The free market
Richard Carnes
Radford Neal writes:
>The postings on this subject seem to me to be singularly unenlightening.
This posting is guaranteed to be a source of enlightenment, or your
money will be cheerfully refunded.
> 1) Limited information is an essential characteristic of the real world.
> Saying the free market is flawed because not everyone knows everything
> is silly.
But it is not silly to point out that, because of unequally
distributed information, government intervention can outperform the
free market in some situations. I'll try to explain how this
happens.
First, I will let George Akerlof explain the point (from his article
in *Quarterly J Econ* 84(3), 1970):
There are many markets in which buyers use some market statistic to
judge the quality of prospective purchases. In this case there is
incentive for sellers to market poor quality merchandise, since the
returns for good quality accrue mainly to the entire group whose
statistic is affected rather than to the individual seller
[multi-person Prisoner's Dilemma -- RC]. As a result there tends to
be a reduction in the average quality of goods and also in the size
of the market. It should also be perceived that in these markets
social and private returns differ, and therefore, in some cases,
governmental intervention may increase the welfare of all parties.
Or private institutions [guarantees, brand-name goods, chains] may
arise to take advantage of the potential increases in welfare which
can accrue to all parties. By nature, however, these institutions
are nonatomistic, and therefore concentrations of power -- with ill
consequences of their own -- can develop.
In order to explain how this happens, we construct a model, using the
automobile market as a convenient illustration. NB: This is not
supposed to be a realistic description of how the auto market works.
A MODEL shows what will happen *given a particular set of
assumptions*. So:
Let there be just four kinds of cars: new and used cars, and good
cars and lemons. A new car is either good or a lemon, and the same
is true of used cars. Individual buyers are assumed to know the
probability q that the new car they buy is a good car; the
probability it is a lemon is (1 - q). By assumption they don't know
if a particular new car is good; they only know the proportion of
good cars produced, which of course is q.
But after owning a car for a length of time, the owner can assign a
new, more accurate probability to the event that his car is a lemon.
So the owners of used cars know more about the quality of their cars
than potential buyers. We are assuming as a hypothesis that it is
impossible for a buyer to tell whether a given car is good or a
lemon; therefore good and bad used cars must sell at the same price.
Now if a used car had the same valuation as a new car, it would be
advantageous for the owner of a probable lemon to trade it at the
price of a new car, and buy a new car, at a higher probability q of
being good than the car he just sold. So the market price of used
cars will be lower than that of new cars, and the owner of a *good*
used car will be locked in: not only can he not receive the "true"
value of his car (what he could get for it if buyers knew its
quality), but he cannot even obtain the expected value of a new car.
Thus we have a modified version of Gresham's law. Most cars traded
will be lemons, and good cars may not be traded at all. Bad cars
drive out the good because they sell at the same price, because a
buyer, by hypothesis, has no way of telling the difference between
good cars and lemons.
So that is the first model. Akerlof goes on to show that worse
things can happen when we assume that there are different grades of
quality, not just good/bad. In this case it is possible to have the
bad driving out the third-rate driving out the second-rate driving
out the first-rate, so that eventually no goods will be traded at any
price level. Utility theory is used to derive this result.
Now how do these models pertain to the real world? One application
is to insurance. People over 65 have great difficulty in buying
medical insurance. Why doesn't the price rise to match the risk?
As the price level rises the people who insure themselves will be
those who are increasingly certain they will need the insurance; it
is easier for the applicant to assess the risks involved than the
insurance company. So the average medical condition of applicants
deteriorates as the price level rises, so that insurance sales may
not take place at any price; just as the average quality of used cars
supplied fell with a corresponding fall in the price level. As an
insurance textbook puts it:
Generally speaking policies are not available at ages materially
greater than 65.... The term premiums are too high for any but the
most pessimistic (which is to say the least healthy) insureds to find
attractive. [O.D. Dickerson, *Health Insurance*]
The principle at work here is called "adverse selection," and is
potentially present in all lines of insurance. Akerlof again:
This adds one major argument in favor of medicare [since insurance
companies must screen their applicants, especially those who seek
insurance on their own initiative -- insurance is not a commodity
available for sale to all buyers]. On a cost benefit basis medicare
may pay off: for it is quite possible that every individual in the
market would be willing to pay the expected cost of his medicare and
buy insurance, yet no insurance company can afford to sell him a
policy -- for at any price it will attract too many "lemons." The
welfare economics of medicare, in this view, is *exactly* analogous
to the usual classroom argument for public expenditure on roads.
The same argument may apply to Social Security, conceived as a form
of poverty insurance: the private sector would not provide it, even
though both buyers and sellers would be better off with it, by
free-market criteria.
Another real-world application concerns the employment of minorities.
Contrary to conservative dogma, the motive of profit maximization may
lead employers to refuse to hire members of minorities for certain
jobs, since ethnic group may serve as a good statistic for the
applicant's quality of education and general job capabilities. An
employer may make a rational decision not to hire any blacks, say,
for responsible positions: it may be difficult to distinguish
those with good qualifications from those with poor qualifications
because many of them were educated in inner-city schools whose
certification of students' abilities is deemed unreliable, so that
good grades convey only limited information about job applicants'
abilities. As George Stigler wrote, "in a regime of ignorance Enrico
Fermi would have been a gardener, Von Neumann a checkout clerk at a
drugstore." The rewards for good work in slum schools tend to accrue
to the group as a whole, raising its average quality, rather than to
the individual. So this is an argument for affirmative action that I
can only sketch here: at least in some circumstances, it can
*increase* the efficiency of the job market, precisely because
information is unequally distributed.
