carnes@gargoyle.UUCP (Richard Carnes) (10/05/85)
In article <10516@ucbvax.ARPA> mcgeer@ucbvax.UUCP (Rick McGeer) writes: >>>Finally, whether you call them "needs" or "demands", you're still >>>talking about the allocation of scarce resources...which is done optimally >>>in a free market. > >It is not well-known to be false. See Alchian & Allen, or Hirschleifer. >Or read Smith, or Pareto, or Hume, or Mill, or Ricardo, or Friedman (either >one) or Stigler, or von Hayek. Of all of history's great economists from >Smith on down, only a very few would not argue this. I am more than a little >surprised that you would make this statement. Most statist economists that >I know would argue that, though the market was optimal, it did not >address concerns of equity. Correct me if I am mistaken, but to my knowledge none of the above-mentioned economists makes the blanket and unqualified statement that "the free market optimally allocates scarce resources," unless perhaps in a textbook which makes oversimplified statements for the consumption of students or as a rhetorical statement which is not intended to be theoretically precise. [BTW, would some libertarian kindly define "statist"? "Non-libertarian" is not a helpful definition. I would like to know the nature of the crime of which I am accused.] There are many situations that can be described in which the market does not "optimally" allocate resources (let's assume for the moment we all agree on what "optimal" means). Here is a very simple one: Let us say there is a town with owners of used cars and potential buyers of the cars. The cars vary in quality from great to lemons, but only the owners know the quality of the cars. A potential buyer must assume that a used car he is looking at is of average quality, and therefore he would only be willing to pay (say) $1000, the price of an average used car. But the only owners willing to sell at that price are those with cars of below average quality. The potential buyers realize this, and so are not willing to buy any car that an owner is willing to sell. Hence there are no transactions, even though such trades would be beneficial to both parties. It is the asymmetry of information that causes the market inefficiency. It is clear that such information asymmetries are common in markets. I'm not saying anything that isn't well known to economists. The article on which this argument is based appeared in the *Quarterly Journal of Economics* in 1970 (G. Akerlof, "The Market for Lemons"). Other well-known market inefficiencies are denoted by the terms prisoner's dilemmas, ethical hazard, externalities, corner solutions, and free riding. I'll elaborate on these later on if I have time. In addition, reasonable arguments can be made (I'll probably post them to the net at some point) that minimum wage laws, anti-discrimination laws such as affirmative action, and vouchers (similar to M. Friedman's educational vouchers) for subsidizing the purchase of basic necessities, can all, at least in some circumstances, increase the efficiency of the marketplace. Please note that I am not now talking about *equity*; I mean *efficiency*. I agree that markets are extremely useful. I am satisfied, unless someone convinces me otherwise, that Arrow, Debreu, and Hahn have shown that the market, assuming some stringent conditions such as perfect competition, achieves a Pareto-optimal state. But they are discussing an abstract model, not the actually existing marketplace, and in addition Pareto optimality is a very debatable standard for optimality, since it does not address some distributional questions that many people feel to be important in assessing social outcomes. My main point is that I object to Rick's dogmatic claim that the free market optimally allocates resources without qualification and without defining "optimality." Yes, a certain model produces a certain *kind* of optimality, and this is useful and important information. But the full story is far more complex than this, and does not lead to the conclusion that the absence of government intervention is the best policy in all circumstances. -- Richard Carnes, ihnp4!gargoyle!carnes
laura@l5.uucp (Laura Creighton) (10/07/85)
In article <206@gargoyle.UUCP> carnes@gargoyle.UUCP (Richard Carnes) writes: > >There are many situations that can be described in which the market >does not "optimally" allocate resources (let's assume for the moment >we all agree on what "optimal" means). Here is a very simple one: > >Let us say there is a town with owners of used cars and potential >buyers of the cars. The cars vary in quality from great to lemons, >but only the owners know the quality of the cars. A potential buyer >must assume that a used car he is looking at is of average quality, >and therefore he would only be willing to pay (say) $1000, the price >of an average used car. But the only owners willing to sell at that >price are those with cars of below average quality. The potential >buyers realize this, and so are not willing to buy any car that an >owner is willing to sell. Hence there are no transactions, even >though such trades would be beneficial to both parties. It is the >asymmetry of information that causes the market inefficiency. It is >clear that such information asymmetries are common in markets. > Actually, what you have to read is something by Israel M Kirzner, who seems to be the current libertarian scholar of the asymmetry of information. What you also have to do is to consider how the market operates. Right now in your situation, there is great opportunity for entrepreneurship. (Kirzner defines the ``pure entrepreneur'' as the dealer in information; but I forget in what book and mine are all still in Toronto...grrr...so I can't look it up.) What you have is a lot of car which are worth less-or-equal to $1000 to their owners and worth equal-to-or-more-than $1000 to the buyers. Thus these trades would be beneficial to both parties. The problem is that nobody wants a lemon. However, Joe Entrepeneur-Car Mechanic comes up with a solution. For $50 he will certify all cars that are worth $1000 or more. If everybody adopts this, then there will be an added cost to Fred Car-Buyer/Mechanic who didn't need the efforts of Joe, but as long as the car still is worth the cost of it to him he doesn't lose (he just doesn't win by as much as he could have). The market recovers from such problems very quickly. For this reason the market is useful as a measuerment of information. This is one of the claims against tarrifs and the like: it destroys the market's ability to convey the information of how valuable something is (in terms of other things) by artificially increasing the value of something. -- Laura Creighton (note new address!) sun!l5!laura (that is ell-five, not fifteen) l5!laura@lll-crg.arpa
josh@topaz.RUTGERS.EDU (J Storrs Hall) (10/10/85)
In article <206@gargoyle.UUCP> carnes@gargoyle.UUCP (Richard Carnes) writes: >Let us say there is a town with owners of used cars and potential >buyers of the cars. ... A potential buyer >must assume that a used car he is looking at is of average quality... This is a fallacy, and if the original paper is based on it, it's completely spurious. Considering that the conclusion, that no one will buy or sell used cars, is completely at odds with reality, that doesn't seem unlikely. Assigning the average (of whatever kind) to an unknown random variable is only valid in certain circumstances. The "average" person is a transexual in the middle of their operation... The "average" pickup truck has three-wheel drive... The "average" microcomputer has a thirteen-bit adress space. The average value is only valid if you can show some things about the distribution of the variable, with constraints on what you can validly use the "value" for. Suppose the example were changed to be more true to the model: instead of cars let's talk about sealed boxes with money in them. (Note that the theory assumes a car has a fixed "value", which is absurd.) With a few minor modifications, the model reduces to gambling, in which people pay for an unknown quantity with a mathematically expected value below the fixed price. If we were to believe the logic, gambling would not occur. But people gamble routinely for expected payoffs of less than 50%!!! --JoSH
bob@pedsgd.UUCP (Robert A. Weiler) (10/13/85)
Organization : Perkin-Elmer DSG, Tinton Falls NJ Keywords: In article <3973@topaz.RUTGERS.EDU> josh@topaz.UUCP (J Storrs Hall) writes: >In article <206@gargoyle.UUCP> carnes@gargoyle.UUCP (Richard Carnes) writes: { a parable about car dealers, prospective buyers, and their assumptions } >With a few minor modifications, the model reduces to gambling, >in which people pay for an unknown quantity with a mathematically >expected value below the fixed price. If we were to believe the logic, >gambling would not occur. But people gamble routinely for expected >payoffs of less than 50%!!! >---- > JoSH All you have proven here is that real people routinely behave irrationally, which doesnt seem to fit the Libertarian mold too well. Bob Weiler.
