>From: Bryan Caplan <[EMAIL PROTECTED]> > >First, the roads and airports are already here, so there would not be >much of a decentralizing effect of cutting off subsidies and eminent >domain now.
But because of the effect of subsidies in distorting the market price link between quantity supplied and quantity demanded, the system will always tend to be overwhelmed with demand beyond its capacity. That's why, according to the estimates of some government officials, the most urgently needed repairs to highway and bridge infrastructure are increasing several times faster than the money appropriated for that purpose. Highways are increasingly congested; and (until 9-11, at least) one of the big issues was airport congestion, with planes stacked up over major airports every time it clouded up. Any time you artificially conceal the real cost of something with subsidies, the demand will outstrip supply. And the more inputs like transportation are subsidized, the more business will tend to use them extensively, by increasing input, rather than increasing efficiency in output per unit of input. So state-subsidized, centralized infrastructure systems turn into Stalinist dinosaurs, generating far more demand than they are capable of meeting, and being constantly bombarded with demands to expand their capacity. If you take away the sugar tit, and build or expand airports and highways only on land that is willingly sold, with building and maintenance costs obtained entirely from weight-based user fees, the costs of shipping will continue to rise dramatically, and the system will continue to become more congested until it reaches the breaking point. Ongoing maintenance costs are an important issue in their own right, BTW--the highway beds weren't designed to handle the abuse caused by 18-wheelers. >Second, at least part of the subsidies have been to sustain small >communities that can't carry their own weight. That was one of the main >pro-airline regulation arguments - cross-subsidizing small unviable >airports with monopoly pricing in big cities. How small a community are we talking about here? Economists who specialize in issues of economy of scale--Walter Adams and Barry Stein, for example--argue that production in large-scale manufacturing industry takes place at many times peak economy of scale. Barry Stein argues, besides, that even with production at a third of maximum economy of scale, in terms of unit cost of production, costs would rise only 5% or so. I think you could go well below that, and still have the minor increases in production cost offset by decreased distribution cost (Ralph Borsodi's law). Kirkpatrick Sale claims that most light and medium consumer goods can be produced fairly efficiently in factories of fewer than fifty workers, serving a market of a few thousand. No doubt there would be cultural problems presented by the bad habit of looking to men in suits to fix everything from their desks 1000 miles away. But there's no inherent barrier to such a diversified local economy that couldn't be solved by intensive education in (the 1970s version of) Karl Hess, Colin Ward, and the *Appropriate Technology Sourcebook*. >Most IO economists think the effect of patents is over-estimated. In >exceptional industries like pharmaceuticals where patents are important, >the main effect would probably just be to end most R&D. Do you mean over-estimated in terms of consumer cost, the level of concentration, the extent of Western control of production in the Third World, or something else? I think the IP provisions of GATT were important to those who wanted to prevent the emergence of native-owned competition. David Noble, in *America by Design*, argued that pooling or exchange of patents has been one of the chief mechanisms for industrial concentration. The U.S. chemical industry received a huge boost during WWI when A. Mitchell Palmer distributed seized German patents to American companies (weighted heavily toward the largest). >Tucker is a great writer, but his economic understanding was spotty at >best. Rothbard has a good critique in *Egalitarianism as a Revolt >Against Nature*. A few simple points: >1. What Tucker calls the "money monopoly" in fact leads to a much >higher rate of monetary growth than free banking would. But how much *availability*, to what groups, and at what interest cost? >2. You can argue about exactly what effect government land grants had >on the land market. But land ownership has never been concentrated >enough in the U.S. for collusion to work. Even if you handed all land >over to 1000 corporations, there is little reason to think land prices >would be any higher. The mutualist critique of landlordism goes beyond land grants. In settler societies like this, one of the early state's most important actions is to preempt ownership of land, transfer it to politically connected groups like land speculators, railroads, and so forth, and at the same time restrict access by homesteaders (As Albert Nock put it, expropriation always precedes exploitation). But at least as important is the ongoing restriction of access to land, by enforcing absenee landlord rights over tenants and over unoccupied land. It is by this ongoing restriction of access that occupier and user has to pay a monopoly price to the landlord. >3. Tariffs, as I said, are globally deconcentrating. Without them, >inefficient national industries would be driven out of business by the >world's best. Historically, though, tariffs also first helped to build up concentrated industry on a national scale *within* this country. First Britain, then the U.S., industrialized under the protection of tariffs, and then adopted "free trade" as an ideology when it was safe to do so. >During the 1990's, we were able to see the California military high-tech >sector switch significantly into civilian production. The latter may >have been less concentrated in some ways, but it is not a clear call >either, even in the areas where copyright doesn't matter. Nevertheless, the high tech industry is the collective beneficiary of past state capitalism or "military Keynesianism," and its ability to make such strategic changes is heavily influenced by a privileged position resulting from previous state aid to accumulation. >I've heard this whole story many times. It has some kernels of truth, >but it is very one-sided. Are you seriously claiming that market shares >have been "stable" ever since the Clayton Act? *Because* of it? Let's say *more* stable, and that it was a contributing factor. Most of the twentieth century regulatory state, in one way or another, serves to cartelize the economy, and was backed by one faction or another of big business. >I'd say you're missing the main point of the rent-seeking literature: It >doesn't actually on net benefit "business." Firms invest in lobbying >until lobbying earns a normal rate of return. It doesn't increase >profits on net. It just wastes resources. I don't entirely disagree. Some of the most central forms of legal privilege are probably to "business" as a whole, at the expense of labor (both as wage-earners and taxpayers). But I agree that most subsidies to big business and most regulatory cartelization is at the expense of overall efficiency. The same was true of mercantilism as Adam Smith described it. State capitalism is subsidizing the inefficiencies of corporate centralization at our expense. On a still narrower scale, sometimes one broad coalition of large corporate interests uses the state for its own benefit, at the expense of other large corporate interests. On this last, both G. William Domhoff and Thomas Ferguson did some good work on the New Deal as reflecting the interests of capital-intensive, export-oriented industry, at the expense of groups represented in the NAM. >In any case, what about the other anti-bigness policies I mentioned? >Double taxation of corporate income? I'd say the net effect of the corporate income tax is cartelizing. It just heightens the contrast between favored beneficiaries of state capitalism (mainly giant corporations), and other (mostly smaller) firms. Exemptions, tax credits, and other tax expenditures go disproportionately to the largest, most politically connected corporations. Many of the largest corporations pay little or no corporate income tax, thanks to such tax expenditures. So in effect, the corporate income tax is only for those without political connections. Regulatory exemptions for small >business? Extra liability exposure of big business? It is hard to see >how these are "rent-seeking measures on behalf of corporate power." But the economy is concentrated enough, in most forms of production, that companies small enough to fall under these exemptions are largely irrelevant anyway. I haven't heard of many auto companies with under 50 or 100 workers. I don't think such exemptions have any significant net effect on mitigating the overall trend of encouraging concentration. _________________________________________________________________ Send and receive Hotmail on your mobile device: http://mobile.msn.com
