What Can Adam Smith Teach Us About Modern Transportation Policy?

April 29, 2015

I recently came across a very good passage in the Wealth of Nations about paying for public infrastructure. Adam Smith seems very keen to have government provide for public infrastructure like roads, bridges, and canals, but also keen to have those that make use of the infrastructure contribute to its upkeep. From page 724 of the Liberty Fund edition (or follow in Part III here):

It does not seem necessary that the expence of those public works should be defrayed from that public revenue, as it is commonly called, of which the collection and application are in most countries assigned to the executive power. The greater part of such public works may easily be so managed as to afford a particular revenue sufficient for defraying their own expence, without bringing any burden upon the general revenue of the society.

A highway, a bridge, a navigable canal, for example, may in most cases be both made and maintained by a small toll upon the carriages which make use of them: a harbour, by a moderate port-duty upon the tonnage of the shipping which load or unload in it. The coinage, another institution for facilitating commerce, in many countries, not only defrays its own expence, but affords a small revenue or seignorage to the sovereign. The post-office, another institution for the same purpose, over and above defraying its own expence, affords in almost all countries a very considerable revenue to the sovereign.

When the carriages which pass over a highway or a bridge, and the lighters which sail upon a navigable canal, pay toll in proportion to their weight or their tonnage, they pay for the maintenance of those public works exactly in proportion to the wear and tear which they occasion of them. It seems scarce possible to invent a more equitable way of maintaining such works.

Except for the part about the post office bringing in lots of revenue to the government, all of this holds true today. Unfortunately, gas taxes and tolls make up less than half of state and local road spending, meaning that we’re leaning on more damaging levies like corporate and individual income taxes to fund transportation projects and maintenance.

Real reform would align the costs of these services with the people who use them most.

More on transportation.

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