carnes@gargoyle.UUCP (Richard Carnes) (10/24/85)
[carnes] >>Let us say there is a town with owners of used cars and potential >>buyers of the cars. ... A potential buyer >>must assume that a used car he is looking at is of average quality... [JoSH] >This is a fallacy, and if the original paper is based on it, it's >completely spurious. Considering that the conclusion, that no one >will buy or sell used cars, is completely at odds with reality, >that doesn't seem unlikely. > >Assigning the average (of whatever kind) to an unknown random variable >is only valid in certain circumstances. >... if >you can show some things about the distribution of the variable, >with constraints on what you can validly use the "value" for. > >Suppose the example were changed to be more true to the model: instead >of cars let's talk about sealed boxes with money in them. (Note that >the theory assumes a car has a fixed "value", which is absurd.) >With a few minor modifications, the model reduces to gambling, >in which people pay for an unknown quantity with a mathematically >expected value below the fixed price. If we were to believe the logic, >gambling would not occur. But people gamble routinely for expected >payoffs of less than 50%!!! The "lemons" model is one of a class of models of interaction known as critical-mass models. The point of the model will be clearer if I reproduce T. Schelling's remarks about it in *Micromotives and Macrobehavior*. [I recommend this book to readers of this newsgroup. It's very readable as well as theoretically important. The point of *M&M* is to show that one cannot simply add up individual decisions and assume the total to be a simple sum of the decisions; at some threshold the aggregate consequences may negate the individual's intentions. What each individual wants can in the aggregate become a situation that no one wants (as in the case of seatbelt non-use, a point that is overlooked by libertarian critics of seatbelt laws).] "[Akerlof] argued that the seller of a used car knows whether or not it is a lemon; the buyer has to play the averages, knowing only that some cars are lemons but not whether the particular car he's buying is. Buyers will pay only a price that reflects the average frequency of lemons in the used-car crop. That average is a high price for a lemon but understates the worth of the better cars offered on the market. The owners of the better cars are reluctant to sell at a price that makes allowance for the lemons that other people are selling; so the better cars appear less frequently on the market and the average frequency of lemons increases. As customers learn this, they make a greater allowance for lemons in the price they're willing to pay. The cars of average quality in the previous market are now undervalued and their owners less willing to sell them. The percentage frequency of lemons continues to rise. In the end, the market may disappear, although institutional arrangements like guarantees, or the certification of cars by dealers who exploit a reputation for good cars, may keep the used-car market alive. "Akerlof generalized this model to a number of markets in which there is unequal information on the two sides -- insurance companies know less than you do, usually, about whether you are accident prone, or susceptible to hereditary diseases, or are contemplating suicide. Life insurance rates for sixty-five-year-olds must allow for a large fraction who are not long for this world. And those who know they are healthy and have a family history of longevity and are exposed to few risks have to pay the same premium as the poorer risks; life insurance being unattractive at that price, few of them buy it. The average life expectancy of the customers goes down, the rates go up further, and the bargain now looks poor even to those of normal life expenctancy. And so forth." [T. Schelling] -- Richard Carnes, ihnp4!gargoyle!carnes
laura@l5.uucp (Laura Creighton) (10/27/85)
In article <225@gargoyle.UUCP> carnes@gargoyle.UUCP (Richard Carnes) writes: > >"[Akerlof] argued that the seller of a used car knows whether or not >it is a lemon; the buyer has to play the averages, knowing only that >some cars are lemons but not whether the particular car he's buying >is. Wrong-o. The buyer can get an expert opinion from his local mechanic, remember. > Buyers will pay only a price that reflects the average frequency >of lemons in the used-car crop. That average is a high price for a >lemon but understates the worth of the better cars offered on the >market. The owners of the better cars are reluctant to sell at a >price that makes allowance for the lemons that other people are >selling; so the better cars appear less frequently on the market and >the average frequency of lemons increases. Wrong again. The sellers of the good cars will instead come up with a way to demonstrate that they have better than lemon cars. Again, they will get their cars certified by the local mechanic. > As customers learn this, >they make a greater allowance for lemons in the price they're willing >to pay. The cars of average quality in the previous market are now >undervalued and their owners less willing to sell them. The >percentage frequency of lemons continues to rise. In the end, the >market may disappear, although institutional arrangements like >guarantees, or the certification of cars by dealers who exploit a >reputation for good cars, may keep the used-car market alive. What is institutional about the arrangement? > >"Akerlof generalized this model to a number of markets in which there >is unequal information on the two sides -- insurance companies know >less than you do, usually, about whether you are accident prone, or >susceptible to hereditary diseases, or are contemplating suicide. >Life insurance rates for sixty-five-year-olds must allow for a large >fraction who are not long for this world. And those who know they >are healthy and have a family history of longevity and are exposed to >few risks have to pay the same premium as the poorer risks; life >insurance being unattractive at that price, few of them buy it. The >average life expectancy of the customers goes down, the rates go up >further, and the bargain now looks poor even to those of normal life >expenctancy. And so forth." [T. Schelling] But this is only news to those economists who had claimed that there was equal information on both sides. It is particularily ironic that *they* should make this mistake, because economists are primarily in the business of SELLING INFORMATION, and opinions or theories which are their thoughts on information. As a practical matter, insurance companies stay in business. It is even possible to get insurance altered when you can provide good information to the insurance companies that you are a lower risk than the statistical average. (For example, some states and some provinces give (or gave) a lower automobile insurance rate to straight-A high school students than others. Abstainers from alcohol can get a much lower rate on all sorts of insurance.) -- Help beutify the world. I am writing a book called *How To Write Portable C Programs*. Send me anything that you would like to find in such a book when it appears in your bookstores. Get your name mentioned in the credits. Laura Creighton sun!l5!laura (that is ell-five, not fifteen) l5!laura@lll-crg.arpa
franka@mmintl.UUCP (Frank Adams) (10/29/85)
[Not food] In article <225@gargoyle.UUCP> carnes@gargoyle.UUCP (Richard Carnes) writes: >"[Akerlof] argued that the seller of a used car knows whether or not >it is a lemon; the buyer has to play the averages, knowing only that >some cars are lemons but not whether the particular car he's buying >is. Buyers will pay only a price that reflects the average frequency >of lemons in the used-car crop. That average is a high price for a >lemon but understates the worth of the better cars offered on the >market. The owners of the better cars are reluctant to sell at a >price that makes allowance for the lemons that other people are >selling; so the better cars appear less frequently on the market and >the average frequency of lemons increases. As customers learn this, >they make a greater allowance for lemons in the price they're willing >to pay. The cars of average quality in the previous market are now >undervalued and their owners less willing to sell them. The >percentage frequency of lemons continues to rise. In the end, the >market may disappear, although institutional arrangements like >guarantees, or the certification of cars by dealers who exploit a >reputation for good cars, may keep the used-car market alive. Akerlof has a point, and the market may be squeezed out if this effect is strong enough. But there is a countervailing force, which in the case of used cars keeps the market alive. This is the fact that the value of an object is different for different people. Thus there is a point where the seller gets more for the car than it is worth to her, and the buyer pays less than the expected value to him, even taking the chance of buying a lemon into account. Certainly the market is less efficient than it would be if both sides had equal access to information. But the conclusion that the market will disappear is, in general, too strong. Frank Adams ihpn4!philabs!pwa-b!mmintl!franka Multimate International 52 Oakland Ave North E. Hartford, CT 06108
