Tuesday, August 31, 2010
Going through a small backlog of HBL installments yesterday, I found a John Stossel piece that makes explicit a point I didn't quite make in Friday's post. There, I merely noted that the post-Katrina school system in New Orleans probably has valuable lessons to teach advocates of capitalism. I'll borrow Stossel's wording to summarize that lesson:
Contracting out to private enterprise isn't the same thing as letting fully competitive free markets operate, but it still works better than government.This is a mouthful, but saying it avoids the pitfall I noted long ago of misapplying the label "privatization" to such situations. He even discusses the same example I once did -- Indiana's privately operated toll roads.
The Stossel piece is also noteworthy for providing more evidence of the practicality of privatizing roads, including the fact that such roads would be safer for a variety of reasons. One that surprised even me was that, in some cases, this could be the result of less signage and fewer of the safety features that governments now indiscriminately add to roads:
It's Friedrich Hayek's "spontaneous" order in action: Instead of sitting at a mechanized light waiting to be told when to go, drivers meet in an intersection and negotiate their way through by making eye contact and gesturing. The secret is that drivers must pay attention to their surroundings -- to pedestrians and other cars -- rather than just to signs and signals. It demonstrates the "Peltzman Effect" (named after retired University of Chicago economist Sam Peltzman): People tend to behave more recklessly when their sense of safety is increased. By removing signs, lights and barriers, drivers feel less safe, so they drive more carefully. They pay more attention.Stossel cites two examples of exactly this occurring where it was tried in Europe. Of course, there are also cases of safety features that take advantage of quirks in human perception that are known to work. Private companies would be free to implement them, of course -- but they would, thanks to the profit motive, be more attuned to whether a given measure (or none at all) is what a given situation calls for.
Contra libertarian paternalists like Richard Thaler and Cass Sunstein, there is no role for government trickery in achieving public safety. The promise of greater profits and the desire to remain alive will "nudge" companies and individuals in such a direction, and the almost-forgotten practice of taking charge of one's own welfare will make both good at it.