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Public Choice: More than a Mere Footnote in Infrastructure Policy Discussions

Adam Thierer

Adam is a senior research fellow at the Mercatus Center at George Mason University. He previously served as President of the Progress & Freedom Foundation, Director of Telecom. Studies at the Cato Institute, and Fellow in Economic Policy at the Heritage Foundation.

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3 Responses

  1. Brett Frischmann says:

    Adam,

    Thanks so much for participating. I really enjoyed your comment. There is so much in there to discuss, but let me clarify two points.

    First, I by no means argue that the demand side considerations “should trump whatever supply-side concerns critics might raise,” and I don’t mean to “sweep” supply-side problems “under the rug.” I believe the supply-side matters as much as the demand-side, but the supply-side gets most/all of the attention and there are various demand-side considerations that are not fully explored. So I aim to explore them carefully.

    As you know and reference, there is an extensive literature hotly debating how best to supply infrastructures of all different sorts. In the book, I don’t actually take a position in that debate. To be clear, I don’t argue that to solve our infrastructure problems in this country we need more government provisioning and I certainly don’t argue against private provisioning. In fact, I intentionally discuss both publicly and privately supplied infrastructures and contrast how commons management is achieved in the different contexts. Regardless of how one comes out in that debate (public vs. private provisioning), the demand-side analysis I provide in the book remains relevant and important. Even if we decided to rely exclusively on private provisioning of infrastructure, we would still need to account for the wedge between private and social demand and we would still need to evaluate the case for commons management. (Even if we decide to follow your P-P-P strategy, saying that we should create clearly delineated property rights doesn’t actually tell us how to delineate the property rights; we might include commons.)

    Second, I agree with you that public choice scholarship, problems with special interests, regulatory capture, and so on are incredibly important in the infrastructure context. But I think they are most relevant to analyzing the supply-side issues and are not terribly relevant to the theory or analysis I undertake. I am happy to discuss this further. But with respect to your post, I think you should have put the quotes from p. 165 the book in context. I do not ask the reader to dispense with government failure concerns in general; I am specifically evaluating claims that government imposed nondiscrimination rules necessarily reduce incentives to invest. Here is what I say:

    “Government regulation involves various costs, and there are many ways in which government failures can be substantial. I do not deny these facts. But these basic facts do not support the broad claim that any government interference with private resource management decisions will reduce incentives to invest in those resources, much less the more specific claim about nondiscrimination rules reducing incentives to invest.
    Broad claims of this sort conveniently ignore the fact that markets depend on a variety of government institutions to function; the claims fail to differentiate one type of government regulation from another; the claims rest on ideological and perhaps cultural beliefs rather than proven theory or empirical fact. Ultimately, there is no reason to credit these claims with predictive or prescriptive value when evaluating whether government-imposed commons management will impact incentives to invest in infrastructure.”

    I understand that “[you] find [my] terse dismissal of public choice insights perplexing because it is precisely those insights that can help us unlock the mystery of why infrastructural supply-side problems have become so costly and seemingly intractable.” All I can say is that my goal in the book is not to unlock that particular mystery, and frankly, I agree with you that public choice problems are a significant part of supply-side problems in traditional infrastructure contexts. I suspect we might disagree about how to address public choice problems … (I suppose I could also say that the book is already 430+ pages and adding supply side and public choice to the mix would double the size of the book)

  2. Adam Thierer says:

    Brett:

    Thanks for your response. To reiterate, I very much appreciate your exploration of the demand-side benefits. My critique should not be read so as to suggest that I am ignorant of those benefits or that I take them lightly. In many cases, those benefits are quite substantial.

    But here is where we part ways: I do not believe it makes sense to separate the cost-benefit calculus. You have made a powerful theoretical case for why the demand-side benefits — specifically the benefits of treating infrastructural resources as a commons — should be taken into account in every policy debate. Again, I take that charge seriously. But we cannot divorce the costs of doing so from the discussion along the lines you have suggested. To do so is to (at least indirectly) suggest that either (a) the demand-side benefits are essentially so valuable to society that they cannot be valued at all or that (b) we should just “pay any price; bear any burden” in pursuit of infrastructural goals.

    I understand that placing an economic value on those societal benefits is complicated and riddled with controversy, but that doesn’t mean we shouldn’t try. And we should absolutely try to figure that out when we have such a definitive answer to the cost side of the equation. That is, we know with great certainty exactly how much most of these traditional infrastructure investments are costing society. And no one doubts that we are paying dearly. The costs just keep going up, up, up. Are we getting our money’s worth? Perhaps we are in some cases. But I am asking you to prove it and to explain to us which investments are worth it and how they are to be paid for.

    With all due respect, it is not enough to say that you “don’t actually take a position in that debate” because by refusing to answer those difficult questions you are taking a pass on the equally important issue of how we go about getting the infrastructure(s) we’ll need in the future. Simply asserting that there’s value in treating those infrastructures as a commons doesn’t tell us how we can expect those infrastructures to get built or how much it’s going to cost us in the process.

    In my opinion, we’re not getting the benefits both of us hope for and yet we are paying more than ever. Something’s gotta change.

    - Adam T.

  3. I think Adam Thierer has some good points. There’s no doubt that “the “3-Ps”: privatize, property-tize, and price,” are good strategies where we know the important inputs and outputs. And there’s no doubt that the government screws up badly, and in systematic ways that *tend* not to be present in the private sector. But the critical thing about the private sector that gives rise to the rubber-meets-road performance that Adam values is competition. In a private sector where there are sole providers or winner-take-all dynamics, there are screw-ups that make the private sector look downright governmental. I speak not only as an employee of the old AT&T, but also as a sideline observer of Microsoft in the 1990s and Google in the 20-teens. In lieu of competition, transparency (aka openness, in a sense) helps; let me just nod in the direction of the increasingly privatized commons resource known as “the military” for screw-ups that defy any sense of scale or reason. History will show that the privatized, non-competitive “homeland security” establishment is traveling the same road. In other words, privatization, property and price fails without a few other important elements.

    Ideally the military is certainly a common resource for a nation. It would be foolhardy to say that a nation, e.g., the United States, should have only one single, private military. It would be worse to say it should have multiple, competing private militaries. No, a nation needs a single, government-operated military. In this case there is no substitute for wise governmental management of this resource. (Adam would you disagree? If so, the discussion gets truly interesting. But if not, then . . . )

    If we admit of the possibility of wise management of one institution in the absence of the “3 P-s” or effective competition for one institution, then we open the door to this possibility for others. So, for example, for over 50 years the Bell System was wisely managed to give the United States the best telephone network in the world. Then, of course, technology changed, the Bell System didn’t, and the rest is history.

    David I

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