josh@topaz.RUTGERS.EDU (J Storrs Hall) (10/29/85)
In article <225@gargoyle.UUCP> carnes@gargoyle.UUCP (Richard Carnes) writes: >I reproduce T. Schelling's remarks about it in *Micromotives and >Macrobehavior*[:] >[The point] is to show that one cannot simply add up individual decisions >and assume the total to be a simple sum of the decisions; at some >threshold the aggregate consequences may negate the individual's >intentions... So what else is new? "[Every individual] generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. [H]e intends only his own security; and by directing that industry in such a manner as its produce may be of greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." --from "An Inquiry into the Nature and Causes of the Wealth of Nations", by Adam Smith, 1776 > >"[Akerlof] argued that the seller of a used car knows whether or not >it is a lemon; the buyer has to play the averages... You have yet to show that there is any reason to suspect that the buyer has any better knowlege of the average value of used cars than of the value of the specific one he is looking at. This is a common collectivist aggregate fallacy: Would you have us believe that the buyer has taken each car for sale, determined its value, added the values and divided by the number of cars, and is then unable to remember which value corresponded to the car he's looking at? How else is he to know the "average" value? Study some operations research--you'll quickly find that merely taking the middle value of the possible range of values of a variable is usually *not* the right thing to do. In particular, a buyer's best estimate of the value of the car in front of him comes not from a mythical "average", but from a physical inspection of the actual hunk of metal. --JoSH
peter@graffiti.UUCP (Peter da Silva) (11/02/85)
> "[Akerlof] argued that the seller of a used car knows whether or not > it is a lemon; the buyer has to play the averages, knowing only that > some cars are lemons but not whether the particular car he's buying > is. Buyers will pay only a price that reflects the average frequency > of lemons in the used-car crop. That average is a high price for a > lemon but understates the worth of the better cars offered on the > market. The owners of the better cars are reluctant to sell at a > price that makes allowance for the lemons that other people are > selling; so the better cars appear less frequently on the market and > the average frequency of lemons increases. As customers learn this, This is preposterous. It totally ignores one little fact... the value of a used car (or anything else, for that matter) is what people will pay for it. Not some arbitrary "worth". In addition, what are the owners going to do with their old cars that they're now "reluctant to sell"? Presumably they're selling them because they (1) need the money or (2) want to buy a new car. Are they going to stick them in their backyards for the kids to play in or something equally absurd? If this is the sort of argument that people on this board even consider meaningful I'm ashamed of the lot of you, libertarians and liberals alike! No, I'm not telling you which I am. -- Name: Peter da Silva Graphic: `-_-' UUCP: ...!shell!{graffiti,baylor}!peter IAEF: ...!kitty!baylor!peter
carnes@gargoyle.UUCP (Richard Carnes) (11/08/85)
Me: >>[The point] is to show that one cannot simply add up individual decisions >>and assume the total to be a simple sum of the decisions; at some >>threshold the aggregate consequences may negate the individual's >>intentions... JoSH: >So what else is new? [quotes Adam Smith on "invisible hand"] What is new is that Schelling describes, analyzes, and classifies the situations in which macrobehavior is more than a simple sum of micromotives. I especially recommend Chapter 7 of *M&M* ("Hockey Helmets, Daylight Saving, and Other Binary Choices"). This chapter deals with binary choices in which one's choice affects either the choice or the reward (payoff) of others. Examples are: keeping your dog leashed or not, voting yes or no on ERA, staying in the neighborhood or moving out, joining a boycott or not, carrying a gun or not, driving with headlights up or down, getting vaccinated or not, etc. Multi-person Prisoner's Dilemmas are a common class of situations that can arise from such binary choices with externalities. Chapter 7 explains "Schelling diagrams" for the analysis of such collective action situations. This chapter is not especially long or difficult, but it greatly clarifies one's understanding of collective action problems. Sample quote: ______________ Shortly after Teddy Green of the Bruins took a hockey stick in his brain, *Newsweek* (October 6, 1969) commented: Players will not adopt helmets by individual choice for several reasons. Chicago star Bobby Hull cites the simplest factor: "Vanity." But many players honestly believe that helmets will cut their efficiency and put them at a disadvantage, and others fear the ridicule of opponents. The use of helmets will spread only through fear caused by injuries like Green's -- or through a rule making them mandatory.... One player summed up the feelings of many: "It's foolish not to wear a helmet. But I don't -- because the other guys don't. I know that's silly, but most of the players feel the same way. If the league made us do it, though, we'd all wear them and nobody would mind." The *Newsweek* story went on to quote Don Awrey. "When I saw the way Teddy looked, it was an awful feeling.... I'm going to start wearing a helmet now, and I don't care what anybody says." But viewers of Channel 38 (Boston) know that Awrey did not. --T. Schelling -- Richard Carnes, ihnp4!gargoyle!carnes
carnes@gargoyle.UUCP (Richard Carnes) (11/28/85)
In response to the postings concerning the "market for lemons" model, Radford Neal writes: >The postings on this subject seem to me to be singularly unenlightening. This posting is guaranteed to be a source of enlightenment, or your money will be cheerfully refunded. > 1) Limited information is an essential characteristic of the real world. > Saying the free market is flawed because not everyone knows everything > is silly. But it is not silly to point out that, because of unequally distributed information, government intervention can outperform the free market in some situations. I'll try to explain how this happens. First, I will let George Akerlof explain the point (from his article in *Quarterly J Econ* 84(3), 1970): There are many markets in which buyers use some market statistic to judge the quality of prospective purchases. In this case there is incentive for sellers to market poor quality merchandise, since the returns for good quality accrue mainly to the entire group whose statistic is affected rather than to the individual seller [multi-person Prisoner's Dilemma -- RC]. As a result there tends to be a reduction in the average quality of goods and also in the size of the market. It should also be perceived that in these markets social and private returns differ, and therefore, in some cases, governmental intervention may increase the welfare of all parties. Or private institutions [guarantees, brand-name goods, chains] may arise to take advantage of the potential increases in welfare which can accrue to all parties. By nature, however, these institutions are nonatomistic, and therefore concentrations of power -- with ill consequences of their own -- can develop. In order to explain how this happens, we construct a model, using the