.
3. “Central Phoenix/East Valley Light Rail Project,” pp. 4-49.

Urban transportation in America suffers from gross inefficiencies. The source of these inefficiencies is political intervention that pushes transportation policy away from cost-effective solutions and toward the distribution of benefits to favored groups—predominately transit managers and suppliers of transit inputs (that is, labor unions, manufacturers of transit equipment, and builders of transit facilities).

The authors estimate that, as currently operated, the costs of public transit exceed the benefits by $6 billion per year. The net negative results are evidenced by mostly empty buses and trains. The authors report that on average only 14 percent of bus seats and 18 percent of train seats are filled.

In contrast to the net loss from transit, highways appear to be contributing large net benefits. The authors estimate that on an annual basis, the benefits from urban highways exceed costs by more than $200 billion.

The authors’ recommendations for improving urban transportation efficiency are directly at odds with current government policy. Both federal and local governments have been steadily increasing subsidies to public transit in order to increase bus frequencies and in many cases to build new rail lines. The authors point out that 30 years of increasing subsidies have failed to lure urban travelers out of their cars. There is little to indicate that maintaining or increasing these subsidies will be any more successful in the future.

Instead of continuing the failed current policy of massive subsidies, the authors advocate privatization. As it now stands, public transit policy is more oriented toward division of “loot” than the efficient production of transportation service. Since customers supply only a small fraction of the total revenue, attention to customer needs is not a high priority. Under privatization, the incentives for transit operators would be shifted toward a more customer-friendly focus because revenues would depend directly on pleasing customers.

Instead of running largely empty buses up and down major streets, a privatized transit system would be drawn toward using smaller vehicles catering to the relatively short typical transit trip (which averages less than five miles). A model for the privatized transit of the future exists today in the “Queens Van Plan.” This is a privately operated transit service in New York City that serves mostly low-income neighborhoods. Despite an unsubsidized fare of only $1, the service operates at a profit. The owner would like to expand beyond the borough of Queens, but is presently barred from doing so by the city council. You see, the public transit system needs to hold on to a “captive” transit clientele lest their case for large extractions from taxpayers be undermined.

The authors also make short shrift of the argument that privatization would harm the low-income transit users who depend on current transit service. They write that the average income of bus commuters is $40,000 and that of rail commuters is $50,000. Further, they claim that transit routes serving minorities are typically less well funded than those that serve more influential political constituencies. The authors favor vouchers for low-income people over the current system.

The authors also advocate privatization and congestion pricing for highways. The already substantial benefits of urban highways could be improved by moving roads out of the socialist, government-owned- and-operated mode and into the commercial mode. Commercially oriented road operators would adapt strategies similar to those used by the phone company to better manage existing capacity and reduce the dead-weight loss of traffic congestion. Peak period road users would pay more. Off-peak users would pay less. The aggregate value of time saved by reducing traffic congestion would result in net benefits for society.

The book is brutally honest in its analysis of current transit performance and daring in its prescriptions for reform. The fact that it is published by the Brookings Institution, an ultra-mainstream think tank, should catch the attention of those prone to dismiss criticism of public transit as right-wing propaganda. It merits the thoughtful consideration of anyone interested in improving urban transportation.

John Semmens is an economist with the Laissez-Faire Institute in Chandler, Arizona.

The battle is over. The auto has won. Because it empowers the individual to go where he wants to go when he wants to go, the auto provides a freedom and quality of service that public transit systems cannot match. The author refutes all the key anti-automobile arguments. For example, in response to the claim that General Motors conspired to drive the streetcar out of business, Dunn points out that streetcars went out of business around the globe, not by any nefarious deeds of General Motors, but by the superior performance of the automobile. In Los Angeles the auto was embraced as a means of escape from the “corrupt” streetcar monopoly.

In response to the argument that the Interstate Highway Act and Highway Trust Fund gave autos an unfair advantage, Dunn points out that the federal highway trust fund is self-sustaining from taxes and fees levied on highway users. This stands in contrast to federal aid to transit in which users pay a minor share of the costs. Dunn compares transit’s and autos’ shares of passenger travel (1 and 99 percent respectively) with their shares of government expenditures (25 and 75 percent). Transit would seem to have the unfair advantage.

In response to the argument that American cities should imitate European cities, Dunn asserts that Europe is imitating America. Despite heavy gasoline taxes, huge subsidies for public transit, and more densely developed urban land use, auto ownership has been growing faster in Europe than in the United States.

Public transit has been declining for very good reasons. Foremost among them is that public transit’s attractiveness is inversely correlated to personal income. When people are poor, public transit may be the best transportation they can get. As people prosper, they want to move up to a higher quality of transportation. It is economic growth that dooms public transit to a dwindling share of urban travel. Short of driving the majority of urban populations into poverty, there is no public policy that is likely to revive public transit.

