So I hope everyone here has had introductory econ under their belts and knows that an externality doesn't mean that a market won't provide any of a good - it only means that given a particular definition of "optimal" a market won't provide the "optimal" amount of a good.
Why, then, do we get arguments like this from a professor of economics:
"If government failed to build highways to connect, say, Atlanta to
Pittsburgh, private firms almost certainly would. (It’s easy to collect
tolls from drivers who use highways.) And likewise for nearly any other
pair of cities in America. So in what way is any actual,
government-built highway necessary for any private entrepreneur’s
economic success? None — if (as is likely) private enterprise would have
done what government instead did by crowding out private efforts."
Private provision of infrastructure says nothing about the value of public provision, for the reasons I stated above.
But what in the world are we supposed to make of this?
Can I look at a private road (or a private just-about-anything-else) and say "if private firms failed to build highways to connect, say, Atlanta to Pittsburgh, the government almost certainly would. And likewise for nearly any other pair of cities in America. So in what way is any actual, firm-built highway necessary for any private entrepreneur's economic success?"
What an unhelpful way of talking about and thinking about infrastructure.
Saturday, August 18, 2012
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I thought exactly the same thing when I saw that post. Of *course* businesses would build roads so that they could conduct their business. But how exactly is that privately-funded and maintained road helpful to the average citizen, who certainly does not have the resources to build it on his or her own? I feel like Mr. Boudreaux (even more so than the rest of the Cafe Hayek crowd) is so enamored with the idea of libertarianism that he can't bring himself to find any kind of fault with its obvious conclusions.
ReplyDeleteDaniel, you realize that you can't actually make arguments go away by labeling them externalities instead of public goods, right? They're the same exact things with different scopes. If you solve the externality/public good problem with pricing, the problem simply does not exist.
ReplyDeleteI'm not sure what you mean. Why do you think I'm trying to make an argument "go away"? I don't think that's what I'm doing.
DeleteWell, I am making a very simple sort of response "go away". I guess I'm trying to make the simpleminded "you guys argue 'but who will build the roads'" response go away. Because the answer to that is "private firms and government or just private firms".
Other than that, I don't think I'm making an argument go away here. I'm just pointing out how dumb it is to say "look, if government didn't build it private firms would". Right. So? It's not a good argument Ryan.
Maybe you could elaborate more what you're getting at, though.
I consider myself libertarian leaning, but what the hell?
ReplyDeleteOf all the issues libertarian people could concern themselves with:
4(+) wars, bank bailouts, corporatism, NDAA, PATRIOT Act, $1 million licences to get a taxi, kids getting lemonade stands shut down for not having a fire extinguisher.
And the issue some libertarians wanna talk about?
Some magic utopia where infrastructure creates itself.
Priorities, eh?
Aziz, all those issues you discuss do not require one to be very "libertarian" in order to feel concerned about them.
DeleteSo if being libertarian involved merely having stance on such issues, then a very broad group of reasonable people could be considered libertarian - thus making "libertarian" a very trivial and diluted label. Libertarians are not the only ones who feel such and such way about those issues after all.
OTOH, you are quite right that "magic utopia where infrastructure creates itself" is not a high priority issue, it is precisely having a strong opinion on non-issues that distinguishes people who are merely somewhat concerned about liberty and people who strongly declare themselves libertarians.
One of the things I dislike about land rationing is that it undermines the provision of infrastructure.
ReplyDelete(1) It raises the cost of acquiring land.
(2) It encourages NIMBY and BANANA sentiments to protect (rising) property prices.
(3) It undermines the revenue incentive to build infrastructure.
But the history of infrastructure does not make a lot of sense unless one grasps the externalities involved.
Daniel,
ReplyDeleteSt. Louis tried this "experiment" in the mid-1800s. We would not permit a railroad bridge across the Mississippi. We already had a monopoly of private ferries that could extort rents from railroad companies to carry their cars (or goods) across the Mississippi.
I could go on but the facts matter not all at to idiots like Don and little to you
How is that St. Louis trying this "experiment"? Of course there won't be any private provision of public goods if the local government prohibits it. But that can hardly be blamed on market processes.
DeleteWell yes! Private superhighways were built all across America linking cities and many small towns from the 1880's onward, until they were forcibly expropiated and private road building ended by the federal goverenment in 1933. New Deal bureaucrats censored documents and textbooks to conceal this from future generations.
ReplyDeleteAlso, capitalists reachged the Moon with privately built spacecraft in 1913. Liberals have hidden this important news for decade.
Isn't it FUN to be conservative?
Early roads in America did tend to be privately built, though generally granted a monopoly on tolls from local government. Of course capitalists would not go to the moon, you generally need government to waste that kind of money.
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ReplyDeleteI Interesting post. I have been wondering about this issue,so thanks for posting.
ReplyDelete