A Street Light Problem

Ho Say Peng

'Can I be privatized?'

This is often not an issue of principle but an issue of practicality. On one hand, camp P thinks that street lights should be provided and maintained by the private sector. On the other hand, Camp G thinks that street lights should be provided and maintained by the government.

Camp P is likely to be consist of free marketeers or capitalists, who argue that street lights are most efficiently managed by private companies. Although Camp P is capitalistic, it does not imply that Camp G is socialistic; but Camp G is no capitalist either. Camp G is not against privatization per se. The likelihood is that Camp G sees itself as being pragmatic. They cite the difficult technicalities of privately-managed street lights: How would people pay? If person A does not pay, does it mean person B, C, D, etc are deprived of street lights? They are unable to answer these questions; so they conclude that only government can provide street lights.

To the layperson with no specialized knowledge in the business of street lights, it is understandable that to conceive the idea of how a private company is to manage street lights is a daunting, and perhaps impossible, task. Yet no such specialized knowledge is necessary to see that it can be done. What is needed is a little imagination.

Let me offer a little of my imagination. A street lamp is a raised source of light on the edge of a road. Why should there be a private company just to exclusively manage street lights? Does it not stand to reason that if there is a private company managing the road, it will provide street lights as well?

On this point, Camp G would argue that the same problem concerning private street lights applies to private roads as well: namely, how would people pay? And if person A does not pay, does it mean person B, C, D, etc are deprived of roads?

What Camp G is thinking of is collective payment. They think that collective payment, through government taxation, is the only way to upkeep a road. Is individual payment impossible? No, it is not.

There is such a thing called toll road. Payments can now be made electronically and not manually. Further arguments against private roads such as overcharging and monopolies can be easily countered. (I could, for example, cite the electronics industry, which is completely privatized. But do you see the prices of electronics rising or declining every year? And isn’t the electronics industry the most competitive of all industries?)

The point is that private roads are possible. In Sweden and California, there exists roads which are privately managed (although they are not privately owned; the companies are operating the roads under governmental contract). In 2001, the Swedish government conducted an evaluation and found out that “private ownership can reduce the cost of maintaining roads to less than half the cost of government provided roads and significantly increase the kilometers which receive regular maintenance.” The Californian model of high volume roads and the Swedish model of low volume roads are microcosms of the vast improvement that can be achieved with the private ownership of roads.

There are two reasons why private roads will be better: (1) Private companies have an incentive–the profit motive–to benefit their consumers by being more efficient; whereas the government, which derives its funds from taxation, does not have an incentive to do so, or perhaps does not have as much incentive as the private companies do; (2) government has no accurate means to do the necessary economic calculation to determine the cost-benefit ratio of such projects, unlike private companies which can do so through the profit-and-loss mechanism. The same principle applies to everything privately- and publicly-run.

I hope I have provoked Camp G into re-thinking some of their assumptions. To paraphrase Bastiat, do not merely look at “that which is seen” and try to imagine “that which is not seen.” And you will come to realize that what you are missing out are the possibilities of better roads–with street lights of course.