automobile market as a convenient illustration. NB: This is not supposed to be a realistic description of how the auto market works. A MODEL shows what will happen *given a particular set of assumptions*. So: Let there be just four kinds of cars: new and used cars, and good cars and lemons. A new car is either good or a lemon, and the same is true of used cars. Individual buyers are assumed to know the probability q that the new car they buy is a good car; the probability it is a lemon is (1 - q). By assumption they don't know if a particular new car is good; they only know the proportion of good cars produced, which of course is q. But after owning a car for a length of time, the owner can assign a new, more accurate probability to the event that his car is a lemon. So the owners of used cars know more about the quality of their cars than potential buyers. We are assuming as a hypothesis that it is impossible for a buyer to tell whether a given car is good or a lemon; therefore good and bad used cars must sell at the same price. Now if a used car had the same valuation as a new car, it would be advantageous for the owner of a probable lemon to trade it at the price of a new car, and buy a new car, at a higher probability q of being good than the car he just sold. So the market price of used cars will be lower than that of new cars, and the owner of a *good* used car will be locked in: not only can he not receive the "true" value of his car (what he could get for it if buyers knew its quality), but he cannot even obtain the expected value of a new car. Thus we have a modified version of Gresham's law. Most cars traded will be lemons, and good cars may not be traded at all. Bad cars drive out the good because they sell at the same price, because a buyer, by hypothesis, has no way of telling the difference between good cars and lemons. So that is the first model. Akerlof goes on to show that worse things can happen when we assume that there are different grades of quality, not just good/bad. In this case it is possible to have the bad driving out the third-rate driving out the second-rate driving out the first-rate, so that eventually no goods will be traded at any price level. Utility theory is used to derive this result. Now how do these models pertain to the real world? One application is to insurance. People over 65 have great difficulty in buying medical insurance. Why doesn't the price rise to match the risk? As the price level rises the people who insure themselves will be those who are increasingly certain they will need the insurance; it is easier for the applicant to assess the risks involved than the insurance company. So the average medical condition of applicants deteriorates as the price level rises, so that insurance sales may not take place at any price; just as the average quality of used cars supplied fell with a corresponding fall in the price level. As an insurance textbook puts it: Generally speaking policies are not available at ages materially greater than 65.... The term premiums are too high for any but the most pessimistic (which is to say the least healthy) insureds to find attractive. [O.D. Dickerson, *Health Insurance*] The principle at work here is called "adverse selection," and is potentially present in all lines of insurance. Akerlof again: This adds one major argument in favor of medicare [since insurance companies must screen their applicants, especially those who seek insurance on their own initiative -- insurance is not a commodity available for sale to all buyers]. On a cost benefit basis medicare may pay off: for it is quite possible that every individual in the market would be willing to pay the expected cost of his medicare and buy insurance, yet no insurance company can afford to sell him a policy -- for at any price it will attract too many "lemons." The welfare economics of medicare, in this view, is *exactly* analogous to the usual classroom argument for public expenditure on roads. The same argument may apply to Social Security, conceived as a form of poverty insurance: the private sector would not provide it, even though both buyers and sellers would be better off with it, by free-market criteria. Another real-world application concerns the employment of minorities. Contrary to conservative dogma, the motive of profit maximization may lead employers to refuse to hire members of minorities for certain jobs, since ethnic group may serve as a good statistic for the applicant's quality of education and general job capabilities. An employer may make a rational decision not to hire any blacks, say, for responsible positions: it may be difficult to distinguish those with good qualifications from those with poor qualifications because many of them were educated in inner-city schools whose certification of students' abilities is deemed unreliable, so that good grades convey only limited information about job applicants' abilities. As George Stigler wrote, "in a regime of ignorance Enrico Fermi would have been a gardener, Von Neumann a checkout clerk at a drugstore." The rewards for good work in slum schools tend to accrue to the group as a whole, raising its average quality, rather than to the individual. So this is an argument for affirmative action that I can only sketch here: at least in some circumstances, it can *increase* the efficiency of the job market, precisely because information is unequally distributed. Some other applications of the lemons model: Dishonesty in business is a serious problem in underdeveloped countries. Our model gives a possible structure to this statement [and permits us to evaluate the costs of dishonesty].... Credit markets in underdeveloped countries often strongly reflect the operation of the Lemons Principle.... [An example] ... concerns the extortionate rates which the local moneylender charges his clients. In India these high rates of interest have been the leading factor in landlessness. [The credit market is similar to the insurance market.] Various institutions can arise to reduce quality uncertainty: guarantees, brand-names, chains (the Howard Johnson's on the interstate provides a better hamburger than the *average* local restaurant), and licensing, degrees, and even the Nobel Prize. Akerlof points out the importance of *trust* in economic transactions. Informal unwritten guarantees are preconditions for production and trade. Business will suffer where these guarantees are indefinite or lacking: the lemons tend to drive out the plums. I'll try to elaborate on these points and respond to comments when I have time, which may be very soon indeed, possibly within six months. -- Richard Carnes, ihnp4!gargoyle!carnes
radford@calgary.UUCP (Radford Neal) (11/30/85)
> In response to the postings concerning the "market for lemons" model, > Radford Neal writes: > > >The postings on this subject seem to me to be singularly unenlightening. > > This posting is guaranteed to be a source of enlightenment, or your > money will be cheerfully refunded. > > > 1) Limited information is an essential characteristic of the real world. > > Saying the free market is flawed because not everyone knows everything > > is silly. > > But it is not silly to point out that, because of unequally > distributed information, government intervention can outperform the > free market in some situations. I'll try to explain how this > happens. As the following quote admits, you don't in fact explain how government intervention is necessary: > First, I will let George Akerlof explain the point (from his article > in *Quarterly J Econ* 84(3), 1970): > > There are many markets in which buyers use some market statistic to > judge the quality of prospective purchases. In this case there is > incentive for sellers to market poor quality merchandise, since the > returns for good quality accrue mainly to the entire group whose > statistic is affected rather than to the individual seller > [multi-person Prisoner's Dilemma -- RC]. As a result there tends to > be a reduction in the average quality of goods and also in the size > of the market. It should also be perceived that in these markets > social and private returns differ, and therefore, in some cases, > governmental intervention may increase the welfare of all parties. NOTE THE FOLLOWING: > Or private institutions [guarantees, brand-name goods, chains] may > arise to take advantage of the potential increases in welfare which > can accrue to all parties. By nature, however, these institutions > are nonatomistic, and therefore concentrations of power -- with ill > consequences of their own -- can develop. So your own authority says that the market can provide these benefits also, but that this would be bad for other reasons. What he means by "nonatomistic" and why he thinks any concentrations of "power" which the market would develop are worse than concentrations in governments is unclear from this quote, so I won't attempt a refutation at this time. > Richard Carnes, ihnp4!gargoyle!carnes Radford Neal
