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Source link: http://archive.mises.org/6750/wresting-land-from-the-sea-an-argument-against-public-goods-theory/

Wresting Land from the Sea: An Argument Against Public Goods Theory

June 15, 2007 by

The assertion that the state must provide “public goods” seems so obvious to the economic mainstream that it is not even debated. In the United States, we are offered the examples of roads, bridges, and recently, the levees of New Orleans. In Germany, the textbook example of the public-goods argument is, as in New Orleans, the system of dikes and levees.

Philipp Bagus examines the theoretical aspects, as well as the historical evidence from the Frisia region in Germany for this government-legitimizing argument, showing that private dikes were the historical norm before the centuries-long infiltration of the state. FULL ARTICLE

{ 10 comments }

Xu Hu June 15, 2007 at 5:31 pm

Excellent Reasoning

One paper related :

“The problem of Externality” by Carl J. Dahlman.
Journal of Law and Economics, Vol. 22, No. 1. (Apr., 1979), pp. 141-162.

It is nothing wrong to argue that market system may yield inefficient outcomes in the presence of externality or public goods, compared with some reference system. But it is false to claim that governmental intervention will provide a remedy.

P.M.Lawrence June 16, 2007 at 12:09 am

It would be more precise to say that governments can usually only cure externalities by moving them elsewhere. For instance, subsidising dike building might eliminate a dike externality by throwing the spread of burden onto taxpayers as a whole, but it might still eliminate an earlier dike one (assuming for the sake of argument that there was one).

Implicit in the article is that “enough” dikes (from a government point of view, or from a productivity point of view) might be harmful to the residents, eliminating the very protection quality of the terrain that was among the things they wanted and why they originally moved there. At a pinch, the Dutch flooded their land for defence.

Oktroi doesn’t mean precisely what the author stated, by the way. It was a term used for a variety of municipal-level rights, not just relating to dikes. With the spelling Octroi it is more familiar as a kind of local customs duty.

Angelo Mike June 16, 2007 at 9:40 am

Excellent work, Philipp!

Niccolo June 17, 2007 at 2:05 am

“Implicit in the article is that “enough” dikes (from a government point of view, or from a productivity point of view) might be harmful to the residents, eliminating the very protection quality of the terrain that was among the things they wanted and why they originally moved there. At a pinch, the Dutch flooded their land for defence.”

Excellent point.

This all sadly reminds me of the sinking of my mother’s native Venice. The government has really just messed everything up since it’s formation in the 19th century, especially considering their general distrust for anyone willing to work on their own property without their consent. The city that has been perpetually sinking for centuries is now about to be washed away forever as the high tides continually progress up to the historic steps of Venetian cathedrals and basilicas; what is being done about it? Nothing. Bureaucrats and the now apparently all wise government engineers are suggesting pathetically insane ideas about under water gates that are going to hold back minimal levels of water tide even if they were funded – during the budget crisis that never seems to end – by our incompetent boobs at the city level and the national level. Though there is one thing to say for them, at least they aren’t actually DOING anything. With their track record, the entire province would fall off into the Adriatic.

The entire thing just gets to me. BLAH

Peter Sidor June 17, 2007 at 12:10 pm

Great article!

To quote:
“Therefore, it does not make sense to claim that forcing A to build the dam would lower (transaction) costs. Maybe A even loves the adventure of sitting on his roof being surrounded by the blue foaming sea.”
Not to question the motive or anything, but perhaps we can construct a more rationally-sounding example.

Maybe A actually wants to create land that is susceptible to flooding. It could be for defense as noted above, or to use something more current, to create a ‘natural habitat’ for the birds and other species that live in this region, in effect a private reserve. In this case, a dike would be directly against his interests.

See, it can’t get more politically correct. :)

Nick Bradley June 17, 2007 at 1:00 pm

Couldn’t a compact be set up by an entrepreneur to ensure that most residents pay for the service?

The entrepreneur could set up a contract where the dike will not be built unless x% of the landowners contributed at least $y to the project. Those with the most to lose from a flood would obviously pay more, while a rice farmer would pay zero.

Niccolo June 17, 2007 at 5:59 pm

“The entrepreneur could set up a contract where the dike will not be built unless x% of the landowners contributed at least $y to the project. Those with the most to lose from a flood would obviously pay more, while a rice farmer would pay zero.”

I see that as a big problem in the violation of the rice farmers rights though.

If people X decided to build a dike, then the entire community would need to agree on it. The rice farmer that would not want the dike may have his property rights infringed upon if the dike crosses his land. You would need to find a way to keep some of the property separate for the people living on the land. In this situation it’s easy, but in others it may not be so.

Nick Bradley June 18, 2007 at 12:34 am

Niccolo,

If the rice farmers made up a small fraction of the community, they could be coaxed with incentives to relocate. If it was 50/50, perhaps land swaps could be undertaken and then a dike could be built only to protect the non-rice farmers.

Niccolo June 18, 2007 at 10:49 pm

“If the rice farmers made up a small fraction of the community, they could be coaxed with incentives to relocate.”
- Nick Bradley

Perhaps and that does seem very likely for many people who don’t have specific incentives or desires to stay on the old land plot, but for those that do, it’s possible that a dike could be built in front of their land, thus interfering with their rice field.

This presents a problem if you’re thinking from a utilitarian perspective. What is the rice farmer to do? One option, obviously, is to pick up and leave and that would occur if his utility value for staying on the land plot was lower than the hassle of doing something about the dike, the reasons for which are numerous and needn’t be explained. Another option, however, is to build some sort of device that could transfer the water from the lake/river/creek/ocean/sea/etc. onto the rice farmers plot. The incentive to do this is high if two conditions are met. One being that the rice farmer values his plot of land higher than he values doing something about the dike; the other being an incapability for the rice farmer and the community/dike owner to come to any sort of agreement.

Let us touch on that second option for a moment. There are many reasons for a dike builder(s) and an unwilling citizen of a community to not be able to come to equally beneficial terms about the dike. And if the dike owner(s) also owns the land on which the dike is placed – which is most likely – then the rice farmer has no right to interfere with the land owned by the dike builder(s). But let’s assume that there could be some sort of agreement reached. Many are available, a tunnel inside the dike allowing for water to continuously transfer through the dike onto the property of the rice farmer, another would be to simply leave that area without a dike and to separate that land from other plots, which is not impossible. The point is that there are options for negotiation as well as options throughout the scenario whatever be the case.

Reactionary June 19, 2007 at 11:30 am

No, dykes cannot be private. They are ostentatious, rude, pushy and generally have a very “in your face” attitude.

Oh. “Dikes.” Sorry.

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