Some other applications of the lemons model:
Dishonesty in business is a serious problem in underdeveloped
countries. Our model gives a possible structure to this statement
[and permits us to evaluate the costs of dishonesty]....
Credit markets in underdeveloped countries often strongly reflect the
operation of the Lemons Principle....
[An example] ... concerns the extortionate rates which the local
moneylender charges his clients. In India these high rates of
interest have been the leading factor in landlessness. [The credit
market is similar to the insurance market.]
Various institutions can arise to reduce quality uncertainty:
guarantees, brand-names, chains (the Howard Johnson's on the
interstate provides a better hamburger than the *average* local
restaurant), and licensing, degrees, and even the Nobel Prize.
Akerlof points out the importance of *trust* in economic
transactions. Informal unwritten guarantees are preconditions for
production and trade. Business will suffer where these guarantees
are indefinite or lacking: the lemons tend to drive out the plums.
I'll try to elaborate on these points and respond to comments when I
have time, which may be very soon indeed, possibly within six months.
--
Richard Carnes, ihnp4!gargoyle!carnes
Radford Neal
> Radford Neal writes:
>
> >The postings on this subject seem to me to be singularly unenlightening.
>
> This posting is guaranteed to be a source of enlightenment, or your
> money will be cheerfully refunded.
>
> > 1) Limited information is an essential characteristic of the real world.
> > Saying the free market is flawed because not everyone knows everything
> > is silly.
>
> But it is not silly to point out that, because of unequally
> distributed information, government intervention can outperform the
> free market in some situations. I'll try to explain how this
> happens.
As the following quote admits, you don't in fact explain how government
intervention is necessary:
> First, I will let George Akerlof explain the point (from his article
> in *Quarterly J Econ* 84(3), 1970):
>
> There are many markets in which buyers use some market statistic to
> judge the quality of prospective purchases. In this case there is
> incentive for sellers to market poor quality merchandise, since the
> returns for good quality accrue mainly to the entire group whose
> statistic is affected rather than to the individual seller
> [multi-person Prisoner's Dilemma -- RC]. As a result there tends to
> be a reduction in the average quality of goods and also in the size
> of the market. It should also be perceived that in these markets
> social and private returns differ, and therefore, in some cases,
> governmental intervention may increase the welfare of all parties.
NOTE THE FOLLOWING:
> Or private institutions [guarantees, brand-name goods, chains] may
> arise to take advantage of the potential increases in welfare which
> can accrue to all parties. By nature, however, these institutions
> are nonatomistic, and therefore concentrations of power -- with ill
> consequences of their own -- can develop.
So your own authority says that the market can provide these benefits
also, but that this would be bad for other reasons. What he means by
"nonatomistic" and why he thinks any concentrations of "power" which
the market would develop are worse than concentrations in governments
is unclear from this quote, so I won't attempt a refutation at this time.
> Richard Carnes, ihnp4!gargoyle!carnes
Radford Neal
Frank Adams
>> Or private institutions [guarantees, brand-name goods, chains] may
>> arise to take advantage of the potential increases in welfare which
>> can accrue to all parties. By nature, however, these institutions
>> are nonatomistic, and therefore concentrations of power -- with ill
>> consequences of their own -- can develop.
>
>So your own authority says that the market can provide these benefits
>also, but that this would be bad for other reasons. What he means by
>"nonatomistic" and why he thinks any concentrations of "power" which
>the market would develop are worse than concentrations in governments
>is unclear from this quote, so I won't attempt a refutation at this time.
The problem is not that such concentrations are *worse* than governments;
it is that they may become *indistinguishable* from governments. Look at
the medieval guilds.
Also, he is not claiming that government is *always* the best solution to
such problems, only that it *sometimes* is.
Frank Adams ihpn4!philabs!pwa-b!mmintl!franka
Multimate International 52 Oakland Ave North E. Hartford, CT 06108
Robert A. Weiler
Keywords:
In article <8...@mmintl.UUCP> fra...@mmintl.UUCP (Frank Adams) writes:
{ another discussion about the market deleted }
>
>Also, he is not claiming that government is *always* the best solution to
>such problems, only that it *sometimes* is.
>
>Frank Adams ihpn4!philabs!pwa-b!mmintl!franka
>Multimate International 52 Oakland Ave North E. Hartford, CT 06108
Here is situation in which a believe government can be a solution to a
problem. I have heard on 2 TV programs ( 'Adam Smith's Money World' and
'Innovation') that a successful drug is NOT a cure or a vaccine, it is
a treatment. In other words, it is more profitable to create a drug
which allows patients to live with their condition than one which prevents
or permanently remedies it with few applications. This seems intuitively
clear. However, I submit it is in the best interest of the overwhelming
majority of the citizens that cures and vaccines be invented. Therefore,
this seems to me to be an appropriate arena for government.
Radford Neal
> problem. I have heard on 2 TV programs ( 'Adam Smith's Money World' and
> 'Innovation') that a successful drug is NOT a cure or a vaccine, it is
> a treatment. In other words, it is more profitable to create a drug
> which allows patients to live with their condition than one which prevents
> or permanently remedies it with few applications. This seems intuitively
Not clear to me. I would have thought a drug company could charge just as much
for a one-time cure as they would have made out of years of treatment. It
seems logical for the patient to pay this much. As the inventor, the drug
company presumably has a patent on the drug and hence the monoply power to
charge this much. So did the programs explain why they don't actually
manage to make as much money from cures?
Radford Neal
Michael Sykora
>. . . In other words, it is more profitable to create a drug
>which allows patients to live with their condition than one which prevents
>or permanently remedies it with few applications. This seems intuitively
>clear.
More profitable for which companies and individuals? More profitable when?