Dunn acknowledges that traffic congestion and air pollution are serious negative byproducts of the automobile. The cure, though, is not to waste billions of dollars on attempts to resuscitate moribund public transit systems in the vain hope that this will provide some relief. Instead, he recommends that public policy focus on more cost-effective solutions.

He calls his program “Auto Plus.” The key is to make auto transportation work more effectively and with fewer negative social impacts. Along those lines, he suggests electronic road pricing, technological fixes for vehicle emissions, and vouchers for the transit dependent. Transit agencies, rather than jealously protecting faltering bus and train monopolies, should become “mobility managers,” says Dunn. As such, transit officials would promote rather than suppress competition from “jitney vans.” And instead of attempting to hold on to the urban poor as a captive clientele, they would be supportive of ways to help the poor obtain cars.

There is one aspect of Dunn’s prescription that may cause some consternation among highway advocates. He recommends ending the “trust fund” concept. In fact, he goes even further by suggesting that higher taxes on cars and trucks could be a productive source of revenue for general government purposes. Let’s not turn efficient transportation into a cash cow for federal boondoggles elsewhere.

Whether one agrees with Dunn’s prescribed remedies or not, his emphasis on hardheaded realism is a better foundation for policy debate than the notions of those who wish that things were different, that people could be induced to give up their prized mobility, or that the clock could be turned back to a time when life was “simpler.”

John Semmens is an economist with the Laissez Faire Institute in Chandler, Arizona.

Driving America is a well-reasoned brief on behalf of the automobile. The car is the travel option of choice because it offers a fast, comfortable, convenient, and affordable way of getting where one wants to go. Nevertheless, there are those who would sacrifice this mobility on the environmental altar.

The crisis du jour is “global warming.” The assumption is that the planet is getting warmer than it should be because of the environmentally “unfriendly” activities of humans. The most unfriendly human activity, according to Vice President Al Gore, is driving a car. Even “clean burning” auto engines emit carbon dioxide (CO₂). CO₂ is a greenhouse gas that helps trap heat from the sun on the planet’s surface. We obviously need some global warming if life is to persist on the earth. The question is how much is enough? Environmentalists who have concluded that any more warming would be too much are seeking to reduce automobile emissions. But James D. Johnston, former General Motors vice president and a resident fellow at the American Enterprise Institute, contends that tightening emissions standards for automobiles is neither a necessary nor a cost-effective means of pursuing environmental goals.

One of the auto-emission programs he challenges is the Corporate Average Fuel Economy (CAFE) regulation. Initially the CAFE regulation was part of the Carter administration’s energy conservation program. More recently, it has been adapted to an anti-greenhouse-gas agenda. Promoting better fuel efficiency doesn’t sound like a bad idea—unless one considers the safety implications.

The main method by which vehicle manufacturers have complied with CAFE regulations has been to make cars smaller. Fuel has been conserved and emissions reduced. However, there has also been an increased risk to people in the cars. Each mile-per-gallon increase in fuel efficiency is correlated with a 3.9 percent increase in the fatality risk. This is because occupants of small cars are twice as likely to be killed in collisions as the occupants of large cars. Cars with wheelbase lengths of 114 inches or more have a 60 percent lower fatality rate than cars with wheelbases of 95 inches or less. To put this in perspective, the mandated air bag is estimated to reduce occupant fatality risk by 9 percent. Thus, the government’s current proposal to make all cars smaller will likely increase the number of traffic fatalities. If safety is really our top priority, should we be trying to prevent people from buying large vehicles?

Consider the CO₂ emissions issue from an order-of-magnitude perspective. Globally there are over 150 billion tons of CO₂ emitted per year. Of this total, human sources contribute about 7 billion tons (less than 5 percent). All the cars in the United States contribute about 280 million tons. Consequently, even if every car in America were permanently parked, annual global CO₂ emissions would be reduced by less than two-tenths of one percent. Obviously, it is unlikely that anything as drastic as a permanent ban on all auto travel will be enacted. So, the potential magnitude of impact from any politically feasible anti-auto measure would be extremely small.

The fact is, there is not much more room for environmental improvement to be had from efforts to mandate cleaner-burning engines, or restrictions on auto travel. Huge gains have already been achieved. Per-vehicle-mile carbon monoxide emissions are down 96 percent. Hydrocarbon emissions are down 97 percent. Nitrous oxide emissions are down 88 percent since the 1960s.

