Monday, August 20, 2007

Toll roads and the public interest

Charlie has a good post pointing out that "Chad the Elder" waxed orgasmic about what he thought was a private toll road in Colorado, when of course, it's not. Just as good, maybe better from Spot's perspective, is that King Banaian took up the baton and ran with it:

While some seem to think a public discussion of spending priorities is a good idea, I think it would be at best a waste of time to contemplate where government's inability to rationally allocate resources and form capital would do the least harm, when private alternatives are present and proven.

Perhaps, Professor, you ought to consider a fact checker for Elder's work! You will recall, boys and girls, that "private bridges" is the same mantra that our nebbish Hamlet recommended on Sunday. At the end of Spot's post just linked, he promised to tell you about the construction of the Paris sewer system.

What could that possibly have to do with private toll roads and bridges, Spotty?

It has a lot to do with them, grasshopper. The key is the identification of the public interest. This story is about the Paris sewer system, but it probably applies to a lot of eighteenth and nineteenth century urban areas. Spot doesn't have a particularly good link for you, boys and girls; it seems most of the scholarly articles are tied up in proprietary databases. It is apparently Bonaparte who got things really rolling in starting to deal with what was an increasing public health concern, namely the pouring of raw sewage into the Seine. Even so, it was decades before anything approaching a comprehensive sewer system was in place.

The decision to construct a comprehensive sewer system was driven by the private market, wasn't it Spotty?

No, grasshopper, the "public" and especially the property owners (the landlords of the increasingly dense residential tenements) who would have to pay for the system preferred the private solution: continuing to throw excrement into the streets where it would run into the Seine. These were the right wingers of their time, and they had to have a sewer system shoved down their throats by Bonaparte, successor governments, and the French civil service. Why? Because the free market could not identify and coalesce around the public interest.

The idea that you can get public goods like clean water, or a safe transportation system, through private decision-making is a notion so loony that someday students will laugh when told about it in class. The purpose of a private market is to adjust and maximize individual interests, and there is nothing at all wrong with that. It is just the wrong tool for figuring out what's good for everybody. Sure, it seemed to the landlords better and cheaper to have their tenants throw their doo-doo in the streets, but when you got a cholera outbreak, it was hard on rent collections.

One thing that actors in private markets always do is try to avoid paying all the externalities of their conduct; that's the way to maximize profit. Social costs are externalities: public health and safety, for example. If safety is left to private hands, you get the Ford Pinto.

No comments: