Can roads be built without eminent domain?
In a post of mine called “Eminent domain ‘abuse?,’” I wrote that eminent domain “has no place in a free society” and that it would be practical to build roads, bridges, and power lines without calling on government to seize land by force of law.
A reader challenged my position, noting that a private contractor who tried to build a road without eminent domain could not obtain the land at a price that would allow a profit. The closer he got to completion, the commenter worried, the higher the price each landowner would charge for the last pieces of the puzzle.
Here’s the kind of scenario this comment suggests. Suppose the New Road Company wants to build a highway from Point A to Point B. It starts quietly buying up plots of land along the planned route. After a year or so, however, word leaks out that millions of dollars have been invested in this route. The planned route is apparent from the locations of the properties being bought. And it’s obvious that the entire investment will become worthless unless the company can acquire a one-acre parcel owned by Joe Lucky, whose land offers the only practical entryway to Point B. “Kind of in a bind, aren’t you?” Joe says when the company’s representative comes calling. “Sure, I’ll sell my land–for $100 million.” The project collapses in debt, and the road never gets built. The implication is that modern transportation would grind to a halt without government’s power of eminent domain to seize property at lower-than-market prices.
Okay, let’s come back to reality. Consider the fact that successful developers are not idiots. No businessman with this little planning ability would ever be trusted with the millions necessary for such a project. On a free market, a typical developer would ensure (before spending millions on purchases) his ability to acquire the entire right-of-way for a reasonable price. How? One approach would make use of option contracts. In an option contract, a landowner agrees to sell his parcel of property for $X, but only if the developer can reach agreements with other owners permitting acquisition of the entire right-of-way for a reasonable price (that is, a price that will allow a profit). What’s more, a smart developer would be working on one or more alternative routes, to encourage price competition among landowners. No single landowner would be able to jack up his asking price arbitrarily, because the developer would never put himself in a position where he had to pay a price so high that profit became impossible.
The idea that public roads, built by eminent domain, are the only practical option for modern transportation is a myth that should long ago have been shattered. But we are too complacent. We sit idly in stopped traffic on inadequate highways and curse the rush hour, never imagining there could be a better option than a government monopoly built on coercion. Of course, a free market does not guarantee that every developer will invest his money wisely. Nor does it preclude the existence of landowners who refuse to sell at any price. The point is that on a free market, such people could do nothing to prevent others from making the necessary transactions to get roads built.
Just imagine, in this age of email, Internet, and FedEx, if someone argued that the only practical means of communicating across the American continent is through the federal government’s postal monopoly. That person would be laughed out of town. It’s high time people understood that not only communication but transportation can flourish under a regime of property rights and freedom of contract.
Image: Wikimedia Commons