Privatizing Roads Solves the Problem of Road Closures
2024-01-01
While traveling recently, I was stuck in a terrible bout of traffic. Unbeknownst to me, West Virginia University’s fall graduation just ended, and I was caught in the middle of the seemingly endless stream of parents, relatives, and friends who were leaving the ceremony. To deal with this problem, the City of Morgantown closed down lanes and reserved them for exclusive use by graduation attendees. Though the city may have done a fine job handling traffic, this raises an interesting question: How would road closures be handled in a free market?
One thing is clear: the government would not have the authority to shut down roads. The example provided above may not be the worst case of government management, but one can easily think of others. Roads are shut down all the time for renovations.
A Message from Tom DiLorenzo: Help Us in Our Fight to Save Freedom in America
2023-12-29
Please help us in our fight to save freedom in America—and indeed the rest of the world—by making as generous a donation as you can.
I became a student of Austrian economics and libertarian philosophy by accident. In my first semester in college in 1972, I signed up for Principles of Microeconomics. In the classroom was a bookshelf that happened to have all the back issues of The Freeman published by the Foundation for Economic Education. I started reading some of the articles—by Ludwig von Mises, F.A. Hayek, Murray Rothbard, Henry Hazlitt, Gary North, Israel Kirzner, William Hutt, and other free-market writers—and I was hooked! I decided then that I wanted to be like these brave, highly educated, and articulate men who were so devoted to the cause of a free society.
Those were the old
Modern Portfolio Theory Is Mistaken: Diversification Is Not Investment
2023-12-27
According to modern portfolio theory (MPT), financial asset prices always fully reflect all available and relevant information, and any adjustment to new information is virtually instantaneous. Thus, asset prices respond only to the unexpected part of information since the expected portion is already embedded in prices.
For example, if the central bank raises interest rates by 0.5 percent, and if market participants anticipated this action, asset prices will reflect this expected increase prior to the central bank’s raising interest rates. Note that once the central bank lifts the interest rate by 0.5 percent, this increase will have no effect on asset prices since stock prices have already adjusted. However, should the central bank raise interest rates by 1 percent, rather than the 0.5