franka@mmintl.UUCP (Frank Adams) (12/08/85)
In article <589@calgary.UUCP> radford@calgary.UUCP (Radford Neal) writes: >> Or private institutions [guarantees, brand-name goods, chains] may >> arise to take advantage of the potential increases in welfare which >> can accrue to all parties. By nature, however, these institutions >> are nonatomistic, and therefore concentrations of power -- with ill >> consequences of their own -- can develop. > >So your own authority says that the market can provide these benefits >also, but that this would be bad for other reasons. What he means by >"nonatomistic" and why he thinks any concentrations of "power" which >the market would develop are worse than concentrations in governments >is unclear from this quote, so I won't attempt a refutation at this time. The problem is not that such concentrations are *worse* than governments; it is that they may become *indistinguishable* from governments. Look at the medieval guilds. Also, he is not claiming that government is *always* the best solution to such problems, only that it *sometimes* is. Frank Adams ihpn4!philabs!pwa-b!mmintl!franka Multimate International 52 Oakland Ave North E. Hartford, CT 06108
bob@pedsgd.UUCP (Robert A. Weiler) (12/12/85)
Organization : CONCURRENT Computer Corp, Tinton Falls NJ Keywords: In article <849@mmintl.UUCP> franka@mmintl.UUCP (Frank Adams) writes: { another discussion about the market deleted } > >Also, he is not claiming that government is *always* the best solution to >such problems, only that it *sometimes* is. > >Frank Adams ihpn4!philabs!pwa-b!mmintl!franka >Multimate International 52 Oakland Ave North E. Hartford, CT 06108 Here is situation in which a believe government can be a solution to a problem. I have heard on 2 TV programs ( 'Adam Smith's Money World' and 'Innovation') that a successful drug is NOT a cure or a vaccine, it is a treatment. In other words, it is more profitable to create a drug which allows patients to live with their condition than one which prevents or permanently remedies it with few applications. This seems intuitively clear. However, I submit it is in the best interest of the overwhelming majority of the citizens that cures and vaccines be invented. Therefore, this seems to me to be an appropriate arena for government.
radford@calgary.UUCP (Radford Neal) (12/13/85)
> Here is situation in which a believe government can be a solution to a > problem. I have heard on 2 TV programs ( 'Adam Smith's Money World' and > 'Innovation') that a successful drug is NOT a cure or a vaccine, it is > a treatment. In other words, it is more profitable to create a drug > which allows patients to live with their condition than one which prevents > or permanently remedies it with few applications. This seems intuitively > clear... Not clear to me. I would have thought a drug company could charge just as much for a one-time cure as they would have made out of years of treatment. It seems logical for the patient to pay this much. As the inventor, the drug company presumably has a patent on the drug and hence the monoply power to charge this much. So did the programs explain why they don't actually manage to make as much money from cures? Radford Neal
sykora@csd2.UUCP (Michael Sykora) (12/14/85)
>/* bob@pedsgd.UUCP (Robert A. Weiler) / 10:48 am Dec 12, 1985 */ >. . . In other words, it is more profitable to create a drug >which allows patients to live with their condition than one which prevents >or permanently remedies it with few applications. This seems intuitively >clear. More profitable for which companies and individuals? More profitable when? The profitability of inventing a cure as opposed to that of inventing a treatment depends on many factors: the relative expense of each, the probability of success of each, whether or not a cure has already been invented (in which case, if the cure is not very expensive, development of a treatment would probably not be profitable), etc. If people want a cure more than a treatment, there will be a profit in it for somebody, though perhaps, for a company that manufactures/ markets the treatment, not a net profit. > However, I submit it is in the best interest of the overwhelming >majority of the citizens that cures and vaccines be invented. That depends on the costs of development, production of the cure/vaccine and on how happpy people are with the treatment. In many situations, people would rather continue treatment than go into deep debt to obtain the cure/vaccine. It also depends on how suceptible to the disease people perceive themselves to be. >Therefore, >this seems to me to be an appropriate arena for government. What about the question of how competent government is likely to be in dealing with the problem, and how much it will cost? Michael Sykora
nrh@inmet.UUCP (12/14/85)
>/* Written 10:48 am Dec 12, 1985 by bob@pedsgd in inmet:net.politics.t */ >... >Here is situation in which a believe government can be a solution to a >problem. I have heard on 2 TV programs ( 'Adam Smith's Money World' and >'Innovation') that a successful drug is NOT a cure or a vaccine, it is >a treatment. In other words, it is more profitable to create a drug >which allows patients to live with their condition than one which prevents >or permanently remedies it with few applications. This seems intuitively >clear. However, I submit it is in the best interest of the overwhelming >majority of the citizens that cures and vaccines be invented. Therefore, >this seems to me to be an appropriate arena for government. I disagree: it seems to me that here is a case where the "prisoner's dilemma" situation works in the public interest: if there are two or more outfits with the technology to come up with a cure who have been providing a treatment, then either outfit can better its competitive situation by coming out with a cure first and screwing the other outfit for its own competitive advantage. This is particularly obvious in the case of a vaccine. It's also worth worrying about the effects of government's entry into the arena. Precisely how should it be established? Offer a prize for a cure? Threaten to kill people if they don't come up with a cure? Give out research grants to folks who say they're working in an area that might result in a cure? This last is the way these things are accomplished now, but it's not clear to me that this works better than the competition, and it strikes me as likely to reward the folks who are best at dealing with governments rather than the folks who are best at research results (conceded that one is not entirely independent from the other). That a treatment is more "successful" than a cure doesn't mean that people can afford to offer it instead of a cure. Further, that government intervenes in the medical area doesn't mean that it will intervene on the side of a cure: One case in point where the government has interfered on the side of TREATMENT rather than cure is dialysis -- Reason magazine once ran a pretty interesting article by someone who'd been cured (by transplant) of kidney failure about the "horrors of a well-intentioned program". The author argues that the transplant costs the patient about as much as a year of dialysis to provide, but because of government incentives, doctors have a financial interest in retaining dialysis patients -- there's more profit in dialysis than in transplantation -- so that the alternative is not emphasized. (I could be wrong on the "one year dialysis cost = one kidney transplant cost" identity as I'm working from memory). As I've argued before: just because the government in theory (or any beneficent, disinterested, arms-bearing force) could "solve" this sort of problem doesn't mean that the historical outcome will be a solution. A powerful government bears all our own imperfections (in the transplant case, probably sloth, greed, and ignorance) magnified.
