Public Good and Fear of Foreigners; G. North

GARY NORTH PUBLICGOODS and""---Fear of Foreigners BACK· IN THE DEAR, dead days of the Sputnik mania, Americans were told that they were in a great economic race with the Soviet Union. We were going to have to tighten our financial belts and "get America moving again." In the rhetoric of the 1960 campaign for the Presidency, this meant .more government spending. The man who coined the slogan for John F. Kennedy was Walt Rostow, whose 1960 book, The Stages of Econom ic Growth, became a best-seller. In it, Rostow argued that the so';' called take-off into sustained national prosperity could be ac complished, in part, by heavy Dr. North, economist, 'lecturer, author, current ly is an associate of Cha1cedon, an educational organization dedicated to Christian research and writing. His latest book is An Introduction to Christian Economics, Craig Press, 1973. government expenditures in "so cial overhead capital" - highways, education, health care facilities, 2md so forth. Professional econom ic historians devastated his thesis' historical examples in· a little known book published in 1963,The liJconomics of Take-Off into Sus tained Growth (St. Martins, 1963), edited by Rostow, but the public never heard of it, including most of the academic public. The· reac tion against Rostow's vision came only after 1965.

Since the mid-1960's, a flood of academic and pseudo-.academic studies has been published on the ~~rowth question. Zero population growth, the no-growth economy, and .the no-growth urban region have all been ballyhooed. Even no growth government _. incredible 131 132 THE FREEMAN March prior to 1965 - has been at least discussed in academic circles. But the standard argument today is that the economics of zero growth can be achieved only with the di rect interference of the political authorities (just as, in 1960, it was assumed that continuous eco nomic growth could be sustained only by means of direct govern ment interference). Those who have faith in the State are not likely to overcome their infatua tion just because their goals have been reversed. Only with a change in operating principles should we expect to see a reversal of the juggernaut State. Economic growth is now too often regarded as a threat to the nation or to a community. Some people fear that we will deplete our national resources. This is quite likely, if the various agen cies of government insist on im posing price controls on key re sources, thus stimulating demand for them without simultaneously stimulating a search for suitable substitutes. Either the State ra tions the goods politically - an in vitation to corruption and ineffi ciency - or else one day we run out of the resource, and we find that the transition to alternative substitutes must be accomplished overnight, at considerable waste and expense.

Other people fear economic growth because of their fear of social change. They wish to pre serve a monopolistic position, so cially or economically, and they can sometimes influence legislators to restrain newcomers in the search for profit or position. Thh: has been the primary result of America's supposed antitrust leg islation; newer, more efficient com· petitors are locked out of the mar kets by legal restraints on price competition. This has been docu mented by D. T. Armentano's book, The Myths of Ant,itrust (Arling ton House, 1972), but the mythol ogy is deeply ingrained in the textbooks. Monopolies continue tc be created by the legislation which is supposed to halt monopolies. But the most important fear o:f economic growth in terms of ib political impact is the fear of bankrupt municipal treasuries, This is one argument against local growth that cuts across ethnic and class boundaries. Almost everyone resists any increases in his taxes: especially property taxes. This iE the arena of the battle against economic growth today.

Subsidized Shortages Perhaps the best way to illus· trate my point is by means of ar historical example. On May 15 1972, the Tarrytown, N. Y. Plan ning Board vetoed the construc tion of 348 town house apart1974 PUBLIC GOODS AND FEAR OF FOREIGNERS 133 ments on a local 25-acre site. Some 60 people jammed the Village Hall to protest the proposed develop ment. "I think it will be a long time before they want apartments in Tarrytown again," commented one of the planning board mem bers after the meeting. "They've had it." (The [Tarrytown] Daily News, May 16, 1972, second front page.) Why the opposition? Because the local streets would be over burdened by a proposed increase of 700 automobiles. Anyone who has tried to drive through Tarry town at peak traffic hours - any time other than midnight to five a.m. - knows how accurate the complaint was. The streets, need less to say, are "free" goods. Sec ond, the village did not need any new apartments. Anyone who has ever attempted to find housing near Tarrytown knows how inac curate that assertion was. But an absence of available housing kept "undesirables" out and returns to owners of rental property high.

