Tuesday, February 28, 2012

Public vs. Private - the battle of the beasts

Though I recognize the importance of a healthy road system, particularly in high traffic areas, I find Frank's contention that because counties are postponing road maintenance and allowing roads to turn to gravel we, as a nation, are worse off. Are all roads to be paved? Wouldn't an efficient allocation of capital be at a point somewhere between 'all roads should incorporate latest technology requiring extensive maintenance' and 'all roads should be natural occurrences with no maintenance costs'? Frank equates an investment in road maintenance to a high return investment, but who is to say that road investment is not correcting from a period of overallocation? This would be similar to me saying I need to buy a new pair of $200 shoes because my old pair of $200 shoes is wearying out. But if my pocketbook is shrinking, perhaps a pair of $100 shoes will suffice.

I am in relative agreement that growing inequality is harmful, in general, to society. But doesn't the excessive spending by the 'rich' on goods/services that provide only relative social value flow back into the economy through construction, employment, etc.? Who is to say (perhaps Frank is building up to this point), that taxing goods that provide only relative social value is the most efficient method of reallocating capital? Wouldn't it be more efficient to privatize the road systems with tolls imposed (absolute prices based on the relative position of the road) than a taxation system? This method would more efficiently identify those 18%/year investment opportunities based on actual revenue from individual road systems, instead of arguing that all road maintenance should occur because it's more expensive in the future... that just sounds wasteful.

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