Our Amazing Somewhat-free Economy
Last Saturday, I woke up at 1:45 a.m. feeling sick as a dog. I didn’t get back to sleep. I had a bad cold, a stuffed-up nose, a headache, and lots of phlegm. (I apologize if this is TMI.) When my wife woke up, she told me I should take Advil. I’m careful not to overdo drugs, and so I took only one Advil. Within an hour, I felt better, not better enough to do anything other than sleep, but better. My headache was gone.
Because I had time to reflect, I told my wife that I didn’t remember having Advil as a child. She said that was because it didn’t exist then. She was right. Ibuprofen, of which Advil is a particular brand, didn’t become available in the United States until 1974, when I was in my early twenties. That got me thinking about the huge range of high-quality cheap goods that we have available in this economy. Of course, because I’m an economist, it reminded me of what’s required for those goods to keep being made and for better ones to replace them. What we need is a fairly free economy. Virtually every government move to make that economy less free, whether by regulating, having the government take over an industry, or taxing more, will reduce our economic progress.
This is from David R. Henderson, “Our Amazing Somewhat-free Economy,” Defining Ideas, October 6, 2022.
One tragic case of government ownership in recent years is the government-owned water system in Jackson, Mississippi. In a March 2021 article in Mississippi Today, Anna Wolfe tells how the water system deteriorated over the years. She attributes the deterioration to “a shrinking city, aging infrastructure, and racism.” But she is a good enough reporter that, without totally seeing its significance, she lands on the real reason for the water problems, in a quote from University of Wisconsin professor Manuel Teodoro:
“The nature of local politics is that city governments will tend to neglect utilities until they break because they’re literally buried,” he [Teodoro] said. “One of the things that is a perennial challenge for governments that operate water systems is that the quality of the water system is very hard for people to observe. But the price is very easy for them to observe.”
The quality of the water system is hard to observe. But the quality of infrastructure in many for-profit businesses is hard to observe and yet many of these businesses deliver a consistently high quality. What makes for bad results is that the quality of the water system is hard to observe and that it’s run by government officials who have the wrong incentives.
Read the whole thing.