Friday, July 29, 2005

Public goods and the desire for bright lines 

Craig has responded to the public goods post, and I think we're agreed on the economics of this. He argues though, that the political dimension of the debate might not allow as nuanced an analysis as my previous post offers.
I�m convinced the King is correct, but �King�s can opener� is that he assumes his argument will also convince the likes of state-wide smoking ban sponsors Ron Latz and Doug Meslow, new urbanists that live and breathe for light rail and legislators that never saw bonding for a stadium, a civic center or a par-three golf course that wasn�t a great investment. Until those folks see the light, I�ll stick to a problem characteristic approach -- at least to a point.

Yes, those folks do exist. And as I argued in my post, you have to be aware of the incentives of the people to whom you give advice. I have some bruises from good advice badly used in Ukraine and elsewhere.

But the problem with trying to draw a bright line that says "these are public goods"/"these are private goods" is exemplified in the comment made by regular reader Michael on my post.

Ok, so... what about roads? You say they are a public good, but too many of them will create diminishing returns right? We don�t want to pave all of Minnesota.

Isn't in the public interest, in the long run, to have enough public roads that are well maintained plus alternatives to roads like tollways and mass transit?

Isn't it putting the cart before the horse, so to speak, to create an alternative if the main public good is not well maintained?

We don't have a public good called "roads". We have roads which are publicly maintained and others which are privately maintained. We sometimes contract out for a road and sometimes not. Some roads are subject to tolls and some are not.

And even then it's not so clear. A private road for a townhome association still has city provision of some services along it, such as garbage pickup, yet might be snowplowed by the association, or contracted to the city to plow.

Each case is unique. Each has the possibility of a variety of institutional arrangements for the provision of the good, each of which has a set of benefits and costs. Craig wants a bright line in order to say "hands off" to the 80% of goods in which government should never intrude.
A product characteristic approach (legislation is the �product�) puts the burden of proof on the sponsor of legislation to show why/how the legislation is a �public good� rather than (as is currently the case) making the burden of proof fall on those that oppose legislation to show why it is bad.

Craig's hurdle would be met time and time again by the supporters of larger government; Michael's line of reasoning gives rise not only to public transportation but land restrictions and environmentalism. All from the start that "roads pass the Fishsticks test". But a theory of Leviathan government would argue for something that doesn't admit the possibility of the 20%.

A deeper problem in this method Craig uses is that it seems quite consequentialist. If the social welfare is improved by public provision, then we use the tax power of the state, even if for a substantial minority of the populace the tax is a confiscation to which they would never have agreed. I find that position difficult to accept ethically. I prefer instead to think constitutionally, to ask what are the rules by which a taxpayer, who is sometimes a beneficiary of one of these decisions and sometimes not, can control the confiscatory powers of the state. I find it dangerous, as a political rule, to imagine that we would write a constitutional rule that says "if X is found to be a public good, you may tax for its provision." Who does the finding? If you say "if X has externalities, ..." you have the problem of not knowing where the relevant scope of externalities are. If you say "if X is indivisible,..." over what range of taxpayers does the indivisibility have to extend? Since this discussion is really about "what is the proper scope of government action in the allocative function of an economy," those questions are vital and lie at a state's constitutional foundation.

I think, btw, that TABOR is a fundamental change that puts that discussion at the fore, in much the same way that Prop 13 did so for California 25 years ago. If Craig wonders how to make my concerns practical to live in the world we are in, TABOR is an answer. We cannot avoid the grasp of Leviathan with any set of bright lines defining what are and are not public goods. Even if the lines could be drawn -- which I contend they cannot, logically -- Leviathan would ignore them.