Incentivizing Investment Roads through the Turnpike Era

Running head: INCENTIVIZING INVESTMENT: ROADS THROUGH THE TURNPIKE ERA 1
Incentivizing Investment: Roads through the Turnpike Era
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INCENTIVIZING INVESTMENT: ROADS THROUGH THE TURNPIKE ERA 2
Incentivizing Investment: Roads through the Turnpike Era
Summary
Turnpike roads are the ancestors of the modern day road network. The turnpikes were the
toll roads of the 17th, 18th and 19th centuries in the era before the creation of the County and
County Borough Councils by the reforms of the local government giving them the responsibility
of maintenance of the primary road network. The premiere American turnpike road was the state
enterprise licensed by the Virginia act of 1785 (Turnpike, 2017). The Lancaster Turnpike built in
1792 in Pennsylvania was the first privately owned turnpike in America. After that, the
Turnpikes became private investments, and their Turnpike companies led the development of the
Turnpikes in America. The construction of the Turnpikes proceeded rapidly.
Problem
The poor state of the road systems in America presented a significant problem to the
merchants that required better connections to the markets. Moreover, in the 1790s there was no
viable steamboat and financing canal construction presented significant challenges as well. The
highways thus remained the sole means of transport. Both the local and state governments had
limited budgets and small bureaucracies that often prevented considerable response by the public
sector (Turnpike, 2017). The Turnpikes which were innovations borne out of necessity played a
significant role in meeting the demands of the merchants at that time.
Significance of the problem
The fact that the capability of the government to adequately fund the construction and
maintenance of the highways presented a significant challenge to the merchants that needed
INCENTIVIZING INVESTMENT: ROADS THROUGH THE TURNPIKE ERA 3
proper means of transportation to the markets. Chartering of the first private turnpike in America
attracted the attention of retailers in other states through their recognition of its potential to direct
commerce away from their regions. The lawmakers thus began chartering turnpikes that saw a
significant increase in the number of highways across America.
Alternative actions
The turnpikes were funded and owned through private investments. Majority of the
investors considered the concept of the community activism and long term gains associated with
the development of the Turnpikes. The majority of investors were thus the locals often
positioned to enjoy the indirect benefits of the turnpikes. The vast majority of the shareholders of
the turnpikes were the land speculators, farmers, merchants or individuals, and firms interested in
commerce. A large number of the ordinary households held the highway stock.
The organizers and investors of the turnpikes ensured their financing through private
stock subscriptions and structured to pay dividends. The large construction costs associated with
the development of the turnpikes necessitated the establishment of appropriate ways of raising
funds. The proceeds from the sale of the stock provided the funds necessary for building the
facility that would then earn enough in toll receipts to cover the operating expenses.
Recommendation
The turnpike communities often faced a significant amount of free rider problem through
their exclusion from benefiting from the turnpikes if the dividends were not in the offing.
Overcoming the free rider problem is thus possible through embracing the civically minded
culture that encouraged investment for the long-term community gains.
INCENTIVIZING INVESTMENT: ROADS THROUGH THE TURNPIKE ERA 4
Promoting public mindedness amongst the people as well play a significant role in the creation
of the firm sense of community spirit that often contribute to the development of community
through funding the various amenities. The increased vibrancy of the community and
cooperation is crucial for its development through adequate funding of the necessary services.
Reference
Turnpike. (2017). Columbia Electronic Encyclopedia, 6th Edition, 1.
INCENTIVIZING INVESTMENT: ROADS THROUGH THE TURNPIKE ERA 5

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