How to price infrastructure.
I received some interesting historical titbits from Andrew Odlyzko in relation to infrastructure pricing reform developments in the 18th and 19th centuries.
Britain in the early 18th century had an abominably poor system of roads. They were open to all (the “King’s Highway,” with the exceptions of toll bridges or toll ferries) and were supposed to be maintained by the local communities through which they passed, with the able-bodied men below a certain rank liable for a certain number of days of unpaid labour each year on these roads.
This system did not work too well, especially since the burden of this statute labour was unevenly distributed (it fell on communities on major highways most heavily), and it was perceived to benefit primarily merchants from larger cities and towns, as the local peasantry was for the most part quite content with the rutted roads they had (and often supported those as a barrier against competition).
In the 18th century there were several waves of road expansion. In these, local bodies would get charters from Parliament to borrow money, use it to improve a section of a highway, and charge tolls for the use of this highway. These were all non-profit trusts (although with the expected opportunities for small-scale graft and corruption), because closing the “King’s Highway” was a very sensitive issue.
Their tolls were set by their charter, to limit discrimination (although not to eliminate it completely, tolls differed depending on the nature of goods, so there was the equivalent of DPI, and were designed to put the heaviest burden on long-haul travellers and the rich, foot travellers would go free). This did produce a great improvement in travel, and gave rise to an extensive coaching business, with average speeds on some routes in the early 19th century reaching 10 mph, about as much as one could get out of horses.
But there were many complaints about inefficiencies and corruption in this system (Macadam’s main contribution was not so much to the technology of roads, as to the administration of the toll trusts), and especially about the hassles. So eventually this system was phased out. It was a Scotsman, William Pagan, who was a pioneer in arguing, in 1845, in “Road reform: a plan for abolishing turnpike tolls and statute labour …” that the country should move to a system of local taxes to pay for road maintenance (Pagan’s proposal was for taxing horses).
It appears that one of the key elements that made the transition from tolls to general local taxation for road maintenance acceptable was that railways took away from the turnpikes the long-haul traffic. Hence the main beneficiaries of the roads were again local communities, and so they became more willing to pay.
For NBN pricing issues see also:
Australia – National Broadband Network – Design and Deployment Strategies
Tagged in: Australia, Australia, New Zealand & South Pacific