Finally, there was a fear of the strain on existing village services - strains that might lead to tax increases. They wanted to restrain access to other "free" goods. "'Who wants this?" asked one resident. "I've talked to people all over town" - a dozen? his next door neighbors? - "and I've found no one who has the slightest desire." The trouble with all such surveys, however sophisticated, is that they never ask those living outside the municipality whether or not they would like to move into a region. Those arbitrarily excluded from the town are then forced to seek less desirable hous ing or surroundings. A Demand for More The overwhelming difficulty with all State-subsidized "services" is that they create demand for more such subsidized services. The only exceptions to this rule are those projects so utterly without re deeming social value that nobody w'ants them at any price. Either the parks or streets get over crowded, or the power lines get overburdened, or the telephone lines get jammed. The government agency then is forced to increase its revenues by placing higher prices on the services (unpopular w'ith those already enjoying the subsidy), or by increasing taxes (:~omewhat less politically objec ti.onable, since resistance is usually diffused in numbers and therefore less vocal in opposition). So resi dents feel compelled to place re straints on newcomers who will not pay their way.

This is not an isolated phenom enon. If anything, the problem is getting worse, since the "war on poverty" programs at all levels of 134 THE FREEMAN Marc) government in the 1960's have cre ated new demands for services, some of which were inconceivable in 1950. U.S. News & World Re port (Dec. 10, 19'73) describes the opinions of residents of Hoffman Estates, a suburban community 30 miles northwest of Chicago. It keeps doubling its population, as more and more people leave the Chicago residential areas. One woman, describing how the once empty fields have filled up with homes, now complains: "We've heard people describe. the' apart ment complexes as a tumor en gulfing the whole area. The people are O.K., but these apartments crowd the schools and raise taxes." She sees the construction of apart ments as a tumor; the desire of others to move into more accept able housing is a threat.

If someone wants open spaces next door, he can purchase the land and leave it empty. Such a purchase must be paid for: prop erty taxes, forfeited purchases of other commodities, increased worry about upkeep, and so forth. The buyer must defend his owner ship economically every day. He forfeits the rent that the land would bring; he keeps out other potential users of the land. It is expensive, especially as the other available plots of open land are gobbled up by apartments. But it is possible to keep a. personal lifestyle if the buyex wants to pa: for it. But people do not want topa: for it. They think that becausl they moved into a small, semi rural community five years agl that they have some kind of auto matic right to the older conditions blessings, even when new economi, conditions appear. They mistak, the right to compete for land 0 open spaces for a property rig h to the land. They call in the polit ical authorities to defend thei "property rights" to semi-rura life at below-cost rates.' They ex elude others from the competitioJ by force, rather than by economi means.

What if there were no publicI: supported school system? What i all the schools were private, 0 even profit-making institutions Then every school would want t, encourage new faces, and local cit izens would not see their pocket books threatened by new arrivah What if the parks and swimminJ pools and street lights were SUIJ plied by profit-making firms? N one would have to pay for anothe person's consumption. The threa would rapidly disappear. N e~ faces would mean new sources 0 profit, new sources of productiv services, new people to trade wit! a wider, more productive loc~ market. But with an ever-growin list of "free" municipal service: 1974 PUBLIC GOODS AND FEAR OF FOREIGNERS 135 outsiders are regarded with sus picion and hostility. These are the direct effects of "free" services and goods - not side-effects, but effects. They receive little public ity in the press; such costs are not counted in the professional sur veys made by graduates of the public administration departments of the uni versi ties.

New Apartments Resented People who live in apartments, especially newly constructed apart ments, generally have children. Low-cost apartments make this doubly true. Or if not children, then older, poorer people live in them. They draw on local tax re sources. They are resented. So new apartments are resented. They are money losers for the municipal governments. Prof. William Alon so, in the Fali, 1973 issue of Dae dalus, puts his finger on the issues involved: Suppose that growth is restricted. What happens to the people who would have moved in but could not? Obviously neither they nor their chil dren cease to exist. They will find sec ond-choice homes; their children will go to more run-of-the-mill schools and impose their costly presence on people who are less able to afford this added burden than the wealthy residents of the suburb in question. It would ap pear that they will be worse off, and so perhaps will the present residents of wherever they end up. The rub is that what seems from the local view point an issue of growth is, in a larger framework, an issue of distribution, both in the social and in the geo graphic sense - not whether these people and their children shall exist, but where and how.

.Alonso concludes, grimly: "The point of the example is that the current Balkanization of metro politan areas into dozens and even hundreds of local governments en courages beggar-thy-neighbor strategies." The point he does not D1ake, however, is that the incen tive behind these strategies would be drastically reduced if the pri mary source of the difficulty were removed: below-cost or "free" D1unicipal services. It is interesting, to say the least, that one agency in the state of New York has been exempted from all local zoning laws: the 'Urban Development Corporation. 'l~his is the agency· that constructs below-cost public .housing for mi nority groups and builds them in residential areas. There is. no doubt that this does disrupt a local community. This is not the slow, steady change encouraged by free market pricing, but rather the instant-transformation, jerky alteration social and economic change of the State-supported wel fare agency . The resentment against the Urban Development 136 THE FREEMAN Marc} Corporation or similar New York City agencies is legendary, and New Jersey residents are not no ticeably more "liberal" in their attitudes. Push comes to shove; zoning law coercion becomes anti zoning law coercion. And as zon ing shifts from local communities to state governments or even Fed eral agencies, the intensity of the coercion and the mob reaction will be that much worse. Yet this is where the trend is headed (U.S.

