The upside of fixing roads and bridges

The bidding to be the next “infrastructure president” has kicked into high gear.

Sadly, but perhaps predictably, there is opposition. Some question the need for road and bridge repair, especially supported by the federal government. Others claim that while spending is good in theory, the United States’ high infrastructure costs mean we should hold off until those costs can be brought down.

But the automatic pooh-poohing of infrastructure spending does us a disservice. Things like transportation networks aren’t like other forms of capital, because they have elements of what economists consider a public good. This is something that the private sector, left to its own devices, can’t or won’t provide enough of. There’s almost certainly a reason for that.

First, government can solve the coordination problem involved in building a road across multiple jurisdictions.

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Second, even with tolls, roads find it difficult to change pricing according to usage – a busier road would have a higher toll – a challenge the free market has yet to meet.

Finally, transportation networks, and other infrastructure like water and electricity, allow businesses to cluster together. Those benefits also can’t be captured by private companies, which is one reason we almost never see cities where the roads are privately owned.

So for all these reasons, infrastructure is often – though not completely – a job for government.

In a recent article, I discussed how to analyze the costs and benefits of infrastructure spending. One potential cost comes from the fact that building or fixing roads and bridges requires using resources that private companies could otherwise use. That’s called “crowding out.” But one big benefit of infrastructure spending is that after it’s finished, private investment can be “crowded in,” due to the complementarity between government capital and private capital.

As for the U.S.’s outsized infrastructure costs, these are very real, and they’re a huge problem. But bringing down costs is a difficult, long-term task. If the U.S. waits until costs decline to repair its crumbling roads and bridges, the cost of maintenance will rise due to the increased physical degradation, canceling out much of whatever cost savings can be made by improving the system.

So the people who are leaping to attack infrastructure spending bills should think again. The benefits are greater than they realize. •

Noah Smith is a Bloomberg View columnist.

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