Monday, August 20, 2012

Ryan Murphy is being slippery and non-sensical...

...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".


  1. this is too funny.

    Daniel finally has to face the fact that the right lies.

    BTW, it is hilarious to read libertarians arguing against public roads because they want to deny people the freedom to live other than in cities.

    Last, its is equally funny to see people lacking the ability to apply Coase. The biggest reason we have public roads is that it is the most efficient way to have good roads. Gov't is many times more efficient at providing roads and the same applies to airports, canals, piers and harbors.

    1. You need to read his post more closely. There was a lot that was bad in it, but he never said that anyone should be denied the freedom to live outside cities.

      He does mention Coase too, and that is a good argument for it. It's not strictly an argument for government roads, of course. Transaction costs can be reduced in large firms too. But it is a case for public provision.

      Try to comment without calling people liars, AH.

    2. Daniel

      This little thought exercise pretty much pitches the entire right wing/libertarian view on the dung heap of bad ideas.

      Given: pubic roads, airports, canals, harbors, river and harbor dredging, etc., promote more people having greater freedom to live and associate and speak with people with whom they want to live with, work, speak and associate than than private roads, airports, canals, harbors, river and harbor dredging.

      So which trumps: the freedoms of speech, association, and travel or [what]?

    3. Daniel,

      BTW, it is an urban myth that people leave cities because of "white flight," as shown by your defense of people who fly the Stars and Bars

    4. Daniel,

      I will stop calling people liars if it is okay with you that I write, something like:

      No matter how bad anything is that I may write, "I will never be as mendacious, deceitful, intellectually dishonest and a disgrace to all thinking people everywhere as is Niall Ferguson (or any other libertarian or right wing wacko about whom your write or comment)?

  2. Why do you think that private roads would lead to urban ghettoization? The usual argument from Urban Economics is that subsidized roads (at least in comparison to other forms of less-rich-biased mass transit) have contributed to "white flight" and ghettoization.

    What you are doing is not undermining CBA - you are undermining CBA as a guide to personal values, values that are ultimately at the root of desired public policy. [CBA doesn't necessarily spit out 'right-wing' conclusions either, which some people assume].

    Even Stephen Landsburg, who tries explicitly to turn CBA into a guide to policy and a moral yardstick is not completely comfortable with it, and argues that a "CBA that adjusts a little for income inequality."

    I disagree with you on an empirical point, your CBA: that the value of the roads' network externality is larger than the loss of the network externality formed by dense cities.

    Your point about worrying about ability to pay, rather than willingness to pay, is not an economist's point, it is a value judgment--which is fine, since there is no such thing as a policy proposal without a value judgment.

    1. All I'm saying is that poor people presumably would benefit more from transportation infrastructure than their ability to pay implies. I have nothing against private roads. You are right when it comes to private cars on roads, but of course there's more to public infrastructure than just roads and more than just cars on the roads. You are taking Ryan Murphy too seriously when he frames this as an argument about private roads.

      I agree on your assessment of CBA. I'm critiquing one way of using it, and I've always considered it valuable too.

      I don't understand what you mean by "the loss of the network externality formed by dense cities". Good agglomeration economies are one of the big benefits of good public infrastructure, right?

      re: "Your point about worrying about ability to pay, rather than willingness to pay, is not an economist's point, it is a value judgment--which is fine, since there is no such thing as a policy proposal without a value judgment."

      Well first I wouldn't say "rather than" willingness to pay. Willingness to pay is important as well and I'm not brushing that aside. But I feel like we grapple with willingness to pay a lot. We often wave our hands at ability to pay and that worries me. I think it is an economist's point insofar as I'm an economist delimiting what these models can and can't tell us.

    2. Should have worded it "rather than only willingness to pay."

      I assumed we were talking about the benefit of public roads - it's harder to evaluate 'infrastructure' as a single thing. Infrastructure is important in cities, of course, moreso than anywhere else. I get now what you mean by ghettoization, I thought you were making the claim that charging for roads would lead to ghettoization, which I found confusing. Infrastructure encompasses many things, some of which lead to vibrant cities, and some that negatively affect urbanization (though perhaps that factor is outweighed by others). Since the conversation started at roads, that's what I had in mind.


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