C. Environmental Economics Chapter 15 Heroic Hunt Farms

Quick, why do you call left-wing environmentalists watermelons? Because while they are green on the outside, they are also red on the inside.

No better illustration of this political mindset can be seen in the controversy involving hunt farms in Canada. In these game ranches — now legal only in Alberta, Saskatchewan, and Quebec, they have just been banned in neighboring Montana — fees are charged to customers who shoot deer, elk, and sometimes other such trophy animals.

But the watermelons are livid at the prospect. A spokesman for the International Fund for Animal Welfare is trying to ban these enterprises in Alberta and Saskatchewan as his next target. The group People for the (so-called) Ethical Treatment of Animals considers these game farm practices cruel and immoral. Other left-wing environmentalists characterize them as lacking any challenge, akin to shooting fish in a barrel.

But what is it with this emphasis on sportsmanship, of all things? Cows, chickens, sheep, and pigs are not given a “fair chance” to escape from the “hunt” in the stockyards of the nation. If hunters want a sure thing, why should this be of any concern to those claiming to be advocates for the environment?

Are these watermelons in favor of playing games by the rules or preserving endangered species? If the former, then they should cease and desist all further fund raising activities, for these are intrinsically fraudulent. In any case, all hunting, whether on game farms or in the wild, is necessarily unfair, at least when done with guns. To make it a real sporting event, even bows and arrows give the humans too great an advantage. In athletic games, the goal is to achieve competition between at least rough equals, so that no one knows, beforehand, who will win. To attain this level of an even playing field, the homo sapiens should be allowed no more than short knives with wolves and bears, and animals of their ilk, and nothing more powerful than, say, a baseball bat or a spear with deer and elk. Then, as back in the caveman days, the animals would have a “sporting” chance.

If the latter, then very much to the contrary of their practice, the interest of those presumptively concerned with the environment should be to protect animals. Thus, the question to be asked is not how big must the private game preserve be so as to allow adequate cover and protection for the animals, but rather whether this process will reduce, or enhance, the chances of survival for these at risk species.

When put in this manner, there can be little doubt of the effect of these enterprises on the long-term survival probability of deer and elk. They will be positive, very much so. For the prices these farmers can charge the hunters will give them every incentive to make sure that their meal tickets never vanish. The going rate for a medium sized elk is $7,500; for a large one, up to $15,000; and for an exceptional bull, no less than $35,000. If there were any farmer foolish enough to allow his “seed corn” to vanish in an orgy of greed for present profits, he would soon enough be forced into bankruptcy. Survival in this industry means, above all, not allowing young female animals, particularly pregnant ones, to be harmed. As in the case of domestic animals, those most at risk are females past child rearing ages, and almost all males. This, in sharp contrast to the hunt for animals in the wild, where just about anything goes.

The free market environmentalist (not an oxymoron) point is that if you want to preserve species, benevolence, even coupled with wise government regulations (when is the last time you saw one of those?) is not enough. If you want to get the job done, as Adam Smith saw over 200 years ago, you have to make it in the financial self-interest of entrepreneurs that this be done.

Nor should this insight on species survival be limited to deer and elk. Not even to bears, wolves, and lions. More exotic animals can also be helped out through the magic of the market, including rhinoceroses and elephants. Yes, the barnyard in these cases might have to be a bit bigger, and the surrounding fences a lot stronger and probably electrified to boot, but game farms for them, too, are the only guarantee we shall continue to have them available to us.

Whales and other fish present a bit of a greater intellectual challenge. But any species that can land one of their own on the moon can surely come up with electrified fences and other aqueous counterparts of barbed wire, to keep a bunch of fish in their places. Only then can private owners of the denizens of the deep have the financial incentive to protect them — at a profit.

With this bit of economic analysis under our belt, what can we make of the efforts of so-called “environmentalists” to oppose hunt farms, a program so clearly in the interest of endangered species survival? In a word, it is hypocritical. It would appear that their hatred for capitalism is stronger than their desire to protect deer and elk. They ostentatiously attempt to hold high the green flag, but their actions belie this, and instead bespeak their internal true red colors.

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Published August 3, 2001.

Chapter 16

Me and Hurricane Ivan: Thanks A Lot, Government

I first became personally aware of Hurricane Ivan on Monday, September 13, 2004. There were newscasts telling of the havoc it had played, and the lives lost in the Caribbean a few days before, but it didn’t dawn upon me until this date that it might visit New Orleans, my home of some three years.

Particularly disturbing was the story of what might happen if Ivan impacted the Crescent City directly: then, since we are perched at the bottom of a geographical bowl, we would be inundated. Large parts of Lake Ponchartrain, our northern neighbor, a bit of the Mississippi River to the south, and also some of the Gulf of Mexico, further to the south, would land in our laps. In this worst case scenario the water level would rise to about 20 feet, higher than many buildings in town. The dikes and pumps would not be able to handle such an onslaught. I reside on the seventh floor of my building, but my home would be commandeered by those living below. Electricity would of course not be available, and New Orleans is pretty hot and humid in September. Worse, the water would be percolated through with toxic wastes from the numerous refineries nearby, by oil, and by alligators, fire ants, and water snakes, I kid you not.