The profitability of inventing a cure as opposed to that of inventing a
treatment depends on many factors: the relative expense of each, the
probability of success of each, whether or not a cure has already been
invented (in which case, if the cure is not very expensive, development
of a treatment would probably not be profitable), etc.
If people want a cure more than a treatment, there will be a profit
in it for somebody, though perhaps, for a company that manufactures/
markets the treatment, not a net profit.
> However, I submit it is in the best interest of the overwhelming
>majority of the citizens that cures and vaccines be invented.
That depends on the costs of development, production of the cure/vaccine
and on how happpy people are with the treatment. In many situations,
people would rather continue treatment than go into deep debt to obtain
the cure/vaccine. It also depends on how suceptible to the disease
people perceive themselves to be.
>Therefore,
>this seems to me to be an appropriate arena for government.
What about the question of how competent government is likely to be in
dealing with the problem, and how much it will cost?
Michael Sykora
n...@inmet.uucp
>/* Written 10:48 am Dec 12, 1985 by bob@pedsgd in inmet:net.politics.t */
>...
>Here is situation in which a believe government can be a solution to a
>problem. I have heard on 2 TV programs ( 'Adam Smith's Money World' and
>'Innovation') that a successful drug is NOT a cure or a vaccine, it is
>which allows patients to live with their condition than one which prevents
>or permanently remedies it with few applications. This seems intuitively
>majority of the citizens that cures and vaccines be invented. Therefore,
>this seems to me to be an appropriate arena for government.
I disagree: it seems to me that here is a case where the "prisoner's
dilemma" situation works in the public interest: if there are two
or more outfits with the technology to come up with a cure who have
been providing a treatment, then either outfit can better its competitive
situation by coming out with a cure first and screwing the other outfit
for its own competitive advantage.
This is particularly obvious in the case of a vaccine.
It's also worth worrying about the effects of government's entry
into the arena. Precisely how should it be established? Offer
a prize for a cure? Threaten to kill people if they don't come up
with a cure? Give out research grants to folks who say they're
working in an area that might result in a cure? This last is the
way these things are accomplished now, but it's not clear to me
that this works better than the competition, and it strikes
me as likely to reward the folks who are best at dealing with
governments rather than the folks who are best at research
results (conceded that one is not entirely independent from the
other).
That a treatment is more "successful" than a cure doesn't mean that
people can afford to offer it instead of a cure.
Further, that government intervenes in the medical area doesn't mean
that it will intervene on the side of a cure: One case in point where
the government has interfered on the side of TREATMENT rather than
cure is dialysis -- Reason magazine once ran a pretty interesting article
by someone who'd been cured (by transplant) of kidney failure about
the "horrors of a well-intentioned program". The author argues that
the transplant costs the patient about as much as a year of dialysis
to provide, but because of government incentives, doctors have a
financial interest in retaining dialysis patients -- there's more
profit in dialysis than in transplantation -- so that the alternative
is not emphasized.
(I could be wrong on the "one year dialysis cost = one kidney transplant
cost" identity as I'm working from memory).
As I've argued before: just because the government in theory (or any
beneficent, disinterested, arms-bearing force) could "solve" this sort
of problem doesn't mean that the historical outcome will be a solution.
A powerful government bears all our own imperfections (in the
transplant case, probably sloth, greed, and ignorance) magnified.
ja...@inmet.uucp
[n...@inmet.UUCP]
>As I've argued before: just because the government in theory (or any
>beneficent, disinterested, arms-bearing force) could "solve" this sort
>of problem doesn't mean that the historical outcome will be a solution.
>A powerful government bears all our own imperfections (in the
>transplant case, probably sloth, greed, and ignorance) magnified.
This appears to be the proper generic rebuttal to *any* statist
claims in the fields of health, education, welfare or the economy -
in all areas, in fact, except defence and law-and-order.
The reason these areas are different is that here the government,
in protecting its own prerogatives (which all organizations tend to
do), tends to defend the citizen. The same is true of any mafia godfather.
Historically, libertarian societies (e.g., communities of states)
have fallen through internal and external strife.
This is the problem for anarcholibertarianism.
The problem for minarchism is that governments, given enough
power in some areas, tend to extend it - especially in cases
where momentarily their interference is, or seems, beneficial.
Most of present power of governments was acquired in emergencies,
then retained.
Stanley Friesen
>
>The reason these areas are different is that here the government,
>in protecting its own prerogatives (which all organizations tend to
>do), tends to defend the citizen. The same is true of any mafia godfather.
Indeed, that is why, in the absence of any government, the Mob
or its equivalent tends to *become* the government! It has happened in
th past: that is a large part of how feudalism developed in Medieval
Europe!
--
Sarima (Stanley Friesen)
UUCP: {ttidca|ihnp4|sdcrdcf|quad1|nrcvax|bellcore|logico}!psivax!friesen
ARPA: ttidca!psivax!fri...@rand-unix.arpa
Frank Adams
>>beneficent, disinterested, arms-bearing force) could "solve" this sort
>>of problem doesn't mean that the historical outcome will be a solution.
>>A powerful government bears all our own imperfections (in the
>>transplant case, probably sloth, greed, and ignorance) magnified.
>
>This appears to be the proper generic rebuttal to *any* statist
>claims in the fields of health, education, welfare or the economy -
>in all areas, in fact, except defence and law-and-order.
>
>The reason these areas are different is that here the government,
>in protecting its own prerogatives (which all organizations tend to
>do), tends to defend the citizen. The same is true of any mafia godfather.
And the proper response to this generic rebuttal is to note that there
are many areas where the government has done a great deal of good.