janw@inmet.UUCP (12/15/85)
[nrh@inmet.UUCP] >As I've argued before: just because the government in theory (or any >beneficent, disinterested, arms-bearing force) could "solve" this sort >of problem doesn't mean that the historical outcome will be a solution. >A powerful government bears all our own imperfections (in the >transplant case, probably sloth, greed, and ignorance) magnified. This appears to be the proper generic rebuttal to *any* statist claims in the fields of health, education, welfare or the economy - in all areas, in fact, except defence and law-and-order. The reason these areas are different is that here the government, in protecting its own prerogatives (which all organizations tend to do), tends to defend the citizen. The same is true of any mafia godfather. Historically, libertarian societies (e.g., communities of states) have fallen through internal and external strife. This is the problem for anarcholibertarianism. The problem for minarchism is that governments, given enough power in some areas, tend to extend it - especially in cases where momentarily their interference is, or seems, beneficial. Most of present power of governments was acquired in emergencies, then retained.
friesen@psivax.UUCP (Stanley Friesen) (12/19/85)
In article <28200390@inmet.UUCP> janw@inmet.UUCP writes: > >The reason these areas are different is that here the government, >in protecting its own prerogatives (which all organizations tend to >do), tends to defend the citizen. The same is true of any mafia godfather. Indeed, that is why, in the absence of any government, the Mob or its equivalent tends to *become* the government! It has happened in th past: that is a large part of how feudalism developed in Medieval Europe! -- Sarima (Stanley Friesen) UUCP: {ttidca|ihnp4|sdcrdcf|quad1|nrcvax|bellcore|logico}!psivax!friesen ARPA: ttidca!psivax!friesen@rand-unix.arpa
franka@mmintl.UUCP (Frank Adams) (12/19/85)
In article <28200390@inmet.UUCP> janw@inmet.UUCP writes: >>As I've argued before: just because the government in theory (or any >>beneficent, disinterested, arms-bearing force) could "solve" this sort >>of problem doesn't mean that the historical outcome will be a solution. >>A powerful government bears all our own imperfections (in the >>transplant case, probably sloth, greed, and ignorance) magnified. > >This appears to be the proper generic rebuttal to *any* statist >claims in the fields of health, education, welfare or the economy - >in all areas, in fact, except defence and law-and-order. > >The reason these areas are different is that here the government, >in protecting its own prerogatives (which all organizations tend to >do), tends to defend the citizen. The same is true of any mafia godfather. And the proper response to this generic rebuttal is to note that there are many areas where the government has done a great deal of good. Without the power of eminent domain, we would all be much poorer. Public road-building has done a great deal of good. You may argue that private roads could have done as well, but that is an unproven assumption. In fact, public roadbuilding took place because of a recognized need for the roads, and a perceived inability of the private sector to provide them. The libertarian proposal is to build toll roads. But for local roads, the cost of collecting tolls probably exceeds the cost of building and maintaining the roads. Frank Adams ihpn4!philabs!pwa-b!mmintl!franka Multimate International 52 Oakland Ave North E. Hartford, CT 06108
janw@inmet.UUCP (12/22/85)
[Frank Adams ihpn4!philabs!pwa-b!mmintl!franka] >In article <28200390@inmet.UUCP> janw@inmet.UUCP writes: [Nat Howard :] >>>>As I've argued before: just because the government in theory (or any >>>>beneficent, disinterested, arms-bearing force) could "solve" this sort >>>>of problem doesn't mean that the historical outcome will be a solution. >>>>A powerful government bears all our own imperfections (in the >>>>transplant case, probably sloth, greed, and ignorance) magnified. [me :] >>This appears to be the proper generic rebuttal to *any* statist >>claims in the fields of health, education, welfare or the economy - >>in all areas, in fact, except defence and law-and-order. [Frank Adams :] >And the proper response to this generic rebuttal is to note that there >are many areas where the government has done a great deal of good. >Without the power of eminent domain, we would all be much poorer. Public >road-building has done a great deal of good. You may argue that private >roads could have done as well, but that is an unproven assumption. In >fact, public roadbuilding took place because of a recognized need for >the roads, and a perceived inability of the private sector to provide >them. The libertarian proposal is to build toll roads. But for local >roads, the cost of collecting tolls probably exceeds the cost of building >and maintaining the roads. The proper way to test these assertions is by controlled experi- ment: two comparable zones in one of which government exercises eminent domain and builds roads and in the other collects less taxes. Elsewhere you made a rather sweeping statement that so- cial experimentation is dangerous and I tried to draw a distinc- tion between proper experimentation, relatively safe and abso- lutely necessary, and rash wholesale innovation, almost univer- sally harmful. I offer the above (tentatively abolishing cer- tain government functions in an area in exchange for a tax re- lief) as another example of the proper, harmless kind of experiment. It is akin to free enterprise zones - which, by the way, have been *tested* on a state basis, in 20 states, 1300 zones, and ap- parently are a great success. That they are still stalled in Washington seems inexplicable. No one gives *reasons*; in fact, they are all *for* it; Senate passed it twice; but the House Ways and Means (under Danny Call-me-Rosty) does not let it out for a vote. Democratic process, you know. I only hope someone, left or right, makes it a BIG election issue for '86. But back to the roads. Until the experiment has been made, on whom is the burden of proof? I would claim, the advocates of government control and coercion. Since you approve, in principle, of a sunset law - it would seem that you agree. But then your sentence above : >You may argue that private >roads could have done as well, but that is an unproven assumption. should read: You may argue that private roads could have done no better, but that is an unproven assumption. Jan Wasilewsky
sykora@csd2.UUCP (Michael Sykora) (12/24/85)
>/* franka@mmintl.UUCP (Frank Adams) / 9:52 pm Dec 18, 1985 */ >Without the power of eminent domain, we would all be much poorer. Public >road-building has done a great deal of good. You may argue that private >roads could have done as well, but that is an unproven assumption. We must not consider whether some good came out of government policies, but whether net good came out of them. If that is what you are saying, then clearly this is an unproiven assumption. >In >fact, public roadbuilding took place because of a recognized need for >the roads, and a perceived inability of the private sector to provide >them. How in the world can that statement be justified? Who recognized the need? Politicians? Politically well-connected road builders? You may indeed be correct, but such an assumption needs justification, particularly in light of the recent Westway fiasco in New York City. >The libertarian proposal is to build toll roads. But for local >roads, the cost of collecting tolls probably exceeds the cost of building >and maintaining the roads. If this is true, the local populace would likely contribute to have roads paved, unless, of course, they didn't want them. This would probably keep property values down, though. Incidentally, "electronic road-pricing" technology is becoming cheaper, and Hong Kong is planning to implement an ERP system soon. (There was an article about private roads including a note about this in the latest issue of the National Taxpayers' Union's newsletter, "Dollars and Sense.") >Frank Adams ihpn4!philabs!pwa-b!mmintl!franka Michael Sykora
