Should Government Give Us the Infrastructure?

An argument against absolutely free markets comes up often. What about so called natural monopolies? So called infrastructure (e.g. sewage plants) have high barriers to entry, and are a challenge to true competition. Therefore if left to private companies, they would become bad monopolies. So it is best for government to provide them.

I think there are answers on several levels.

  1. Moral. The argument is saying that men need to be forced, like brutes. Horses will do no work unless harnessed, and led around by a bit in their mouth (if not whipped). Haven’t we proven beyond a shadow of a doubt that this is wrong?
  2. Economic. The question of how men coordinate their actions–how they CAN coordinate–is one of the major questions of economics. The answer is: each must pursue his own interest, which in an economics context means profit. Pursuit of profit and only this pursuit leads men to work together. Adam Smith may have used an unfortunate phrase “the invisible hand”. I describe in my dissertation the mechanics of it. But no matter how you slice it, economics is about people coordinating based on their individual interests and individual knowledge. Central planning is about the negation of coordination, and the destruction of economics as such.
  3. Scope. There is an analogy to when people demand of philosophy to explain the latest observation from astronomy or a particle accelerator. It is outside the scope of philosophy. It is not the job of the philosopher to answer what it means when you see a super massive black hole. Similarly, it is not the job of the economist to envision every business model in a free market. It is the job of a million entrepreneurs, each developing his own unique business model. Indeed, economists often make lousy entrepreneurs.
  4. The 8th grader. I love using the standard of a precocious 13 yr old. “So you’re saying that government is smarter than the people, and only government is smart enough to figure out how to build a sewer!?”

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