Friday, June 10, 2011

Muckraker

Pivoting off of the piece on an Indian city called Gurgaon in India, which grew from barely nothing to seemingly-thriving hub for big companies, Kevin Drum and Alex Tabarrok react. It’s Tabarrok’s reaction that’s worth thinking about and responding to. He talks about the original developer who started building there and says:
Had the original developer been responsible for both the oases and the desert it could have built the power plants, the roads and other infrastructure and made locating in Gurgaon even more desirable than it is now. It is true that a city requires public goods which local governments often do not provide. Charter cities try to get around this problem by importing wholesale a new, higher quality government. An alternative is to avoid government all together and privatize enough to make the entire city what is in effect a hotel on a grand scale.

But what to do now? The governments involved are inefficient and often corrupt. We can hope that they will get better in response to the well-educated populace and the incoming corporations but even today, the solution is not simply to hope for better government but to expand on what is working well. The firms that operate the private oases are “small cities,” the solution is to make these cities larger.

Connect enough office parks, factories, and apartments, for example, and it will make sense for a private firm to build an efficient electric plant rather than have smaller firms use inefficient and polluting diesel as is the case now.

I’m not quite sure Gurgaon in practice or Gurgaon in theory quite fulfills the libertarian vision ascribed to it. There’s a throwaway line in the article that hasn’t gotten the necessary attention:
The water supply is vastly inadequate, leaving private companies, developers and residents dependent on borewells that are draining the underground aquifer. Local activists say the water table is falling as much as 10 feet every year.

There’s just not enough water. This is a manageable problem if there’s only one or a few Gurgaons, but it is not in any way a scalable solution. The world is already running low on water as it is without the determinedly voracious appetites of mature capitalism factoring on a worldwide scale. The theoretical or actual Gurgaon would have more voracious appetites still. Obviously water is underpriced in all scenarios and therefore I suppose a monopolistic business controlling all of the water might be an adequate solution but I find monolithic business to be equal to monolithic government on the list of evils to avoid.

The article overall is reminiscent of the situation in the United States circa 1900 or so, and in that case rather than leave the country to governments, or hope for a better government, citizens organized and built a much better government for themselves. They had in many cases decidedly mixed results and bequeathed us with some permanent mistakes but overall figured out a system that worked pretty well for a pretty long time. Tabarrok later describes the problems arising from private provision of public goods as “second-order” problems of monopoly, but that’s only a way of evading that at a certain point you need an active, competent government.

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