franka@mmintl.UUCP (Frank Adams) (12/27/85)
In article <4340025@csd2.UUCP> sykora@csd2.UUCP (Michael Sykora) writes: >>/* franka@mmintl.UUCP (Frank Adams) / 9:52 pm Dec 18, 1985 */ > >>Without the power of eminent domain, we would all be much poorer. Public >>road-building has done a great deal of good. You may argue that private >>roads could have done as well, but that is an unproven assumption. > >We must not consider whether some good came out of government policies, >but whether net good came out of them. If that is what you are saying, >then clearly this is an unproiven assumption. Strictly speaken, it is unproven; but I think it is pretty obvious. >>In >>fact, public roadbuilding took place because of a recognized need for >>the roads, and a perceived inability of the private sector to provide >>them. > >How in the world can that statement be justified? Who recognized the >need? Politicians? Politically well-connected road builders? You may >indeed be correct, but such an assumption needs justification, particularly >in light of the recent Westway fiasco in New York City. The need for roads has been recognized by the vast majority of the population for a long time. I don't see how you can deny this. >>The libertarian proposal is to build toll roads. But for local >>roads, the cost of collecting tolls probably exceeds the cost of building >>and maintaining the roads. > >If this is true, the local populace would likely contribute to have roads >paved, unless, of course, they didn't want them. This would probably >keep property values down, though. We are talking about the prisoner's dilemma here. Everyone is better off if the roads are there, but each individual is worse off if they contribute to building them. Also, by local roads, I mean everything but expressways. Local roads are not used only by local people. >Incidentally, "electronic road-pricing" technology is becoming cheaper, and >Hong Kong is planning to implement an ERP system soon. (There was an article >about private roads including a note about this in the latest issue of the >National Taxpayers' Union's newsletter, "Dollars and Sense.") What is "electronic road-pricing"? What roads are they planning to apply it to? Assuming it is some sort of "use now, pay later" system, Hong Kong has a great advantage in having essentially all domestic traffic. Cars driven in Hong Kong are either driven by a local owner, or rented locally. Frank Adams ihpn4!philabs!pwa-b!mmintl!franka Multimate International 52 Oakland Ave North E. Hartford, CT 06108
sykora@csd2.UUCP (Michael Sykora) (01/02/86)
>/* franka@mmintl.UUCP (Frank Adams) / 8:05 am Dec 27, 1985 */ >>We must not consider whether some good came out of government policies, >>but whether net good came out of them. If that is what you are saying, >>then clearly this is an unproiven assumption. >Strictly speaken, it is unproven; but I think it is pretty obvious. I am talking about individual policies, not whether it is better to have a government or not at all. In the case of eminent domain I'll admit you may be right (though I disagree), but it is hardly obvious. Do you really know that much about the history of eminent domain. >The need for roads has been recognized by the vast majority of the population >for a long time. I don't see how you can deny this. Roads yes. Public road-building, not necessarily. In any case, the fact that a need is "recognized" by few or many does not necessarily indicate that there is in fact a need. >We are talking about the prisoner's dilemma here. Everyone is better off if >the roads are there, but each individual is worse off if they contribute to >building them. I don't think that's clear at all. In some cases they would be worse off, in others better. It's very difficult to generalize about such a thing. >Also, by local roads, I mean everything but expressways. Local roads are >not used only by local people. True, but they may be predominantly used by local people. Also, major users of local roads are those who provide services for local residents. >What is "electronic road-pricing"? What roads are they planning to apply >it to? I don't remember that the article indicated this, but let's assume it's for major highways. In the future, however, it might be applied to local roads. >Assuming it is some sort of "use now, pay later" system, Hong Kong has a >great advantage in having essentially all domestic traffic. Cars driven >in Hong Kong are either driven by a local owner, or rented locally. So? >Frank Adams ihpn4!philabs!pwa-b!mmintl!franka Mike Sykora
franka@mmintl.UUCP (Frank Adams) (01/03/86)
In article <4340033@csd2.UUCP> sykora@csd2.UUCP (Michael Sykora) writes: >>What is "electronic road-pricing"? What roads are they planning to apply >>it to? > >I don't remember that the article indicated this, but let's assume it's for >major highways. In the future, however, it might be applied to local roads. I really want to know what "electronic road-pricing" is. Does one attach some sort of device to each car? Does one photograph licence plates and send bills to their owners? Something else? >>Assuming it is some sort of "use now, pay later" system, Hong Kong has a >>great advantage in having essentially all domestic traffic. Cars driven >>in Hong Kong are either driven by a local owner, or rented locally. > >So? So the choice between governmental and private solutions depends on the situation. It may well be that private (if a privately owned public utility counts as private) enterprise is viable to run the roads in Hong Kong, because the authority can get sufficient access to all the cars which will be driving there, and/or to their owners, yet be nonviable elsewhere. Frank Adams ihpn4!philabs!pwa-b!mmintl!franka Multimate International 52 Oakland Ave North E. Hartford, CT 06108
sykora@csd2.UUCP (Michael Sykora) (01/03/86)
>/* franka@mmintl.UUCP (Frank Adams) / 8:05 am Dec 27, 1985 */ >>We must not consider whether some good came out of government policies, >>but whether net good came out of them. If that is what you are saying, >>then clearly this is an unproiven assumption. >Strictly speaken, it is unproven; but I think it is pretty obvious. I am talking about individual policies, not whether it is better to have a government or not at all. In the case of eminent domain I'll admit you may be right (though I disagree), but it is hardly obvious. Do you really know that much about the history of eminent domain? >The need for roads has been recognized by the vast majority of the population >for a long time. I don't see how you can deny this. Roads yes. Public road-building, not necessarily. In any case, the fact that a need is "recognized" by few or many does not necessarily indicate that there is in fact a need. >We are talking about the prisoner's dilemma here. Everyone is better off if >the roads are there, but each individual is worse off if they contribute to >building them. I don't think that's clear at all. In some cases they would be worse off, in others better. It's very difficult to generalize about such a thing. >Also, by local roads, I mean everything but expressways. Local roads are >not used only by local people. True, but they may be predominantly used by local people. Also, major users of local roads are those who provide services for local residents. >What is "electronic road-pricing"? What roads are they planning to apply >it to? I don't remember that the article indicated this, but let's assume it's for major highways. In the future, however, it might be applied to local roads. >Assuming it is some sort of "use now, pay later" system, Hong Kong has a >great advantage in having essentially all domestic traffic. Cars driven >in Hong Kong are either driven by a local owner, or rented locally. So? >Frank Adams ihpn4!philabs!pwa-b!mmintl!franka Mike Sykora