Without the power of eminent domain, we would all be much poorer. Public
road-building has done a great deal of good. You may argue that private
roads could have done as well, but that is an unproven assumption. In
fact, public roadbuilding took place because of a recognized need for
the roads, and a perceived inability of the private sector to provide
them. The libertarian proposal is to build toll roads. But for local
roads, the cost of collecting tolls probably exceeds the cost of building
and maintaining the roads.
ja...@inmet.uucp
[Frank Adams ihpn4!philabs!pwa-b!mmintl!franka]
>In article <2820...@inmet.UUCP> ja...@inmet.UUCP writes:
>>>>As I've argued before: just because the government in theory (or any
>>>>beneficent, disinterested, arms-bearing force) could "solve" this sort
>>>>of problem doesn't mean that the historical outcome will be a solution.
>>>>A powerful government bears all our own imperfections (in the
>>>>transplant case, probably sloth, greed, and ignorance) magnified.
>>This appears to be the proper generic rebuttal to *any* statist
>>claims in the fields of health, education, welfare or the economy -
>>in all areas, in fact, except defence and law-and-order.
>And the proper response to this generic rebuttal is to note that there
>are many areas where the government has done a great deal of good.
>Without the power of eminent domain, we would all be much poorer. Public
>road-building has done a great deal of good. You may argue that private
>roads could have done as well, but that is an unproven assumption. In
>fact, public roadbuilding took place because of a recognized need for
>the roads, and a perceived inability of the private sector to provide
>them. The libertarian proposal is to build toll roads. But for local
>roads, the cost of collecting tolls probably exceeds the cost of building
>and maintaining the roads.
The proper way to test these assertions is by controlled experi-
ment: two comparable zones in one of which government exercises
eminent domain and builds roads and in the other collects less
taxes. Elsewhere you made a rather sweeping statement that so-
cial experimentation is dangerous and I tried to draw a distinc-
tion between proper experimentation, relatively safe and abso-
lutely necessary, and rash wholesale innovation, almost univer-
sally harmful. I offer the above (tentatively abolishing cer-
tain government functions in an area in exchange for a tax re-
lief) as another example of the proper, harmless kind of experiment.
It is akin to free enterprise zones - which, by the way, have been
*tested* on a state basis, in 20 states, 1300 zones, and ap-
parently are a great success. That they are still stalled in
Washington seems inexplicable. No one gives *reasons*; in fact,
they are all *for* it; Senate passed it twice; but the House Ways
and Means (under Danny Call-me-Rosty) does not let it out
for a vote. Democratic process, you know. I only hope someone,
left or right, makes it a BIG election issue for '86.
But back to the roads.
Until the experiment has been made, on whom is the burden of proof?
I would claim, the advocates of government control and coercion.
Since you approve, in principle, of a sunset law - it would seem
that you agree. But then your sentence above :
>You may argue that private
>roads could have done as well, but that is an unproven assumption.
should read:
You may argue that private
roads could have done no better, but that is an unproven assumption.
Jan Wasilewsky
Michael Sykora
>Without the power of eminent domain, we would all be much poorer. Public
>road-building has done a great deal of good. You may argue that private
>roads could have done as well, but that is an unproven assumption.
We must not consider whether some good came out of government policies,
but whether net good came out of them. If that is what you are saying,
then clearly this is an unproiven assumption.
>In
>fact, public roadbuilding took place because of a recognized need for
>the roads, and a perceived inability of the private sector to provide
>them.
How in the world can that statement be justified? Who recognized the
need? Politicians? Politically well-connected road builders? You may
indeed be correct, but such an assumption needs justification, particularly
in light of the recent Westway fiasco in New York City.
>The libertarian proposal is to build toll roads. But for local
>roads, the cost of collecting tolls probably exceeds the cost of building
>and maintaining the roads.
If this is true, the local populace would likely contribute to have roads
paved, unless, of course, they didn't want them. This would probably
keep property values down, though.
Incidentally, "electronic road-pricing" technology is becoming cheaper, and
Hong Kong is planning to implement an ERP system soon. (There was an article
about private roads including a note about this in the latest issue of the
National Taxpayers' Union's newsletter, "Dollars and Sense.")
>Frank Adams ihpn4!philabs!pwa-b!mmintl!franka
Michael Sykora
Frank Adams
>[Frank Adams ihpn4!philabs!pwa-b!mmintl!franka]
>>In article <2820...@inmet.UUCP> ja...@inmet.UUCP writes:
> [Frank Adams :]
>>And the proper response to this generic rebuttal is to note that there
>>are many areas where the government has done a great deal of good.
>>Without the power of eminent domain, we would all be much poorer. Public
>>road-building has done a great deal of good. You may argue that private
>>roads could have done as well, but that is an unproven assumption. In
>>fact, public roadbuilding took place because of a recognized need for
>>the roads, and a perceived inability of the private sector to provide
>>them. The libertarian proposal is to build toll roads. But for local
>>roads, the cost of collecting tolls probably exceeds the cost of building
>>and maintaining the roads.
>
>The proper way to test these assertions is by controlled experi-
>ment: two comparable zones in one of which government exercises
>eminent domain and builds roads and in the other collects less
>taxes. Elsewhere you made a rather sweeping statement that so-
>cial experimentation is dangerous and I tried to draw a distinc-
>tion between proper experimentation, relatively safe and abso-
>lutely necessary, and rash wholesale innovation, almost univer-
>sally harmful.
This one really can't be done on a small scale. If you try it in
an area as small as, say, a U.S. county, people will just bypass it
using free public roads nearby. You had better plan on doing it
for a whole state, at minimum.
Now that state, whichever it is, already has a lot of roads in it.
