Home > Politics, Things to be Outraged by, Uncategorized > Billboards, Healthcare and the Tragedy of Externalities

Billboards, Healthcare and the Tragedy of Externalities

The reason we are in such bad shape today is that most Americans have no code.  To see what I mean consider the following 2 codes.  Code A: everyone has the right to use their property however they want as long as it isn’t destructive to someone else’s property.  Code 2: the government controls all property and should make whatever decisions are best for the society as a whole.  Obviously these two codes are incompatible.  Anyone could see that.  The problem is that they don’t teach us to choose a code and stick to it.  They teach us to be afraid of having a code, to value things like “compromise,” “moderation,” “centrism,” etc. 

So we tell ourselves that there is some truth on both sides and that we hold both values.  We are for private property but we also think the government should intervene sometimes when there is a big enough social benefit.  But we don’t realize that by doing this we are implicitly choosing one of them.  When we go on this way we always end up running into these contradictions where we don’t know what to do.  And we try to weigh the benefits and costs of both sides.  But by doing this we are accepting the premise that the welfare of different people can be compared.  In other words we are accepting the notion of “social value.”  And what do you know, when you compare the benefit to one measly property owner against the perceived value to society it usually seems like the latter is much “larger.”  This is why progressivism works.  Progressives actually believe in the second code and they know you don’t.  But they are progressively getting you to accept it even though if you knew what you were getting into it would horrify you.

Case in point: here is a story from the town I currently call home.  Note this quote: “It’s a skyline that’s collectively owned by all of us and suddenly it becomes privately marked.”  The skyline is not collectively owned!  A skyscraper is private property.  There is no subtle distinction here.  The reason this guy thinks it is public property is that the public can see it.  Did you hear me?  It’s collectively owned because the public can see it!  Therefore, what a private owner does to his own property is a decision which must be made by government because it affects other people who want to look at something other than what the supposed owner wants to put there.  And this is not just a crazy proposal by a fringe group, this is existing policy.  This guy is complaining because we are going back to letting owners decide what to put up on their own private property.  How did this happen?

Well, I already told you but let’s get a little more specific.  A long time ago in a galaxy far far away people believed in private property and there was a lot of economic work done showing that private property and individual freedom let to efficient outcomes.  Then someone discovered the concept of an externality, a situation that could make free markets inefficient.  So we said “OK government, go ahead and regulate situations where there is an externality to make them efficient.”  We forgot that we had property rights for the sake of our freedom, we thought we got them because they were efficient!   So as soon as someone came along and told us a little bit less freedom would be more efficient we weighed the social cost against the social benefit and agreed.  And at that moment the code “everyone has the right to use their property however they want as long as it is not destructive to someone else’s property” became “everyone has the right to use their own property however they want so long as the decision doesn’t affect anyone else in any way.”  But this is the same code as “The government controls all property and should make whatever decisions are best for society as a whole.”  It just doesn’t sound the same, it sounds kind of like the first one….

The reason that this code is the same as code B is that we have to live together.  When people live together in a society, their actions affect each other.  Practically everything you do affects other people.  People have to look at your house, your car, your yard etc.  Does that mean the government can tell you what kind of flowers to grow in your garden?  The air you are breathing is air someone else can’t breath.  If you walk out on your front porch and pass gas, your neighbor has to smell it.  Obviously I could go on and on like this and if you are skeptical you will say “yeah but the government would never try to regulate those things that’s just silly.”  But can you imagine what people would have said if Ayn Rand had said in Atlas Shrugged in 1957 that the government had decided people’s buildings were public property because other people look at them and therefore they can tell you what you can and can’t put on them?  (If you can’t, it would have been much like what they did say anyway which is that it was crazy and it would never happen.) 

To find a more important example of this phenomenon one need look no farther than the court battle over the recent healthcare bill.  This bill requires you to buy health insurance even if you don’t want it.  The reason that they claim they have the right to do this is that your refusal to buy health insurance affects other people.    The reason it affects other people (and interstate commerce) is that your decision affects demand for and therefore the price of health insurance and if you don’t want it they are going to give it to you anyway.  These of course are both direct consequences of their interference in the healthcare and health insurance markets but that’s a topic for another post.  The thing you need to understand is that even not doing anything affects other people because if you did do something it would affect some market and that would affect other people.  This means that there is literally nothing that the government can’t prevent you from doing or even force you to do.  By the way, notice that the pretext of efficiency is completely dropped (in this case it is certainly less efficient) that was just a transitory technique to change the code.  So let’s review the transformation in values.

Code 1: We believe in private property rights.  A pleasant side effect of this is economic efficiency.

Code 2:  We believe in economic efficiency which usually means we should respect private property rights but sometimes the government should intervene when there is some externality which would make free markets and private property inefficient.

Code 3:  We believe in private property rights as long as the exercise thereof does not have any external effect on someone else, then the government can regulate it.

Code 4: The government controls all property and activity and can prevent or require any action by any person it wants in the name of public welfare.

We are at number 3 right now but the only difference between 3 and 4 is that when you’re at 3 you haven’t noticed that 3 and 4 are the same.  I will present a similar argument with respect to taxes shortly.

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