Or the externalities are properly priced and the vast majority of the miles of transport are done by train, which would be cheaper if trucks had to pay for the road maintenance they cause. And cause less pollution (both in ton-miles and from reduced emissions during repaving). And the potatoes end up costing what they cost to get to you?
I'm not sure the potato subsidy is worth distorting the transport economics.
Trucks do “pay.” They move goods that are sold and taxed. Until subways start shipping things other than people, they can’t be considered the same as roads. A subway can move people around; roads also move significant goods around. Every single thing in a store has arrived by road for at least some portion of the journey. Farmers aren’t shipping carrots via tram.
I said trains, not subways. I said "majority of miles" not "to the store". The tax is the same on goods shipped by other methods, so you can't count it as somehow balancing out the economic distortions caused by subsidizing trucking infrastructure.
The problem is that non-truck solutions cost more relatively due to government intervention, messing up the market's ability to find more optimal solutions. This one is simple, it doesn't even require you to think about carbon taxes to do the math. It's direct costs, subsidies to a certain technology. Don't pick winners and losers, create an environment where capitalism can function and find the actual best solutions.
Charge trucks for damage they directly cause to roads. Simple.
A trucker can cut road damage 10x just by adding more axles. This saves you money. But they'll only do it if they save money too. If everyone has to pay for wear, then the truckers have a reason to make those upgrades.
It does matter though. If the cost of road wear was added to the products that caused them those products would become more expensive and sell less. Suddenly there's an incentive for Potato Inc. and friends to figure out how to transport such that there's less wear etc.
To me it matters a lot. Capitalism only works when the true costs of things are accurately reflected in their prices.
If the road maintenance cost of transporting the potatoes is priced into the potatoes, then the potato company might opt to transport the potatoes in a different (cheaper) way.
But if the road maintenance costs appear free or near-free to the potato company, they have no incentive to care about it. Also it makes drivers who don't eat potatoes subsidize the potato consumers.
> To me it matters a lot. Capitalism only works when the true costs of things are accurately reflected in their prices.
That's actually not true. Capitalism always works, no matter the problem. However, free markets don't account for externalities, and in some cases supply/demand constraints create unacceptable non-economic problems. Thus, to avoid the effects of non-economical problems then it's preferable to create economic incentives that reflect the non-economic constraints.
The price is included. Potatoes are sold and the proceeds taxed. Those taxes go to pay for roads. If we didn’t have to fix roads, taxes could be lower, resulting in higher profits for the potato farmer.
So in your model, road wear is priced into the costs of all goods, no? That's one way to do it, but the problem is that then a single potato logistics company has no incentive to use a (presumably more expensive) transport method that causes less road wear, because the benefits are spread evenly across everyone, and costs are borne entirely by the switching company, so nobody would switch. (unless you made some rule forcing everyone to switch, which is another way to do it)
If road taxes are directly tied to the things causing wear, then every company causing that wear has an incentive to find a transport method that causes less wear (assuming that the additional cost of that transport method is lower than the cost of the road wear - that's why some people argue that using markets is better than using rules; if you've properly priced the market, the market will balance between road and rail based on cost.)
That's why it's important to make sure that all externalities are directly tied into the cost of whatever is creating those externalities.
Or, if potatoes had to be shipped at market cost, potatoes from far away would be less competitive to potatoes grown closer.
Net result would be better prices for local farms, less road maintenance needed, no impact to the end consumer overall (less taxes to support less roads).
