My Journey from Free Market Ideologue, Part 5: Commercial Development

As a friend of Chuck, I can tell you he means it as follows:

Originally he believed that we had a well-functioning free market, and that everything that got built was just the market expressing consumer preferences. Over time he (and I and many others) began to realize that the system was not a functioning free-market at all, but rather a strange amalgam of layers of public policy and social engineering with really bad side effects.

This isn’t super easy to see because it’s hidden in a bunch of cultural stuff we just take for granted. Things like how so many postwar neighborhood have 40’ wide paved streets with curb and gutter, sewer, and buried utilities. That must be because it’s practical and affordable, right? But when you really dig into it you find that the homes lining that street don’t even pay a meaningful fraction of the maintenance cost of that infrastructure... so where does the money come from? That turns out to be very opaque and hard to answer. (You can read about it here: https://www.strongtowns.org/the-growth-ponzi-scheme)

And so on. So as we began to figure this stuff out, we built Strong Towns to share what we were finding and try and get a lot more people to look at it in their own communities so we could figure out how widespread these phenomena were, and start to figuring out what to do about it. That journey is still in progress.

I think his free market ideology wasn't "the government ruins everything it touches" or "there are no market failures" but rather "anything that grows the market is good." He considered it to be "free market" when cities did things that contributed to economic growth even if the cities were doing it. Consequently, his point isn't about showing that there were market failures, but that you can't just assume that the choice which grew the market was the right choice.

It is about how he used to believe his world was the product of a free market, and how he slowly realised that this was not the case - that market forces are irrelevant in the world of civil engineering, as public investment does not typically even involve doing the simplest possible analyses of long-term costs and revenue. From "idealogue", pinning his entire perspective on a limited set of theoretical principles, to someone who recognises the messy and broken reality that doesn't actually fit into the theoretical mold.

>At this point in my life, I was a self-described free-market Republican with an outspoken passion for markets and my chosen profession of civil engineering, which to me was a technical way to say “city building.” If I had been pushed to reconcile my rejection of congestion pricing with my support for the free market, I would have had no problem. I would have said something like:

> Markets are about the expression of personal preference. It was clear that, since most people drove automobiles, auto-based infrastructure was the clear market preference. Since most people lived in single-family homes, they were also the clear market preference. Given those clear and obvious preferences—combined with the fact that people paid taxes and expected the government to respond to their desires—charging people more for something they already paid for was a ploy to benefit the rich. Instead of congestion pricing, the state should have been building more capacity.

If the market decided, the planet wouldn't last, because markets are absolutely incapable of long-term strategic planning - long-term meaning half-century or more.

When your accounting system includes biases that specifically exclude certain kinds of value - i.e. anything currently labelled an externality - there's going to be a hard limit on the rationality and foresight of any decisions that rely on it.

It seems like less of an argument and more of a demonstration on how local governments are getting swindled by property developers. These developers make promises that all this money will be generated in the local economy if local governments agree to subsidize development. The agreements these developers make with the governments effectively ensure that most of that economic activity goes into their pockets, while ensuring that locals end up bearing the costs of maintaining the new facilities through increased property taxes.

In essence, these deals get sold on the fact that they will bring $X million dollars into the local economy, but nobody realizes that 0.95*$X million dollars is going right back out again until it's too late. After a few years, the city coffers would be empty and maintenance costs of the infrastructure built for these developments would leave them insolvent.

The tie back to the "free market" is a little less clear. But it seems to be to be a collection of anecdotes that "economic activity" doesn't magically flow into government coffers. The whole concept of cutting taxes to raise revenue is a joke and doesn't work. Small towns need to operate like a for profit business and take a hard look at the ROI for infrastructure investments, and this means collecting taxes.

Cronyism is found in all political systems and in some systems like fascism might even be considered a defining characteristic. People trying to manipulate the political system for economic gain is unfortunately always going to happen whether there is little or a lot of economic freedom in the system.

>...When capitalism produces outcomes they approve of, it's because capitalism is good. When capitalism produces outcomes they don't approve of, it's because what was going on wasn't really capitalism, it was its debased, photo-negative, bearded-Spock version, "crony capitalism."

Can you give an example?

Its not just right wing media - this is the very definition of confirmation bias.

Socialists do the same thing. Outcomes they like can be attributed to collectivism and those they don’t like they attribute to capitalism / free markets.

All ideologies have costs, benefits, and results that deviate from the ideal. Doesn’t mean they are “wrong.”

Absolutely right. It is as disengenuous as someone who would call Stalinist Russia "crony communism".

People who are not willing to refine their models in the face of new evidence are more idealogues than thinkers.