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  • This “Privatization” Is a Fake

    Posted on by Azrael 1 Comment

    This “Privatization” Is a Fake

    “Welcome to the beginning of a new era for American infrastructure,” said Vice President Mike Pence while introducing Donald Trump for a press conference. “Starting today,” Pence continued, “this president will take historic steps to keep his promise to rebuild America.”

    Wow, that’s some serious hoopla. Excited?

    Well, curb your enthusiasm. What’s happening is not awful, and it is probably even essential, but it marks no new era.

    Trump was announcing… what exactly? It was a memo with a signature but has no force of law. Still, there was a big press conference, remarks by the President, multiple rounds of applause, and a formal signing that actually does nothing at all.

    This seems to be a pattern. The public relations element of this administration’s actions is wildly outstripping the reality. That is both good and bad. The unwelcome parts of the Trump agenda (protectionism, drug warriorism, travel restrictions) have so far proven to be as overblown as the welcome parts (health care reform, tax cuts, and privatization).

    Fake Privatization



    The memo Trump signed was an endorsement of an idea to “privatize” Air Traffic Control, but the word is in quotes because that’s not actually what the legislation does – and yes, there is legislation, pushed by Bill Shuster, the Republican chair of the House Transportation and Infrastructure Committee. The idea itself has been around since the 1970s. Some form of spinning off Air Traffic Control has already been successfully adopted by 50 other nations.

    The US, with air traffic control as part of a huge regulatory bureaucracy, is an anomaly at this point. Old-fashioned, unworkable. The proposed change does the following, according to Wired Magazine:

    Trump wants to hand over the nation’s air traffic control infrastructure to a private, nonprofit entity with its own board made up of airlines, unions, airports, and federal officials (like a real company!)… The FAA would oversee this new nonprofit entity, which would be funded through user fees – like takeoff and landing charges – instead of the excise taxes on passenger tickets and fuel that currently fund the country’s aviation system. Moving air traffic controllers from the FAA to this new organization would take about three years, the Trump administration estimates

    There you have it. It’s a new government-backed nonprofit organization, overseen by government with government officials on the board.

    It will probably be in a better position than the current government bureaucracy to be adaptive and that could translate to a better experience for consumers, eventually.

    Again, that’s probably an improvement. It is certainly not privatization. It looks more like what happened to the US post office: it became the US postal service, with independent operations and financing. Again, maybe an improvement. But this is not the new permissioning of competition, market-based pricing, or free enterprise. Not anywhere close to it.

    Real Deregulation 

    The first great strides toward introducing markets to the airline industry came in 1978 with the Airline Deregulation Act. It’s hard to imagine, but the government used to control all fares, routes, and industry structure. That meant flying was mostly for the elite who could afford it. After this partial deregulation, everything changed. Fares fell 30% over the next two decades, and another 25% since, and the number of passengers on domestic flights soared. It’s what made flying a normal experience in American life.

    However, none of it went far enough. There is still no free market in airports. The barriers to building new airports are almost insurmountable. Existing airports face an almost impossible time just making new runways. Airports themselves can be privately owned, but deal with a labyrinth of regulations on pricing. What John Meyer wrote 17 years ago remains true:

    Neither the use nor the supply of airport runways and air traffic control services is determined on the basis of their highest-value uses. A commercial jet with hundreds of passengers, paying thousands of dollars in ticket and jet fuel taxes, is given no more priority in departing and landing than a small private aircraft. Access determined by first-come, first-served queuing is a guarantee that demand and supply will be chronically mismatched and congestion and delays will ensue, with air travelers suffering as a result.

    Airlines themselves cannot manage their industry structure outside federal antitrust regulations. The FAA’s rules are stopping modernization in the use of drones, Uber for flying, and air space access.

    Then you have the security problem. The TSA was created by Congress after 9-11, effectively nationalizing airline security. The high costs and delays of that decision created 10 years of hell for consumers and airlines, and this never ends. No one is even talking about the privatization of this system, even though no institution has more incentive to provide security than airlines and their customers.

