> [Foldvary] says that traffic jams are caused by
 > government failure to act, and [he] says
 > they are caused by the market failing to be free.
 > Martin C. Tangora


I said in a free market, there is no periodic congestion,
but that can be the case also with governmental roads.
The owner of a private road has a profit incentive to charge at least 
enough to avoid periodic congestion.
When the government owns the road, it can do the same.
Periodic congestion is caused by government ownership AND
the absence of congestion pricing by the authorities.


 > Does "free market" include governmental imposition
 > of external costs?

No, the opposite.
The free market includes the prevention of external costs by 
internalizing them, such as with pollution charges and congestion tolls,
when transaction costs prevent private
parties from internalizing the costs as Coase described.

Fred Foldvary