If this experiment is going to work, you will have to sell them to
somebody. Whoever buys them will have to spend a fair amount of money
to enable them to collect tolls. This seriously interferes with the
access rights of those with adjoining property -- the state will at
least have to exercize its eminent domain one last time to force them
to sell those rights.
And I really think that the effect of all this would be that people would
move out of the state in droves, and that those left would be impoverished.
This would not be easily reversed, either; it is much easier to destroy
the economy in a region than it is to build it back up again.
Doesn't sound "relatively safe and absolutely necessary" to me.
>Until the experiment has been made, on whom is the burden of proof?
>I would claim, the advocates of government control and coercion.
>Since you approve, in principle, of a sunset law - it would seem
>that you agree. But then your sentence above :
>
>>You may argue that private
>>roads could have done as well, but that is an unproven assumption.
>
>should read:
>
>You may argue that private
>roads could have done no better, but that is an unproven assumption.
I would claim, until an experiment has been made, the burden of proof is
on those who wish to change the status quo. I approve of a sunset law;
but I also approve of a constitution and common law which are not subject
to it.
It is an established fact that private roads have nowhere been built. It
is an established fact that railroads have never been built without state
exercize of eminent domain (and almost always, subsidies, too). It is
an established fact that airports large enough to handle jets have always
been built with public money, using eminent domain.
Part of the reason why these things have never been done privately is
because of public competition. But this puts the cart before the horse.
The reason for public spending on these things is that private interests
did not provide them.
Frank Adams
>>/* fra...@mmintl.UUCP (Frank Adams) / 9:52 pm Dec 18, 1985 */
>
>>Without the power of eminent domain, we would all be much poorer. Public
>>road-building has done a great deal of good. You may argue that private
>>roads could have done as well, but that is an unproven assumption.
>
>We must not consider whether some good came out of government policies,
>but whether net good came out of them. If that is what you are saying,
>then clearly this is an unproiven assumption.
Strictly speaken, it is unproven; but I think it is pretty obvious.
>>In
>>fact, public roadbuilding took place because of a recognized need for
>>the roads, and a perceived inability of the private sector to provide
>>them.
>
>How in the world can that statement be justified? Who recognized the
>need? Politicians? Politically well-connected road builders? You may
>indeed be correct, but such an assumption needs justification, particularly
>in light of the recent Westway fiasco in New York City.
The need for roads has been recognized by the vast majority of the population
for a long time. I don't see how you can deny this.
>>The libertarian proposal is to build toll roads. But for local
>>roads, the cost of collecting tolls probably exceeds the cost of building
>>and maintaining the roads.
>
>If this is true, the local populace would likely contribute to have roads
>paved, unless, of course, they didn't want them. This would probably
>keep property values down, though.
We are talking about the prisoner's dilemma here. Everyone is better off if
the roads are there, but each individual is worse off if they contribute to
building them.
Also, by local roads, I mean everything but expressways. Local roads are
not used only by local people.
>Incidentally, "electronic road-pricing" technology is becoming cheaper, and
>Hong Kong is planning to implement an ERP system soon. (There was an article
>about private roads including a note about this in the latest issue of the
>National Taxpayers' Union's newsletter, "Dollars and Sense.")
What is "electronic road-pricing"? What roads are they planning to apply
it to?
Assuming it is some sort of "use now, pay later" system, Hong Kong has a
great advantage in having essentially all domestic traffic. Cars driven
in Hong Kong are either driven by a local owner, or rented locally.
Radford Neal
> is an established fact that railroads have never been built without state
> exercize of eminent domain (and almost always, subsidies, too).
>
> It is
> an established fact that airports large enough to handle jets have always
> been built with public money, using eminent domain.
>
> Part of the reason why these things have never been done privately is
> because of public competition. But this puts the cart before the horse.
> The reason for public spending on these things is that private interests
> did not provide them.
>
> Frank Adams ihpn4!philabs!pwa-b!mmintl!franka
> Multimate International 52 Oakland Ave North E. Hartford, CT 06108
In the case of airports, this is easily explained by air travel being
a luxury of the ruling class. They were built by the government because
this class found it cheaper to use their political power than to pay more
for air fares.
It's unlikely that eminent domain was really required. The airports are
generally outside cities where land is relatively cheap; there's considerable
flexibility on siting; the option of not building an airport is quite
viable, so hold-outs have no assurance the buyer will eventually give in.
Disclaimer: I haven't researched this in detail. Maybe I'm wrong. This
doesn't appear to be an impediment to posting news articles though. (Nor
do I think it should be.)
Radford Neal
Michael Sykora
>>We must not consider whether some good came out of government policies,
>>but whether net good came out of them. If that is what you are saying,
>>then clearly this is an unproiven assumption.
>Strictly speaken, it is unproven; but I think it is pretty obvious.
I am talking about individual policies, not whether it is better to have a
government or not at all. In the case of eminent domain I'll admit you may be
right (though I disagree), but it is hardly obvious. Do you really know that
much about the history of eminent domain.
>The need for roads has been recognized by the vast majority of the population
>for a long time. I don't see how you can deny this.
Roads yes. Public road-building, not necessarily. In any case, the fact that
a need is "recognized" by few or many does not necessarily indicate that there
is in fact a need.
>We are talking about the prisoner's dilemma here. Everyone is better off if
>the roads are there, but each individual is worse off if they contribute to
>building them.
I don't think that's clear at all. In some cases they would be worse off,
in others better. It's very difficult to generalize about such a thing.
>Also, by local roads, I mean everything but expressways. Local roads are
>not used only by local people.
True, but they may be predominantly used by local people. Also, major
users of local roads are those who provide services for local residents.