I was told by several old-time dwellers in this city that this was an unlikely occurrence. Much more probably the storm would miss us by miles, but that we would still likely lose electricity, and I would be advised to stock up on water, canned food, and flashlight batteries. Not a very pleasing scenario, even if the worst of this disaster passed us by.

Estimated time of arrival of this hurricane: Thursday morning, September 16. Naturally, I thought of retreating to higher ground, along with most other townsfolk. I tried to get a flight out of the local airport on the next day, Tuesday, but nothing was available. There were some standby flights available later that night, but I literally couldn’t get to within ten miles of the airport, traffic was so heavy. (Further complicating the airport situation was that it had high-rise parking, taken up not only by air travelers, but also by locals fearing drowned automobiles.)

The announcement was made that the New Orleans Airport would be shutdown as of Wednesday morning, September 15. I made travel arrangements in Houston, Texas (ordinarily about 6 hours away by car) and Lafayette, Louisiana (some 2.5 hours away) for late afternoon Wednesday, September 15, and set out to reach either of them at around 4 a.m. that day. However, I soon experienced literally bumper-to-bumper traffic, and was informed on the radio that this would hold all the way west to the Texas border. It took me some seven hours to reach Baton Rouge, where I had no plane reservation (ordinarily, a 90 minute trip) by dint of some heavy lane-switching New York City-type driving. Luckily, at 11 a.m. I was able to purchase a ticket on the spot for that afternoon, and spent the next few days in Seattle.

It is likely that hurricanes are on the minds of many people in New Orleans, what with the near miss of Ivan, and Jeanne in the offing. Floridians, too, experienced a spot of bad weather. However, hurricanes are only the tip of the iceberg, so to speak: there are also typhoons, earthquakes, lightening strikes, tornadoes, tidal waves, storms, cyclones, monsoons, and just plain old bad weather. All of them are a pain in the butt, and dangerous to boot. These catastrophes are all the fault of — wait for it — government. Had the voracious state not gobbled up oh, about 40 percent of the annual GDP for the last half century or so (in Western Europe, the figure is more like 50 percent), it is likely that mankind would have made at least some progress not merely anticipating these cataclysms, and plotting their future paths, but, also, stopping them from occurring in the first place.

Needless to say, this prediction cannot be definitive. It is extremely difficult to analyze contrary-to-fact conditionals such as these. All we can say for sure are first, richer is safer: the more wealth in a society, the better able the people who comprise it are to figure out a way to ward off natural disasters (and unnatural ones too). Second, governments have instead wasted these vast amounts of monies on killing their own citizens (R.J. Rummel puts the figure on this at almost 200 million in the last century), warred with others of their ilk (at the cost of hundreds of millions of more lives), and engaged in various and sundry welfare type schemes (for example, social “security,” socialized medicine, and economic regulation) which have reduced economic growth and development, played havoc with economic incentives, and undermined private property rights and economic freedom, the last best hope for humanity.

So, gentle reader, the next time you are stuck in traffic attempting to escape from one of these conflagrations, remember who, really, is likely at fault. It is your friendly neighborhood local government, along with those in the state capital, and with them the denizens of the federales.

Now, there are those, benighted souls, who resist this eminently reasonable economic analysis. They might attempt reductios ad absurdum such as: “I guess Hong Kong, which was one of the most ardent supporters of free markets, was able to prevent typhoons and other such natural disasters.”

Let me say the following in response to such an objection. Surely, it cannot be denied that hurricane prevention (not mere tracking) is a normal good, forgive the economic jargon. That is, the richer is the society, the more likely it is to want and get this service. Therefore, it follows, logically, that the richer we are, the more likely, or the sooner, we are to have this service of natural disaster prevention.

Let us stipulate that the government spends some 40–50 percent of Gross Domestic Product. If it did not do so, we would be far richer, ceteris paribus. It may be that under free enterprise, we would get full hurricane, etc., prevention in “only” 100 years from now, while under the semi-socialist fascist system we now have we would have to wait 200 years for it. Who knows? Stopping these things, cold in their tracks, I admit, is tough to do. But, it is a matter of pure economic logic to say that this happy day will come sooner, ceteris paribus, the richer we are, and that government is a drag on the economy. QED.

This does not at all imply that Hong Kong, a very small country, even when it was (relatively) free, would have by now discovered a cure for these natural disasters (or for cancer, or AIDS, or whatever); only that a free Hong Kong is more likely to have done so, at any given time, than a less free Hong Kong.

Second objection: an individual cannot expect to earn a profit from good hurricane forecasting, let alone stopping one from starting in the first place. There is a classic free rider problem here. The benefits are so widespread whoever could stop such natural disasters from taking place could not exclude non-payers from enjoying them.

Here is my reply: we already have hurricane forecasting, not all of it provided by government. This demonstrates that the market has overcome the so-called free rider “market failure” problem. The free enterprise system has not seen fit to “exclude” non-payers. Rather, entrepreneurs give it away for free, sometimes as a loss leader; sometimes it serves the function of advertising.

