A Bump In The Road

Why does everyone complain about government?

Take roads, for example. They’re either full of potholes or under repair. And the repairs always seem to come in late and over budget.

Source: Wikipedia

This is what economist Adam Smith calls an “agency problem.” People tend to look after their own goods more carefully than they care for someone else’s stuff. And with the government, it’s always body else’s stuff.

One way out of the pothole problem, is to privatize. Toll roads tend to be well-maintained at a reasonable cost. Why? The private company has its own money at risk and it works like a phone company: by maintaining private ownership under local regulation. The system isn’t perfect, but we find fewer potholes in the phone system than in our roadways.

But we won’t see toll charges on our phone bills based on GPS tracking of our driving any time soon. We could, though. It could mean better roads at lower costs. And that would be a good thing.


Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
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