Tuesday, May 20, 2008

Levees without Levies

One excuse for the government's hammerlock on the economy is the fiction of so-called "common goods." Bureaucrats fearing for their sinecures will tell you that there are goods that due to their nature cannot fairly and efficiently be supplied by the free market.

Take flood protection as an example, and you'll see that those "common goods" aren't all that common after all. Given the recent performance of the Army Corps of Engineers, having flood protection supplied with the efficiency of the free market would be a welcome change, right? So how will so-called "common goods" be supplied in a fully free, purely capitalist country?

Let's look at the original "state of nature," which is the epitome of what its detractors call atomistic individualism: Everybody would build a levee around his own property.

Now, of course, there are savings possible through cooperation. Instead of building a levee on all four sides of each lot, one wall along the waterfront of each lot will suffice, for a savings of three quarters — if and only if all owners of waterfront property cooperate to some degree.

What if one of them refuses to cooperate? He may or may not have good reasons for his refusal. Maybe he wants the river mud as fertilizer on his fields, or he's an eco-terrorist who hates all levees on principle, or he's just a contrarian. Maybe he says he likes to have a periodic pool in his living room. But maybe he's in fact stingy and hopes the others will pay for his share of the levee, so they can complete it and realize their huge savings. If they do pay for him, he becomes what economists call a "free rider."

In fact, that kind of a holdout is not a problem. Instead of building the levee along the river, the levee cooperative can build it bending around his property, on the land side. He would still have his periodic flooding and not get free flood protection.

The levee cooperative would have to pay for the length of levee added by the detour deviating from the course of the river, but that extra expense is negligible given the huge savings. Plus, it will protect them from blackmailing by additional "free riders." To paraphrase the old saying, "Millions for defense, not a penny for blackmailers." In any event, avoiding that additional cost is no excuse for initiating the use of force and coercing all property owners to participate.

A problem requiring more creative solutions is the fact that once the levee has been completed all along the river or all around the island, those property owners not living on the waterfront get flood protection for free.

The simplest solution is to say that flood protection is the problem of owners of waterfront property, and the price they have to pay for their views and access to navigation and irrigation.

Yet they can make those "free riders" in the hinterland pay if they want to, without using force. All they have to do is to look at the law of causality.

Let's first look at the simplest case possible, all landowners in the hinterland refusing to join. Everything it takes to induce them to pay is a floodwall on the landside and some pipelines to deliver them the water that is due to them. Savings to the levee cooperative would still be fifty percent, from not building levees between their lots.

If some landlocked landlords decide to join up, that might grow into a complex network of levees, floodwalls, spillways, and pipelines. However, that would still be still cheaper than building a levee around each and every individual lot. And it would be cheaper than running an IRS in perpetuity to collect taxes.

What's more, once one or two such systems have been built and put in operation, would-be "free riders" across the country will see that levee builders are not bluffing but mean business. Consequently, the number of holdouts will drop with every additional project.

Note that flooding "free riders" is not an initiation of force. They only get delivered the water that is rightfully coming to them, as they did not pay for being protected from it. It's not actively pumped. It's not more water than would reach their property in the absence of a levee system. It's not stopped from flowing back out when the flood recedes.

Do I hear the collectivists howl? Could you howl again? Ah, you say it's cruel to flood a man and his family if there's a perfectly good levee between him and the river?

So I guess going for a man and his family with guns to force him to pay taxes is somehow not cruel? No way.

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