Are Governments Discovering the Price Mechanism?

At Division of Labour, my co-blogger Frank Stephenson calls attention to this article on how states and municipalities are coming up with new user fees that they’re using to cover budget shortfalls. Some of the ideas discussed, like fees for emergency response and fees to dump trash in a landfill, are excellent ideas. Some of the other ideas are less sound. Nonetheless, I think this could be a step in the right direction. I remain somewhat skeptical because they haven’t taken the second step, which is to privatize the operations in question and allow competition. Pricing the costs and benefits of people’s actions is a great thing. Maintaining a monopoly is not.

I think we could move in this direction, but it will require an ideological change. At the end of the article, a lady who was charged for emergency response after she sideswiped someone said that she doesn’t plan to pay “because it isn’t fair.” Implicit in this is the assumption that it is somehow fair for everyone else to bear the costs of responding to an accident she caused. I expect, though, that people will come to see the fundamental “fairness” of the market as they accumulate experience bearing the costs and benefits of their actions.

Art Carden is a Research Fellow at the Independent Institute and Associate Professor of Economics and Business at Rhodes College.
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