News & World Report, March 6, 1972: "Fight Over Zoning Heats Up") . A Moral Question Ultimately, the problem is not simply technical. It is a moral and religious question. Do men have a right to property that they have not or will not purchase for them selves? Do local residents have the right to maintain their lifestyles at below-cost prices? Does one family have the right to educate its children at the expense of some other family? So long as a vocal minority and a silently assenting majority of people answer yes to such questions, the fight over zon ing will indeed heat up. But it is .not just the school question, either. In Fairfax, Vir ginia, a relatively wealthy suburb of Washington, D. C., there has been a moratorium on the con struction of new sewers, as well as restrictions on new buildinJ permits. Why should this be neces sary? Why can't the municipal au thorities add new residents to th sewer lines? Because it would ne cessitate an increase in taxes tl treat the sewage successfully. Nl one considers the other possibil ity: private sewage treatment.

Given the tremendous pressure in Fairfax for new homes, lanl costs have skyrocketed. An acre 0 land without the sewer line rna; be worth $5,000; with the sewel $15,000 or more would be likelv Thus, the mere addition of a sew er line grants a huge subsidy t local land owners. Is it not reason able to suspect that a private firI1 could find a way to make a profi under such circumstances? Is i not likely that many thousands 0 dollars could be generated fror the sale of sewer lines ? Would no local owners be willing to pay thousand or even two thousan dollars to be allowed to hook int a line that would grant them a instant increase in the value 0 their property? But local, "pul: licly owned" sewers are suppose to be priced "fairly," that is, bE low the value of the service. S heavy demands are placed upo the municipal authorities to buil more and more lines, and expan the treatment facilities as weI Only taxes are not supposed to g up, or if they are, they must 1J 1974 PUBLIC GOODS AND FEAR OF FOREIGNERS 137 paid by those who have not yet been allowed to hook up to the lines. Under such circumstances, it is not difficult to understand· that a moratorium on sewer construc tion has been imposed. Economic growth - best defined as an in crease of people's voluntary op tions - slows down.

Some municipalities are now re quiring housing developers to build public schools in order to get licensed. Others are not al lowed to expand at all. With the ecology pressure groups all around, developers are assumed to be guilty before they can prove them selves innocent. They must con form. to other's conception of aes~ thetics (not just medically harmful or land-value-depressing pollution, but aesthetics). So growth slows down. Nothing New The problem is very old. The poor law legislation of early mod ern England forced parishes to care for indigents. As a result, potential indigents were not al lowed to come to a new parish. The same result took place in seven teenthcentury New England when the Puritans imitated the poor laws by establishing tax-support ed charities (although they were incredibly tiny efforts by modern standards). Visitors could stay only a few days or weeks; if they stayed longer, they became poten tial permanent charges of the public treasury. Thus, restrictions were placed on the sale of land or rentals throughout the century in virtually every town. Town offi cials had to approve every such sale.

The problem is simple: public goods are in short supply in com parison to demand. The prices of the goods are politically imposed. Thus, communities want to re strict access to these goods and services. They use political coer cion to keep outsiders away from the treasury. Only those who are clearly not tax liabilities are greet ed with open arms. The conclusion is simple· enough: reduce the level of the redistribution of wealth by coercion within any communitY:l and you thereby increase the op tions of the inhabitants and po tential inhabitants to make eco nomic decisions without legal sanc tions or public censure. In short, economic growth is furthered by increasing freedom. The very na ture of the local redistribution of vvealth restricts men's options, and by definition this restricts eco nomic growth. By abolishing these redistribution schemes, you reduce the fear and hatred of outside "'invaders," and civilized life be comes more likely. Let every man pay his own freight, and the costs of shipping will go down. ~ land Use RegulationA Tool of Politics, Not of Planning Bernard H. Siegan IN THE PRESENT nationwide con troversies on land use regulation, one concept appears largely un challenged: it is government land use planning. There seems to be much agreement that public plan ning for the use of land is both necessary and desirable. Surpris ingly, even strong opponents of zoning at times have conceded the virtues of land use planning at some levels of government.