23 Jan 2016

Time for Bryan Caplan to Give Rothbard Another Look

Bryan Caplan, Economics, Rothbard 11 Comments

Alex Tabarrok has a post explaining that (government) water systems have been bad on lead contamination for a century; it’s not just an isolated problem in Flint.

There’s no way I can talk about this without sounding like a punk, so I simply remind everyone of Bryan Caplan’s EconLog post from 2014 entitled “Why Do Government Enterprises Work So Well?” in which drinking water was one of the counterexamples Bryan offered to Rothbardian cynicism.

11 Responses to “Time for Bryan Caplan to Give Rothbard Another Look”

  1. Tel says:

    Lead contamination in water is one of those classic first world problems that you have when you run out of real problems. Sure, lead is bad for you, and copper pipes are much better than lead pipes… the more important thing is that you can get water at all and it doesn’t have cholera in it.

    Little bit by little bit the lead pipes have been replaced with copper and other things, levels of lead continuously go down; but a few hundred years ago lead was the fastest and easiest solution to the problem at hand. Like with all technological advance, infrastructure sits around waiting for the investment money to come along and upgrade it.

    The Europeans even went nuts and decided to outlaw lead in soldier so the tiny exposed join between two copper pipes could be considered “safe” that no lead was exposed. This is clearly a case of regulation gone off the deep end. They outlawed lead in circuit boards, just in case someone wants to lick their electronic gear or something.

    So would a private system choose a better balance between spending on infrastructure upgrades, and profit making, and delivering a higher quality product? Quite likely yes, usually private systems are more efficient, especially if there’s competition. Mind you a lot of private houses has very old wiring that could be a fire hazard and almost certainly does not comply with all the latest safety standards… but the private owners don’t see it worth the money sunk into ripping it all out and replacing with newer wiring. The old stuff does the job.

  2. Bob Roddis says:

    Lost in the narrative is that Detroit water (which Flint had been using) is very clean because it comes out of the Detroit River upstream from Detroit near Lake St. Clair which replaces its entire volume of water with clean water from Lake Huron every 7-14 days. Lake Huron gets its new water from clean melting snow in northern Ontario. The Flint River suffers from farm runoff and who knows what else. Detroit charges a lot for its water. Flint is waiting for the building of a new water supply system from Lake Huron which is not quite completed. In the interim, the decision was made to use cheaper Flint River water which apparently ate all of the gunk off the existing pipes that had protected the clean Detroit water from the lead. Apparently, a very cheap additive coulda/shoulda been added to the Flint River water which would have avoided the entire problem.

  3. Major.Freedom says:

    Perhaps the real reason Caplan is not an Austrian is that he wants an excuse not to become a Rothbardian cynic.

    If the KWA were a private corporation subject to competition, the survivors of the water poisoning could at least choose not to pay for the privilege of being poisoned.

  4. Patrick Szar says:

    Caplan, for all his merits, whatever they are, criticizes Rothbard here, and Austrians in general for painting with too broad a brush, I think. However it is he, who misinterprets the Austrian claims as universal, rather than marginal. Economics commonly speaks to incentives affecting the marginal actor. When Rothbard says consumers get in the way of bureaucrats, he doesn’t mean every single bureaucrat forgets his role as producer, but is marginally (and yes, its a large margin) more likely to act on behalf of motivations that are isolated from profit and loss. This is a pretty consistent error in everything I’ve read from Caplan.

  5. Anonymous says:

    Enterprise funds serve as a revenue source for the general government fund, possibly encouraging price gouging, non line item taxation.
    Enterprise funds can destroy a local market, health clubs versus rec center.
    Enterprise funds can drive prices below the natural rate, destroying resources.
    Enterprise funds often rely on a monopoly, water enterprise for example. The laws prohibit storage, trucking it in and do not allow secondary lines and towers to be built.
    Although water may only be pennies per gallon, you will never know the real market prices, it may be more, it may be even less considering water is natural occurring, travels mostly via gravity and needs only minimal care.

  6. Bob Roddis says:

    “The Flint Water Crisis Is the Result of a Stimulus Project Gone Wrong. The new water system was never a cost-cutting measure. It was an expensive jobs project.

    Documents that have just resurfaced show that the then DWSD Director Susan McCormick presented two alternatives to Emergency Manager Ed Kurtz that slashed rates for Flint by nearly 50 percent, something that made Detroit far more competitive compared to the KWA [new Lake Huron system] deal. “The cliff notes version,” she said in an internal e-mail to her staff, is that the “proposal offers a today rate of water for Flint/Genesee of $10.46 as compared to $20.00 paid currently per Mcf—48% less that could be realized nearly immediately and even more when compared to the increases coming with KWA.” In fact, when compared over the 30-year horizon, the DWSD proposal saves $800 million or 20% over the KWA proposal, she pointed out.

