Reducing Demand By Increasing Taxes: The Non-Logic of Road Socialism

When entrepreneurs and business owners and managers face difficulties in the market, it is rare for them to throw in the towel, blame the customer, increase prices and hope that the problem goes away. A business that does not live up to the expectations of the customer becomes marginalized and on the long run goes out of business. Because a business must survive on free exchange, it has to continually overcome the challenge of providing goods and services. Some ways to do that, for example, include continually investing in newer and better technology or finding alternate production processes. The state, however, does the exact opposite of what the market would usually do. It resorts to rationing and often deliberately increases prices to try to lower the demand for a good or service that it is "offering." Road socialism is no different. The National Surface Transportation Policy and Revenue Study Commission is proposing that the federal government should raise gas taxes by 40 cents per gallon. The purpose is to use the additional revenue to improve highways and bridges but also to ease congestion.Citing the recent bridge collapse tragedy in Minneapolis, the report refers to government infrastructure as "no longer acceptable." Yet because the state has displaced and replaced road entrepreneurs and finances everything through taxation, consumers are unable to express their preference. Interestingly enough, the report recognizes that demand is very high (or maybe too high; it wants to reduce demand) but that the conditions of the roads and bridges are no longer acceptable. This is the typical consequence of state intervention, for otherwise how is it possible to have a situation where a good or service offered is of very poor quality and at the same time in high demand? Thus, the bureaucratic solution is never to deregulate or to privatize/de-monopolize but to create other interventions such as higher gas taxes in this case.

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