>What is "electronic road-pricing"? What roads are they planning to apply
>it to?
I don't remember that the article indicated this, but let's assume it's for
major highways. In the future, however, it might be applied to local roads.
>Assuming it is some sort of "use now, pay later" system, Hong Kong has a
>great advantage in having essentially all domestic traffic. Cars driven
>in Hong Kong are either driven by a local owner, or rented locally.
So?
>Frank Adams ihpn4!philabs!pwa-b!mmintl!franka
Mike Sykora
ja...@inmet.uucp
> It is an established fact that private roads have nowhere been built.
Not *exactly* true, though Frank still has a point.
The following is from the Funk & Wagnalls encyclopedia:
>>The early turnpikes were all government enterprises, but later turnpikes
>>were built and operated by private companies under state charters.
>>Few of these private companies were able to net a profit over an extended
>>period, and nearly all of the roads had reverted to county control
>>by 1850.
Frank Adams
In article <1...@calgary.UUCP> rad...@calgary.UUCP (Radford Neal) writes:
>In the case of airports, this is easily explained by air travel being
>a luxury of the ruling class. They were built by the government because
>this class found it cheaper to use their political power than to pay more
>for air fares.
Really? I think you will find that a majority of the U.S. population has
flown; I would guess an overwhelming majority. Having an airport nearby
is very advantageous for a city (execpt for that relatively small area
which suffers from the noise). There is a consistent pattern in major
cities of suburbs near airports growing much faster than those which are
not. This is because businesses like to be near airports, and it is
advantageous to be in an area where there are lots of businesses.
(Because businesses provide jobs, among other reasons.)
>It's unlikely that eminent domain was really required. The airports are
>generally outside cities where land is relatively cheap; there's considerable
>flexibility on siting; the option of not building an airport is quite
>viable, so hold-outs have no assurance the buyer will eventually give in.
But a jetport takes up a huge area. Rationally it may not make sense to
hold out, but the required area is large enough that there will almost
certainly be an irrational holdout. Someone who likes where they live,
and doesn't want to move, no matter what. "Truckloads of money? No
thanks, I'm comfortable." Probably 1% of the population will either
demand huge amounts of money to move, or refuse outright, without any
consideration of whether the buyer has any other options.
Not building an airport is a viable option for a large city if it doesn't
care about the well being of its inhabitants.
Frank Adams
>>it to?
>
>I don't remember that the article indicated this, but let's assume it's for
>major highways. In the future, however, it might be applied to local roads.
I really want to know what "electronic road-pricing" is. Does one attach
some sort of device to each car? Does one photograph licence plates and
send bills to their owners? Something else?
>>Assuming it is some sort of "use now, pay later" system, Hong Kong has a
>>great advantage in having essentially all domestic traffic. Cars driven
>>in Hong Kong are either driven by a local owner, or rented locally.
>
>So?
So the choice between governmental and private solutions depends on the
situation. It may well be that private (if a privately owned public
utility counts as private) enterprise is viable to run the roads in Hong
Kong, because the authority can get sufficient access to all the cars
which will be driving there, and/or to their owners, yet be nonviable
elsewhere.
Michael Sykora
>>We must not consider whether some good came out of government policies,
>>but whether net good came out of them. If that is what you are saying,
>>then clearly this is an unproiven assumption.
>Strictly speaken, it is unproven; but I think it is pretty obvious.
I am talking about individual policies, not whether it is better to have a
government or not at all. In the case of eminent domain I'll admit you may be
right (though I disagree), but it is hardly obvious. Do you really know that
much about the history of eminent domain?
>The need for roads has been recognized by the vast majority of the population
>for a long time. I don't see how you can deny this.
Roads yes. Public road-building, not necessarily. In any case, the fact that
a need is "recognized" by few or many does not necessarily indicate that there
is in fact a need.
>We are talking about the prisoner's dilemma here. Everyone is better off if
>the roads are there, but each individual is worse off if they contribute to
>building them.
I don't think that's clear at all. In some cases they would be worse off,
in others better. It's very difficult to generalize about such a thing.
>Also, by local roads, I mean everything but expressways. Local roads are
>not used only by local people.
True, but they may be predominantly used by local people. Also, major
users of local roads are those who provide services for local residents.
>What is "electronic road-pricing"? What roads are they planning to apply
>it to?
I don't remember that the article indicated this, but let's assume it's for
major highways. In the future, however, it might be applied to local roads.
>Assuming it is some sort of "use now, pay later" system, Hong Kong has a
>great advantage in having essentially all domestic traffic. Cars driven
>in Hong Kong are either driven by a local owner, or rented locally.
So?
>Frank Adams ihpn4!philabs!pwa-b!mmintl!franka
Mike Sykora
ja...@inmet.uucp
[Mike Sykora sykora@csd2]
>>>/* fra...@mmintl.UUCP (Frank Adams) / 8:05 am Dec 27, 1985 */
>>>We must not consider whether some good came out of government policies,
>>>but whether net good came out of them. If that is what you are saying,
>>>then clearly this is an unproiven assumption.
>>Strictly speaken, it is unproven; but I think it is pretty obvious.
>I am talking about individual policies, not whether it is better to have a
>government or not at all. In the case of eminent domain I'll admit you may be
>right (though I disagree), but it is hardly obvious. Do you really know that
>much about the history of eminent domain?
What seems *obvious* is that eminent domain contributed to rapid
road-building, and railroad-building, in USA. *Net good* is not
at all obvious, and I don't see how to verify it even with his-
totical research - unless someone uncovers a natural controlled
experiment. Otherwise, we are reduced to guesswork. Had there
been no eminent domain, what would have been the history ? In
most cases, probably the only difference would be the price paid
for the property acquired and that the road interests would have
applied different forms of pressure. It would be net loss for
*them*. But the money would go to work on other things.
