...but he's starting to get more lucid.
First, for the slippery part: he accused me of putting forward an argument that cost-benefit analysis to justify my view of things and that could justify nationalizing everything. That, my dear readers, is not a true statement. All I presented was hesitations about making claims about optimality that are always lurking in the background for me, and that don't lead me to any answer.
Then he changes course and just accuses me of saying things that make traditional cost-benefit analysis useless. This is a little strong, but closer to lucid. And I'm also already on record with that opinion. Between problems with ability to pay (why should marginal productivity in the labor market ration welfare?) and intersubjective utility comparisons, cost-benefit analysis is rather dicey. I wouldn't say it's useless. It's a good option in the absence of other good options that at the very least helps us organize our thoughts about it. But everyone should question the extent to which it can really nail down optimality, even as an approximation.
The solutions to the ability to pay problem are redistribtutional in nature, but that ultimately is going to distort all the factor markets where people earn income.
My concern with Don was:
1. He seemed to go down the road of juxtaposing government and the market, as if both don't provide goods with external benefits.
2. He made a really weak statement that assumed that juxtaposition and deserved to be pointed out as a really weak statement.
The rest of the second link, from Ryan, provides more details on the economic arguments for public roads.
UPDATE: My apologies. I was in a hurry to get to campus this morning so I recommended Ryan's list of economic arguments for public transportation without reading it in its entirety. I implied that it was more lucid than his comments on the blog here, which accused me of arguing for nationalizing everything. He is actually still spouting that nonsense farther down in the post. I apologize for missing that initially. He writes: "[quoting me:] “It’s very plausible that there are lots of people of lower means out
there whose benefits would exceed the toll but who really couldn’t pay
it five days a week to get to their job, particularly if it means
maintaining a car on top of it.” No, it’s not plausible, Daniel. Price
theory tells us that is implausible by definition – have you learned
price theory?" Yes, I have. Thanks. But we make up these things called "utility functions" and we rescale them monotonically at whim to avoid these tough questions. What Ryan could say reasonably here is that price theory tells us that given certain budget constraints an agent is going to choose a bundle of goods that maximizes their utility by consuming to the point where the ratio of the marginal benefits of those goods is equal to the ratio of the prices of those goods. What price theory does not tell us is that the benefit or utility enjoyed by a low income person is always going to be less than or equal to someone of greater means. So no, price theory doesn't tell us what Ryan is suggesting it tells us here. That's the whole problem of interpersonal utility comparisons and of taking the budget constraint as some kind of natural limit. The budget constraint is just the output of some other market. He continues: "If you are concerned about disproportionate effects on the
poor, you increase transfers to the poor when doing this. If you are
worried about them blowing that money, you give them transportation
vouchers." Right. I didn't specifically mention vouchers in the post, but I brought this up. He goes on: "To go from that to NATIONALIZE is ridiculous." I agree. That's why I didn't go there. Why does Ryan keep repeating this? Unless you just mean public provision is nationalization. But that seems like a misuse of the word "nationalization".
So there is a little more nonsensicality in Ryan's post. But he also neglects one of the most important externality arguments for infrastructure: network externalities and agglomeration. He mentions rural households as well as who I'm trying to defend, and that's actually not what I had in mind at all. I was thinking of more of urban ghettoization.
This usually doesn't happen with Ryan - it usually happens with less thoughtful libertarians than him. How can I write a post that isn't anti-private-provision of infrastructure at all and have him come out of it thinking I'm promoting nationalization???
What I'm promoting is skepticism when people use CBA or neoclassical micro type pronouncements of optimality for a firm conclusion. These things are much better at explaining behavior and the emergence of social order out of diverse and conflicting goals than they are at telling us what is "optimal".
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