    The votes for nationalization in Congress were nearly unanimous, suggesting that the political class learns nothing from history. Put a government bureaucracy in charge of airport security? What do you think will happen? Exactly what did happen: massive inefficiency, high cost, pointless invasions of privacy, and no innovation.

    Real Reform

    It’s fun to dream about what a real infrastructure revolution would look like. This is my preferred slogan: sell it all! What if the federal highways were actually sold to private enterprise and managed entirely by them? What if road entrepreneurs could build and finance them as they see fit? 

    The economics of that would not be unlike the way the internet works today: advertising could fund management and ownership could change hands based on a profit-and-loss system. Bridges and dams could be sold as assets and owned by corporations, and renamed on that basis. Whole sectors of public property in cities could go private, like Atlantic Station in Atlanta, where even the policing is private.

    Maybe we could finally get our flying car.

    The main resistance to a serious and sweeping infrastructure reform is the fear that no one could know for sure what the results would be. But that is a feature and not a bug. The whole point of freedom is to discover new ways of serving each other in a voluntary society: no central plans, no bureaucrats predetermining results, no regulations killing creativity.

    That would indeed mark a new era for infrastructure.


    Jeffrey A. Tucker

    Jeffrey Tucker is Director of Content for the Foundation for Economic Education. He is also Chief Liberty Officer and founder of Liberty.me, Distinguished Honorary Member of Mises Brazil, research fellow at the Acton Institute, policy adviser of the Heartland Institute, founder of the CryptoCurrency Conference, member of the editorial board of the Molinari Review, an advisor to the blockchain application builder Factom, and author of five books. He has written 150 introductions to books and many thousands of articles appearing in the scholarly and popular press.

    This article was originally published on FEE.org. Read the original article.


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  • Don’t Thank the Government for Your iPhone

    Posted on by Azrael 1 Comment

    Don’t Thank the Government for Your iPhone

    There is much chortling in economists’ circles at this tweet from Marianna Mazzucato:

    Yes, I know, but then economists don’t have much in the way of jokes. The laughter is because Ms. Mazzucato is the economist who insists that government is responsible for innovation in this world of ours. Yes, that’s right, the same government that took four months to notice a typo on a visa application, she argues, is the one which made the iPhone possible.

    She’s written an entire book on the subject of the entrepreneurial state and is setting up an institute to propagate the idea.

    Invention vs. Innovation vs. Government


    The problem with her assertion is that she, and her acolytes, have forgotten the basic economics of invention and innovation – something which we really should remember given that William Baumol, the man who explained it all to us, died this past week.

    The essential point is that we must distinguish between invention – the creation of new things – and innovation – the combining of extant things to enable new things to be done. Baumol was insistent that the state was equally good, or equally bad, if you prefer, at that invention part in comparison with the market unadorned. But the market performed heroically in comparison with the state with regard to innovation.

    This is a hugely important distinction – don’t forget that the word “entrepreneur” is not meant to mean someone who invents new stuff, it’s meant to mean someone who organizes stuff in a new manner. An entrepreneur collates capital, labor, and technology in order either to sate some human need or to do so in a different manner. The state, as Baumol insists, is bad at being the entrepreneur.

    It’s not even, as a series at The Register shows, very good at supporting the invention either.

    Mazzucato’s basic observation is that the varied underlying technologies which go into an iPhone were all backed by government money. The touch screen, for example: it was, in a small way, state-funded in America. But the Register story is all about how the British state invested in an earlier solution to the same problem and entirely messed it up.

    You’d think that if the state were taking 40 percent of everything everyone does every year, then, as with the blind monkey who occasionally finds a banana, we should get some useful tech out at the other end. However, the broad point is that this isn’t an efficient way of doing it – whether or not it produces the odd useful result.

