10.11.2009

The Impediment of Infrastructure

When I was in grad school, Alan Burdette, for whom I was a TA, joked about the radial Catholic E.F. Schumacher and recommended his book, Small is Beautiful (note there are three hyperlinks here). I haven’t read it, I’m sorry to say, even though it’s been on my reading list since then.

There’s a popular meme regarding governments and lemonade stands, many in reference to shutting down kids’ entrepreneurial spirit, some in reference to “I wouldn’t trust X to run Y.” The scorn that I hear when I read this statement makes me wonder what it is about government that suddenly drives people toward incompetence. It’s not like our first MBA president did a bang-up job at regulating or nurturing the economy.

John Steele Gordon summarizes the problem succinctly as: Politicians need headlines. He spends more time on it broadly (that’s just item #2) in this article.

I’m adding a second category of problem, because I think Mr. Gordon is a dyed-in-the-wool ideologue of the “free market is everything” school, and myself, I rather like Jonathan Tasini’s turn of phrase: “the ‘free market’ is just a marketing term.”

It’s not that business is inherently good and government is inherently bad, respectively, at running businesses. Part of their problem is size. We trumpet the idea of “economy of scale,” because it means that we can make expensive things more cheaply. It makes things more accessible. To make this work, we have to develop infrastructure.

Infrastructure is the reason we can all drive cars and trucks all over the country – all over almost any country for that matter. In this case, infrastructure includes roads, bridges, gas stations, not to mention the folks who manufacture those vehicles, the smaller companies that create the widgets that go inside them, that fix them, that exist to counter known problems.

Infrastructure is the reason why developing a non-gas-powered car is going to be a nightmare. Every related interest group is going to line up against new fuel types under all kinds of logic – it’s too expensive, it’ll put gas station owners out of business, it’s impractical.

The bigger the business, the greater the infrastructure – as a rule. There are ways to be flexible, such as sourcing out your R&D. But just to be clear – when we’re talking about how great the market is, we’re talking about how successful a big company is and how nimble a small company is. The problem is that we tend to think those companies are the same thing.

1 comment:

  1. Who's still talking about how great the market is?

    I know. Lots of people.

    The problem is not that we "tend to think those companies are the same thing" the problem is that we're repeating, enabling, and giving credence to the myth of a free market by doing anything but shouting down or gouging the eyes out of the imbeciles and cynical opportunists who keep talking about the market as if it is anything like "free".

    Every aspect of the market (from centralized currency to safety regulations to subsidies and tax breaks) is regulated or designed by government to benefit those big "successful" companies or destroy small companies. This is and has been the case since the inception of capitalism. We've been fed this lie for 400 years, allowing people to repeat it at all is absurd.

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