    That works out to over $26 million in annual savings for a city in precarious financial shape.

    So why didn’t Flint jump at the offer?


    [S]ources close to the situation at the time tell me that it was essentially because Genesee County and Flint authorities saw the new water treatment as a public infrastructure project to create jobs in an area that has never recovered after Michigan’s auto industry fled to sunnier business climes elsewhere. And neither Snyder nor his Emergency Manager Ed Kurtz nor the state treasurer Andy Dillon had the heart to say “no,” especially since to hand Flint to DWSD [Detroit water] would have made the whole project less viable. What’s more, they felt that just as Detroit was receiving an infrastructure boost post-bankruptcy (with the state-backed $650 million ice-hockey-arena-cum-entertainment center) it was only fair that Flint get one too.

    [T]he Flint water crisis is the result of a Keynesian stimulus project gone wrong.”


  7. Gene Callahan says:

    And for decades private companies sold paint with lead in it: so private enterprise doesn’t work either! Nothing works!

    (Just noting the silliness of the “There was some problem with X; therefore X is a failure!” reasoning.)

    • Gene Callahan says:

      Or, as Ronald Coase said, we are “choosing between social arrangements which are all more or less failures.”

      • Bob Murphy says:

        Right Gene and the government is much MORE. It’s not that “Holy cow there was lead in the water and we had no idea! In retrospect that is bad!” That’s not why people are flipping out about the Flint situation.

    • Major.Freedom says:

      Gene, it is amazing how after all these years you still have no clue what the argument is really about.

      When you read an anarchist argument like “The government has caused lead to exist in drinking water, therefore abolish government”, it is not a logically sound inference to then respond with “Well by that logic, given there have been private companies that have caused lead to exist in drinking water, then you must accept the argument that we must abolish private enterprise”.

      The reason why your response misses the mark is that anarchists are not saying, have never said, nor does the anarchist argument above even require, the assumption that private enterprise never results in lead in drinking water. The anarchist argument springs from two main premises, both of which you don’t seem to want to admit it realize.

      One, the ostensive purpose of government threatening innocent people with gun violence in order to gain monopoly control over the potable water system is to prevent, essentially, lead from entering the drinking water system. That is the intellectual reason anarchists are given for why there is such violence. It is for our own good, because entrepreneurs in a competitive market are too stupid and/or irresponsible to be able to produce potable water systems for society on their own.

      Anarchists on the other hand never claimed nor have they ever based their market ideology on the notion that water must be privately run so that we can avoid the presence of lead in drinking water. That has always been merely a benevolent outcome.

      Two, even if a fully privatized water system had widespread problems of lead in the drinking water, the cause is not an absence of guns being pointed at innocent people, nor an absence of coercive monopolies, nor an absence of states. The solution to this problem is NEW ideas, NEW entrepreneurs, NEW technology, and most important of all, that which totally blows up your muddled worldview, there would be a need for NEW economic competition against the obviously inept existing water providers.

      Problem solving is an intellectual activity. It is ridiculous to believe “Lead in water? OK, point guns at innocent people to steal their money and have the gun toting maniacs monopolize it.”. That doesn’t solve it. That doesn’t even address the root problem!

      The reason why anarchists always pounce on instances of government failure as justification for eliminating governments, is not because they believe private markets will never have such failures, but rather because in the case of governments, it is illegal to compete with the inept water providers in government. The only way that anarchists can get what is needed, is for there to be competition against the inept, and that in turn requires and implies absence of governments.

      You got to stop looking at this as a personal issue. It is not that government agents as people are inherently corrupt and stupid, even though most are, it is that the ROLE they play, the ACTIONS they take, make actual problem solving an impossibility. Actual problem solving requires the highest degree of economic calculation, so that if there is a relative increase in the demand for potable water, we would know just how much more in demand it is. We need to allow people to choose, make new plans, implement new ideas, and bankrupt the inept. That requires competition, and competition in turn is incompatible with government control.

      Government is at root nothing but a way people act towards others. To abolish government is to abolish a particular mode of activity that is antithetical to stopping problems by way of individual human choice, as opposed to the choices of only gun toting maniacs and those they hire and believe in and pay.

      Intelligence must trump violence, Gene, and that is why anarchism must trump statism.

    • Guest says:

      Poor people ate lead paint chips. How did they get so poor?

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