    Where Government Funds Start and Stop

    And even this is to miss Baumol’s point. Let us concede, for the sake of argument, that all of the iPhone technologies did come from government paid research. GPS, for example, was designed to let soldiers know where they were and where the enemy was assumed to be. We can call that invention. But no government ever thought to put that same technology into a smartphone so that we could be sent an ad by the doughnut shop we just walked past. That’s innovation, a new use for an extant piece of technology.

    Nor has any government ever designed a successful smartphone. Even if the basic technologies all were tax-supported, government didn’t do the innovation. Apple designed and made the iPhone, not government.

    As for our government, we wanted to have a slice of the equity in what was being developed with tax money – the touch screen technology. The American version of the same sort of thing was also developed with tax money through Darpa, the defense research agency. But the one thing that Darpa never does do is take equity stakes in technologies it funds. That’s why any old entrepreneur can pick up a Darpa-funded technology, play with it, and see if it can be combined in some useful manner into something people want.

    Mazzucato, however, insists this sort of government invention must be run the British, unsuccessful way, not in the successful and American manner.

    This is to misunderstand economics at an even more basic level than Baumol’s ideas, for the reason that we ask government to fund basic research is because it is a “public good,” something that the private sector will not fund because it is almost impossible to make a profit out of it. Thus there will be too little production of public goods and we’ll be made richer if the state overcomes this problem.

    Mazzucato is now insisting that the state must take ownership of the public goods it creates. Yet the very reason we ask the state to create them is because it’s damn near impossible to usefully own them. This is not a notably logical line of reasoning.

    The very analysis which leads to us asking the government to tax-fund certain research is the very reason why the government shouldn’t be trying to own the results.

    Inventions are public goods. Gaining access to public goods is one of the reasons we have government – because ownership of such isn’t really possible. Which is why, if the state does produce them, it should give them away. We’ve paid our taxes, we’ve got our public goods, what’s the problem here?

    And no, the state did not invent the iPhone. That’s innovation, the one thing government is provably, ridiculously, bad at.

    Republished from CapX.


    Tim Worstall

    Tim is a Fellow at the Adam Smith Institute in London

    This article was originally published on FEE.org. Read the original article.


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  • Americans Are Embracing Bad Government Because They Don’t Know History

    Posted on by Azrael Comment

    Americans Are Embracing Bad Government Because They Don’t Know History

    Recent news has proudly informed us that U.S. graduation rates are rising. Unfortunately, rising grad rates don’t tell the whole story.

    If one truly wants to know how American students are doing in school, a look at the Nation’s Report Card might offer a better picture. Those numbers tell us that not even half of America’s high school seniors are proficient in any subject. The area they rank the worst in? U.S. History.

    The fact that only 12 percent of U.S. high school seniors are proficient in history was recently reflected in another survey put out by YouGov. That survey asked Americans of all ages how familiar they were with famous leaders, many of whom were prominent Communist leaders from the last century. As the chart below shows, a number of millennials described themselves as “unfamiliar” with these leaders.

    Perhaps that’s also why these same millennials were unfamiliar with the number of people killed under Communist leadership. In fact, 32 percent of millennials and gen-Xers believed that more people were killed under George W. Bush during his time in office than were killed during Joseph Stalin’s time in power.

    But so what, right? History is a boring subject full of old, privileged white men. Does it matter if the current generation of students have no clue whether or not one leader killed more people than another from a rival government?

    According to Thomas Jefferson, it certainly does. In 1807 he wrote, “History, in general, only informs us what bad government is.”

    In other words, if we expect our nation to stay on a straight course, then we need to make sure our students have a clear knowledge of governments throughout history – what worked and what didn’t.

    Is it possible that our nation is in its current state because recent generations have not learned the lessons which past empires and nations teach us through the history books?

    This first appeared at Intellectual Takeout.

    Annie Holmquist


    Annie Holmquist

    Annie is a research associate with Intellectual Takeout. In her role, she writes for the blog, conducts a variety of research for the organization’s websites and social media pages, and assists with development projects. She particularly loves digging into the historical aspects of America’s educational structure.

     

    This article was originally published on FEE.org. Read the original article.


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