Comment by ksdale | Hacker News Reader

Comment by ksdale | Hacker News Reader

This is a super interesting series, but I'm failing to see how most of the issues he covers are market failures. I love the way he explains infrastructure as an investment, but it seems like most of these infrastructure projects would... not be pursued by someone who was responsible for the full cost (naturally, negative externalities can be market failures, but are they in this case?)?

I suppose it's some sort of market failure that municipalities are allowed to basically kick the can down the road, building ever more infrastructure without the revenue to sustain it, but that's generally not at all what people mean when they talk about market failures, is it?

As I said, I love this series, and he sounds right about everything, but calling it a journey from free market ideology seems odd, since most of the issues he has are with governments making bad investment decisions (unless I'm completely misreading this). If they were companies they would have gone out of business and lost their ability to make such bad decisions (hopefully, if not, that would also be a market failure). It just seems odd to describe actions by governments as actions by market participants when the line is usually drawn between government actors and market participants.

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.

Then the title of the series is badly worded. The journey is not from free market ideology to another viewpoint, as the title suggests. It is more an awakening to the fact that we do not have a free market or at least to a set of facts about how strongly the markets are inhibited by governments.

Absolutely no idea why this is being down-voted, given the grandparent gave all the evidence required to support this argument.

The article explicitly warns of that sort of confirmation bias.

In particular, it points out that the free market had already failed the people in the community. The remedy, essentially government financial incentives to business, was the only thing that made enterprise possible. But since the whole system innately runs at a loss for the comunity, a harsh future reckoning arises.

So it points to a possible deep flaw in our economic system and underling assumptions that simple theories obviously do not explain.

After all, one should believe the simplest working explanation, but certainly no simpler. The complete confidence in completely unfettered markets is apparently overly simplistic. Likewise, some forms of business incentives are counter productive.

Thank you for responding!

I'm not super familiar with Strong Towns, but I really appreciate the work that's gone into it and I'm definitely going to read more.

As for the hidden costs, it reminds me of assessments in HOAs and condo associations. Once infrastructure starts to age, it can become unbelievably expensive to perform even basic maintenance, as you mention. In instances where the people who live in a place are responsible for way more of the costs themselves, the picture starts to look a lot less rosy!

I guess my issue with the free market vs not free market framing is that, while I agree completely with you that the system in not a functioning free market at all, the title of the series implies that we need to move away from a free market? But then, as you say, the system is already not that. I don't have much of an opinion one way or another, besides believing that this sort of financial analysis is very important.

Thank you for taking the time to respond!

Tell Chuck I'm a big big fan of his writings!

> This isn’t super easy to see because it’s hidden in a bunch of cultural stuff we just take for granted.

This is why sociologist mostly clump all the ism (capitalism, socialism, etc) into religion. They work within the same framework.

If someone said "give all the poor people money to improve the life of a rich person who owns thousands of hotels" you would trhow that person out of the window. Now dress it in the complex Myths, which the article tries to unwrap, and everyone buys!

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.

I agree completely. I would absolutely consider myself a "free market ideologue", but my definition of that seems to be a far cry from the author's.

From the city's perspective, they have to at least cover their expenses. Infrastructure may be an acceptable place for them to have a net loss as long as it's made up somewhere else in the budget, but municipal infrastructure investment should not viewed as a means of maintaining solvency in and of itself.

Considered in the author's perspective, a municipality differs from a for-profit company only in that it also has the responsibility to provide services that are not otherwise profitable; in short, they coerce their residence to pay for things - by force if necessary.

If it were profitable to run a $7m (or $13m, as it turned out) infrastructure project to support a proposed airport business park, then why would the government need to do it? Why wouldn't the developer of the business park do it?

>you can't just assume that the choice which grew the market was the right choice.

If the wasted money was taken from taxes that were taken from the market, can we really say the market grew? It sounds like the business center project shrunk the economy overall.

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.

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