Rather than mandating new, lower standards, which may be infeasible or extremely costly, we need better enforcement of existing standards. The author reminds us that the worst 7 percent of emitters cause 50 percent of the pollution. Remedying this source of pollution through a mobile emission-testing program would be the most cost-effective way to make a significant reduction in vehicle-caused air pollution.

Johnston makes use of interesting historical statistics to illustrate that when it comes to pollution, the car is a substantial improvement over its predecessor. In 1900, horses in New York City “emitted” over 1,000 tons of manure and 70,000 gallons of urine per day. While these emissions are biodegradable, the health risks were considerably more immediate and pervasive than the risks posed by today’s automobile emissions.

The book is a well-reasoned and carefully documented answer to the critics of the automobile. Its flaws are minor, springing from a “choose the lesser evil philosophy,” which leads the author to support the “Partnership for a New Generation of Vehicles,” a government-business endeavor.

Johnston urges those who appreciate the car to take political action on its behalf. Regardless of whether one follows this prescription, he offers a wealth of valuable information and insight for those interested in transportation and the environment.

No one has labored longer than Gabriel Roth has in the pursuit of a more efficient transportation system. For over 40 years he has been analyzing problems and suggesting solutions. Most of this work has been in the form of shorter policy studies, conference presentations and papers, and magazine or journal articles. This book endeavors to present a more complete and comprehensive exposition of his views on how roads might be more effectively operated for the benefit of both users and the larger society.

The current methods of financing and operating roads are less than optimal. While there are “highway user taxes,” they are levied in ways that do not take full advantage of the commercial potential that “pricing” the roads offers. Highway user taxes do not vary with traffic demand. As a result they cannot serve to ration demand. Highway user taxes have an inconsistent relationship to the costs incurred to serve various users. As a result, users who impose high costs on the system are encouraged to demand more service than can be provided with existing resources. Investment decisions are similarly diverted from the optimum because they are not driven by the need to serve customers in order to earn a profit.

Mr. Roth’s solution to the deficiencies of the current public highway system is to “commercialize” the roads. He distinguishes this from “privatization” by allowing for public as well as private road corporations. His model for a commercialized road system is the telephone market. Each road corporation would have a defined territory within which it would operate as a business. As a starting point, he suggests that state highways would be incorporated into a single business within each state. County roads and city roads would also start out as geographically defined monopolies within their respective boundaries. Compared to a competitive “ideal,” these geographically circumscribed monopoly businesses might be prone to less than full efficient operating habits. Further, since Mr. Roth’s model would permit new entrants to the market, the source of potential competition should help reduce monopoly abuses. However, a more relevant standard of comparison is the current system. On this basis, Mr. Roth’s solution would likely be an improvement.

Mr. Roth’s basic requirements for a commercialized road system include the following elements:

1. The roads must have owners. As beneficiaries of the increased value of the asset, the owners will have strong incentives to nurture and improve the roads. This stands in contrast to the current system wherein the roads aren’t really owned by anyone. As a result the roads are alternately overbuilt and neglected.

2. The roads must be financially self-supporting. The only means we have of knowing whether resources are used wisely is if the customers willingly pay the full cost of their deployment and use. The current mixture of user and non-user taxes and cross subsidies undermines the wise deployment of resources.

3. The law must not discriminate between publicly owned and privately owned roads. If there are user taxes, privately operated roads must have access to a pro-rated share. In the current system, the users of privatized toll roads get no return on the gas taxes paid for fuel burned while driving on the toll road. To the contrary, the users of privatized toll roads are compelled to fund “free” public roads that may unfairly draw customers away from the toll road.

4. Revenues must accrue to those who earn them. That is, fees imposed on road users must be paid over to the road owners rather than being diverted to some other purpose (as federal highway user taxes have been diverted to “deficit reduction”).

5. Standards must be established to allow for the free flow of traffic from one road system to the next. The standards established by privately owned and operated railroads that permit the smooth transfer of freight cars from one corporation’s track to another’s demonstrate the market’s ability to handle this requirement.

Perhaps the key tool for promoting efficiency in a commercialized road system is the pricing of road access and use. Mr. Roth presents a comprehensive list of requirements that must be met if a road-pricing mechanism is to have an optimal impact on efficiency. Mr. Roth expects commercialization to result in a road system that is more efficient, more equitable, and safer. Given that the marketplace has usually produced better results than government has for all of these objectives, the probabilities are high that Mr. Roth is correct.

Even though we might have wished for a more radical solution (I myself have written a number of articles and papers advocating that public roads be sold to private operators), those wishing to be fully informed on the evolving issues of highway privatization can ill-afford to be ignorant of Mr. Roth’s work. This latest effort is a well argued and nicely detailed addition to his already impressive output on this issue.