A chilling effect might be there (in the absence of ED) for the
railroad industry in general. Again, the money would go to work
on something else. This is just a case of an industry artificial-
ly made lucrative by government-granted privilege. It could, by
chance, be good for the economy. But not obviously.
In some cases, the owners would prove intractable - this would
mean a bypass, or some alternative technical solution. There
would be an immediate net loss (perhaps) to the economy, but the
acquired technical experience would be useful. After all, roads
and railroads *are* built in mountainous or swampy areas, too,
and some landscape features are as recalcitrant as a stubborn
farmer. Why not treat a person with the same respect as a crag ?
Being able to sweep away obstacles by simply buying a few
congressmen must have been nice; but hardly necessary. This is a
frequent mistake: "it has always been done this way" is *not* a
good argument for "this way". A good argument would be "several
ways have been tried, and this one came out better every time".
Assuming there *was* a net loss, the question would arise: how
*big* a loss ? Eminent domain is a very serious limitation of in-
dividual rights. The reason it does not chafe more is that it has
always been there. Still, these rights should be worth *some-
thing* to most people.
Jan Wasilewsky
Radford Neal
> >In the case of airports, this is easily explained by air travel being
> >a luxury of the ruling class. They were built by the government because
> >this class found it cheaper to use their political power than to pay more
> >for air fares.
>
> Really? I think you will find that a majority of the U.S. population has
> flown; I would guess an overwhelming majority.
Really? I would guess that even today maybe 30% haven't flown. One of us
will have to actually do work looking up statistics to resolve this one...
I was actually thinking more of an earlier period when airports were
first being built however, not the current situation.
> Having an airport nearby
> is very advantageous for a city (execpt for that relatively small area
> which suffers from the noise). There is a consistent pattern in major
> cities of suburbs near airports growing much faster than those which are
> not. This is because businesses like to be near airports, and it is
> advantageous to be in an area where there are lots of businesses.
> (Because businesses provide jobs, among other reasons.)
This doesn't jive with my personal knowledge of Calgary, where the fastest
growing area is furthest away from the airport.
Radford Neal
Laura Creighton
>
>Really? I think you will find that a majority of the U.S. population has
>flown; I would guess an overwhelming majority. Having an airport nearby
>is very advantageous for a city (execpt for that relatively small area
>which suffers from the noise). There is a consistent pattern in major
>cities of suburbs near airports growing much faster than those which are
>not. This is because businesses like to be near airports, and it is
>advantageous to be in an area where there are lots of businesses.
>(Because businesses provide jobs, among other reasons.)
>
>care about the well being of its inhabitants.
>
I think that having an airport is great for the people who move in to the
area because jobs were created because there was an airport -- but it is
very debateable whether or not the existing citizens received a net
benefit. Is it to the advantage of the people of a city when their
population of 750,000 soars to over a million in 3 years? I don't know.
I don't know how to figure out, either.
--
Laura Creighton
sun!hoptoad!laura (note new address! l5 will still
ihnp4!hoptoad!laura work for a while....)
hoptoad!la...@lll-crg.arpa
n...@inmet.uucp
Two points, in response to Frank Adams:
1. My understanding is that there were non-government-funded
roads throughout New England in the early 1800s, but that
farmers prevailed upon the legislatures to provide them with
more and better roads. I would have preferred paying the
higher vegetable prices to giving the IRS more to work with,
but wasn't consulted.
2. I've also seen articles about the electronic gadget for
vehicle billing. My understanding was that some Asian nation
was going to use it to bill people for using the main roads
into town during rush hour. The gadget took the form of a
plate attached to the bottom of a car that was somehow
readable by a senor embedded in the road. The car doesn't
have to stop or even slow down, as I recall. Bills were to be
issued monthly, I think. The idea was to "tax" folks for
using the streets during rush hour, and thus hold down the
traffic to the impatient and the wealthy.
It's not hard to see how a private road owner would require
cash payment or such a gadget before permitting someone to
ride on his road (it would be easy to detect a car with no
plate, and lower a parking-lot gate 100+ feet in front of it
while hooting warnings. One could then collect the fare (in
cash) at the gate. Naturally cars that knew they had to pay
cash would ordinarily go in separate lanes.
By the way, it's not an obvious threat to civil liberties,
unless no-name, cash-in-advance accounts, and pay-as-you-go
usage are forbidden.
3. There are reasonable road systems around that are privately
owned but restricted in use -- logging roads are like this, and
road rallies are often held on them.
Michael Sykora
>I really want to know what "electronic road-pricing" is. Does one attach
>some sort of device to each car? Does one photograph licence plates and
>send bills to their owners? Something else?
I'm sorry, but I really don't have any technical information on it, but if
I see anything else on it I'll post.
>So the choice between governmental and private solutions depends on the
>situation. It may well be that private (if a privately owned public
>utility counts as private) enterprise is viable to run the roads in Hong
>Kong, because the authority can get sufficient access to all the cars
>which will be driving there, and/or to their owners, yet be nonviable
>elsewhere.
I'm not sure I understand what you mean by "sufficient access?" I would
assume that if a driver uses a road and doesn't pay hia/her bill, that would be
treated similarly to a case of a consumer not paying a bill in general.
Frank Adams
>> Having an airport nearby
>> is very advantageous for a city (execpt for that relatively small area
>> which suffers from the noise). There is a consistent pattern in major
>> cities of suburbs near airports growing much faster than those which are
>> not. This is because businesses like to be near airports, and it is
>> advantageous to be in an area where there are lots of businesses.