janw@inmet.UUCP (01/05/86)
[Mike Sykora sykora@csd2] >>>/* franka@mmintl.UUCP (Frank Adams) / 8:05 am Dec 27, 1985 */ >>>We must not consider whether some good came out of government policies, >>>but whether net good came out of them. If that is what you are saying, >>>then clearly this is an unproiven assumption. >>Strictly speaken, it is unproven; but I think it is pretty obvious. >I am talking about individual policies, not whether it is better to have a >government or not at all. In the case of eminent domain I'll admit you may be >right (though I disagree), but it is hardly obvious. Do you really know that >much about the history of eminent domain? What seems *obvious* is that eminent domain contributed to rapid road-building, and railroad-building, in USA. *Net good* is not at all obvious, and I don't see how to verify it even with his- totical research - unless someone uncovers a natural controlled experiment. Otherwise, we are reduced to guesswork. Had there been no eminent domain, what would have been the history ? In most cases, probably the only difference would be the price paid for the property acquired and that the road interests would have applied different forms of pressure. It would be net loss for *them*. But the money would go to work on other things. A chilling effect might be there (in the absence of ED) for the railroad industry in general. Again, the money would go to work on something else. This is just a case of an industry artificial- ly made lucrative by government-granted privilege. It could, by chance, be good for the economy. But not obviously. In some cases, the owners would prove intractable - this would mean a bypass, or some alternative technical solution. There would be an immediate net loss (perhaps) to the economy, but the acquired technical experience would be useful. After all, roads and railroads *are* built in mountainous or swampy areas, too, and some landscape features are as recalcitrant as a stubborn farmer. Why not treat a person with the same respect as a crag ? Being able to sweep away obstacles by simply buying a few congressmen must have been nice; but hardly necessary. This is a frequent mistake: "it has always been done this way" is *not* a good argument for "this way". A good argument would be "several ways have been tried, and this one came out better every time". Assuming there *was* a net loss, the question would arise: how *big* a loss ? Eminent domain is a very serious limitation of in- dividual rights. The reason it does not chafe more is that it has always been there. Still, these rights should be worth *some- thing* to most people. Jan Wasilewsky
nrh@inmet.UUCP (01/08/86)
Two points, in response to Frank Adams:
1. My understanding is that there were non-government-funded
roads throughout New England in the early 1800s, but that
farmers prevailed upon the legislatures to provide them with
more and better roads. I would have preferred paying the
higher vegetable prices to giving the IRS more to work with,
but wasn't consulted.
2. I've also seen articles about the electronic gadget for
vehicle billing. My understanding was that some Asian nation
was going to use it to bill people for using the main roads
into town during rush hour. The gadget took the form of a
plate attached to the bottom of a car that was somehow
readable by a senor embedded in the road. The car doesn't
have to stop or even slow down, as I recall. Bills were to be
issued monthly, I think. The idea was to "tax" folks for
using the streets during rush hour, and thus hold down the
traffic to the impatient and the wealthy.
It's not hard to see how a private road owner would require
cash payment or such a gadget before permitting someone to
ride on his road (it would be easy to detect a car with no
plate, and lower a parking-lot gate 100+ feet in front of it
while hooting warnings. One could then collect the fare (in
cash) at the gate. Naturally cars that knew they had to pay
cash would ordinarily go in separate lanes.
By the way, it's not an obvious threat to civil liberties,
unless no-name, cash-in-advance accounts, and pay-as-you-go
usage are forbidden.
3. There are reasonable road systems around that are privately
owned but restricted in use -- logging roads are like this, and
road rallies are often held on them.sykora@csd2.UUCP (Michael Sykora) (01/11/86)
>/* franka@mmintl.UUCP (Frank Adams) / 2:05 pm Jan 3, 1986 */ >I really want to know what "electronic road-pricing" is. Does one attach >some sort of device to each car? Does one photograph licence plates and >send bills to their owners? Something else? I'm sorry, but I really don't have any technical information on it, but if I see anything else on it I'll post. >So the choice between governmental and private solutions depends on the >situation. It may well be that private (if a privately owned public >utility counts as private) enterprise is viable to run the roads in Hong >Kong, because the authority can get sufficient access to all the cars >which will be driving there, and/or to their owners, yet be nonviable >elsewhere. I'm not sure I understand what you mean by "sufficient access?" I would assume that if a driver uses a road and doesn't pay hia/her bill, that would be treated similarly to a case of a consumer not paying a bill in general. >Frank Adams ihpn4!philabs!pwa-b!mmintl!franka Mike Sykora
franka@mmintl.UUCP (Frank Adams) (01/13/86)
In article <4340045@csd2.UUCP> sykora@csd2.UUCP (Michael Sykora) writes: >>So the choice between governmental and private solutions depends on the >>situation. It may well be that private (if a privately owned public >>utility counts as private) enterprise is viable to run the roads in Hong >>Kong, because the authority can get sufficient access to all the cars >>which will be driving there, and/or to their owners, yet be nonviable >>elsewhere. > >I'm not sure I understand what you mean by "sufficient access?" I would >assume that if a driver uses a road and doesn't pay hia/her bill, that would >be treated similarly to a case of a consumer not paying a bill in general. All right, I'll spell it out. Suppose the state of Texas implements such a scheme. I live in Connecticut. I can get in my car, and in about two days drive to Texas. If the scheme requires that something be attached to my car in order to detect the use of the road, then Texas has to either man the borders, and attach the device, or forbid my entry. If photographic techniques are used, they still have a problem forcing me to pay the bill. I will note that states generally require visitors from out of state to pay traffic fines immediately, because of the problems trying to collect from people out of state. (Most bills are intra-state matters.) There is a deeper question here; when did I agree to pay them for use of the road? For Texas residents, there is an implicit contract involved in the motor vehicle license. They had better post signs at every point where one gets on a non-free road if they want to have any hope of collecting. All these problems are that much worse as regards someone from Canada. It is essentially impossible to enforce petty legal claims across national borders. Frank Adams ihpn4!philabs!pwa-b!mmintl!franka Multimate International 52 Oakland Ave North E. Hartford, CT 06108