Country Roads

Charleston's Post & Courier ran an article yesterday about those living in the poorest area of South Carolina. This passage caught my eye:

Times weren't always this bad. The town of Allendale, just three square miles wide, once boasted dozens of motels, restaurants and mom-and-pop shops that catered to the ebb and flow of Florida-bound tourists along U.S. Highway 301. The road threaded through Orangeburg, Bamberg and Allendale counties like a ribbon of prosperity.

Then came Interstate 95, about 35 miles away, which siphoned off thousands of travelers almost overnight. Many of the old motels, diners and gas stations on U.S. 301 now sit empty and in disrepair, the skeletal remains of their signs jutting up from the tall grass and weeds The road now seems like a worn belt, binding the region in poverty.

Whenever the government constructs a new highway, it is in effect subsidizing the location decisions of people and businesses by making the area around the road much more valuable than it otherwise would be. As the article--and, a friend reminded me once, the movie Cars--illustrates , this can have dramatic effects on people's livelihoods. Given these effects, how can it be decided when a new road is warranted?

Perhaps the simplest answer is to figure out if people will pay to use the road at a level sufficient to cover its costs. Adam Smith put it well over 225 years ago:

When high roads, bridges, canals, &c. are in this manner made and supported by the commerce which is carried on by means of them, they can be made only where that commerce requires them, and consequently where it is proper to make them.

If something--whether it be a new mp3 player, suitcase, theme park, movie, or whatever--is not thought to be commercially viable, this is a strong signal that the thing ought not be produced.  Odd that this useful test is not often used for the construction of roads.