>> (Because businesses provide jobs, among other reasons.)
>
>This doesn't jive with my personal knowledge of Calgary, where the fastest
>growing area is furthest away from the airport.
There are undoubtably exceptions; the location of the airport is not the
only factor affecting economic development. My personal knowledge includes
Chicago, Boston, and Hartford. Chicago and Hartford both fit the pattern.
In Boston, the airport is on the coast, and the nearby areas are already
fully developed. There are a number of other cities where I have the
impression that the area around the airport(s) has grown more rapidly, but
I don't know them well enough to be sure.
Frank Adams
>>situation. It may well be that private (if a privately owned public
>>utility counts as private) enterprise is viable to run the roads in Hong
>>Kong, because the authority can get sufficient access to all the cars
>>which will be driving there, and/or to their owners, yet be nonviable
>>elsewhere.
>
>I'm not sure I understand what you mean by "sufficient access?" I would
>assume that if a driver uses a road and doesn't pay hia/her bill, that would
>be treated similarly to a case of a consumer not paying a bill in general.
All right, I'll spell it out. Suppose the state of Texas implements such
a scheme. I live in Connecticut. I can get in my car, and in about two days
drive to Texas. If the scheme requires that something be attached to my
car in order to detect the use of the road, then Texas has to either man
the borders, and attach the device, or forbid my entry. If photographic
techniques are used, they still have a problem forcing me to pay the bill.
I will note that states generally require visitors from out of state to
pay traffic fines immediately, because of the problems trying to collect
from people out of state. (Most bills are intra-state matters.) There is
a deeper question here; when did I agree to pay them for use of the road?
For Texas residents, there is an implicit contract involved in the motor
vehicle license. They had better post signs at every point where one gets
on a non-free road if they want to have any hope of collecting.
All these problems are that much worse as regards someone from Canada.
It is essentially impossible to enforce petty legal claims across national
borders.
Michael McNeil
>> flown; I would guess an overwhelming majority.
>
>Really? I would guess that even today maybe 30% haven't flown. One of us
>will have to actually do work looking up statistics to resolve this one...
Pray tell, what do you define an overwhelming majority to be? I ran
across the figure in question in the recent *Time* cover story about
the current air travel price war, where they reported that 70% of
Americans have now flown. So, your estimate of 30% *not* having
flown appears to be correct. I would say, though, that 70% is quite a
substantial majority -- not what one would ordinarily call an "elite."
--
Michael McNeil
3Com Corporation "All disclaimers including this one apply"
(415) 960-9367
..!ucbvax!hplabs!oliveb!3comvax!michaelm
And there's a dreadful law here -- it was made by mistake,
but there it is -- that if any one asks for machinery they
have to have it and keep on using it.
Edith Nesbit, 1910, *The Magic City*
Clayton Cramer
> >> flown; I would guess an overwhelming majority.
> >
> >Really? I would guess that even today maybe 30% haven't flown. One of us
> >will have to actually do work looking up statistics to resolve this one...
>
> across the figure in question in the recent *Time* cover story about
> the current air travel price war, where they reported that 70% of
> Americans have now flown. So, your estimate of 30% *not* having
> flown appears to be correct. I would say, though, that 70% is quite a
> substantial majority -- not what one would ordinarily call an "elite."
>
While 70% of the population flies, and therefore a majority of Americans
fly, it is still true that most of the flying in America is done by a very
small percentage of people. For most Americans, one plane flight _a_year_
is exceptional. For business travellers, one plane flight _a_month_ is
probably common.
Stanley Friesen
>In article <2...@calgary.UUCP> rad...@calgary.UUCP (Radford Neal) writes:
>>
>>growing area is furthest away from the airport.
>
>only factor affecting economic development. My personal knowledge includes
>Chicago, Boston, and Hartford. Chicago and Hartford both fit the pattern.
>In Boston, the airport is on the coast, and the nearby areas are already
>fully developed. There are a number of other cities where I have the
>impression that the area around the airport(s) has grown more rapidly, but
>I don't know them well enough to be sure.
>
airport was built. It was *deliberately* placed in a undeveloped area,
with few residents, in an attempt to minimize the noise nuisance
problem(the old airport was adjacent to downtown KC). The area is now
on of the most rapidly gowing developement areas in the Kansas City
area. So much for getting the airport away from the city where it
won't bother anyone!
Laura Creighton
> A prime example is Kansas City. About 15 years ago a new KCI
>airport was built. It was *deliberately* placed in a undeveloped area,
>with few residents, in an attempt to minimize the noise nuisance
>problem(the old airport was adjacent to downtown KC). The area is now
>on of the most rapidly gowing developement areas in the Kansas City
>area. So much for getting the airport away from the city where it
>won't bother anyone!
Ah, but the attempt suceeeded! They didn't plunk down an airport and
inconvenience exiting residents with the noise. What they did was make
it possible for you to choose to accept the noise level in exchange
for the other benefits of living by an airport ... if you had to move
there to a new development area you can hardly say that you didn't
choose it.
Actually, you can. Allow me to make a prediction. Because of the
noise, places to live are cheaper near the airport. So lots of people
move there. Allow them to live their five years and they will start
agitating that the plane noise is offensive, and start trying to get
some government to do something about the noise. The proper response
to such people is to tell them that they can move back wherever they came
from if they no longer find the trade between chearp housing and noise
to their advantage, but if there are a lot of them (many potential votes)
the airport may be hit with a lot of restictions. My sympathies to the
airport builders and owners -- they just got handed a ``you can't win''
situation...
--
Laura Creighton
ihnp4!hoptoad!laura
hoptoad!la...@lll-crg.arpa