If I knew how to stop Ivan (at very low cost) I would be the most popular man on the planet. Surely, I could find a way to turn that to my financial advantage without threatening that if I were not paid off, I would desist. There is no doubt I would win a Nobel Prize in physics, or some such. Without question private foundations would give me millions to get further discoveries out of me.

There is a whole libertarian-Austrian literature on the difficulties with the free rider argument. The interested reader is encouraged to access it.

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Published September 20, 2004.

Chapter 17

Me and Katrina: Weather Socialism

Here I was, sitting in my office at Loyola University, New Orleans, where I teach economics, very busy doing what I take to be the Lord’s work, and something unlikely as a wind on steroids rends asunder my work and life. It presented the denizens of New Orleans with a stark choice. Evacuate at great inconvenience and run the risk that the oncoming bad weather will veer elsewhere rendering such flight unnecessary, or stay put and brazen it out, and have to deal with flooding, lack of electricity, no air conditioning in 90-degree-plus temperatures, to say nothing of actually loss of life and/or limb, either due to the storm itself, or to the aftermath, including looting, flooding, and loss of law and order.

My own modus operandi, finely honed after spending almost half a decade in New Orleans, has been to wait until the very last minute, and then bolt out of here, tail between my legs, and then sit in bumper-to-bumper traffic. For Ivan, I crept to Baton Rouge, a trip of a little over an hour in ordinary circumstances, in nine hours. For Katrina, I left home early Sunday afternoon (August 28) inched up to Vicksburg in eight hours, which would usually take a little over two hours. Then, I went on up to Little Rock, my previous stamping ground (actually, it was Conway, a town of about 50,000, which lies about 30 miles northwest of the capital of Arkansas), and from there to Vancouver by plane.

I am now safely ensconced in western Canada, writing up the notes I took en route. Happily, I escaped lightly, without too much inconvenience. But my heart goes out to those who were very much less fortunate.

What has this to do with political economy, the usual subject of my writing interest? A lot, that’s what.

I. Private Enterprise

First of all, the levees that were breached by the hurricane were built, owned, and operated by government. Specifically, by the Army Corps of Engineers. The levees could have been erected to a greater height. They could have been stronger than they were. The drainage system could have operated more effectively. Here, the New Orleans Sewerage and Water Board was at fault. It consists of three main operating systems: sewerage, water, and drainage. Had they been, a lot of the inconvenience, fright, and even loss of life undergone in this city could have been avoided.

Then, too, these facilities may have fooled many people into thinking they were safer than they actually were. I know this applies to me. Thus, people were in effect subsidized, and encouraged to settle in the Big Easy. Without this particular bit of government mismanagement, New Orleans would likely have been settled less intensively. (On the other hand, at one time this city was the largest in the South; statist negligence of a different kind — graft, corruption, over-regulation — is responsible for it having a smaller population than otherwise.)

I am not appalled with these failures. After all, it is only human to err. Were these levee facilities put under the control of private enterprise, there is no guarantee of zero human suffering in the aftermath of Katrina. No, what enrages me is not any one mistake, or even a litany of them, but rather the fact that there is no automatic feedback mechanism that penalizes failure, and rewards success, the essence of the market system of private enterprise.

Will the New Orleans Sewerage and Water Board suffer any financial reverses as a result of the failure of their installations to prevent the horrendous conditions now being suffered by New Orleanians? To ask this question is to answer it.

One crucial step forward then, would be the privatization of this enterprise as part of the rebuilding process (if that indeed occurs; for more on this, see below). Perhaps a stock company could be formed; I suspect that the largest hotels, restaurants, universities, hospitals and other such ventures would have an incentive to become owners of such an enterprise.

Right now, the levees are run by the very same types of folks responsible for the post office and the motor vehicle bureau. I takes no position on whether levees are a good or bad thing; only that if they are to be built, this should be done by an economic entity that can lose funding, and thus put its very existence at risk, if it errs. This can only apply to the market, never the state.

This is neither the time nor place to examine in detail the case for private ownership of bodies of water such as the Mississippi River, Lake Ponchartrain, and, indeed, all oceans, rivers, seas, and lakes. But the same principles apply here as they do to land. Suffice it to say that this is a question that should be explored, for it is no accident that where there is private property there is safety and responsibility, and where there is not there is no responsibility.

Second, numerous roads, highways, and bridges were washed out, collapsed, or were swept away. This makes it far more difficult for rescuers to get to the beleaguered city, and for refugees to leave. You will never guess who built, operated, and maintained these facilities. Yes, it was government!

It of course cannot be denied that various oil drilling rigs also came unglued, and that these were all private enterprises. One of them even collided with a bridge, greatly damaging it. However, there is a significant difference between the two types of events. The market test of profit and loss applies only to the latter, not to the former. Those oil companies that built their platforms more strongly will tend to grab market share from those that did not. No such regimen operates in the governmental sector. Imagine if the oil drilling rigs were all built by the state. They would have undoubtedly created far more damage.

II. The Dead Hand of the Past

It is by no means clear that there should even be a city in the territory now occupied by New Orleans.

Ideally, under a regime of economic freedom, what determines whether a geographical area should be settled at all, and if so how intensively? It depends upon whether or not, in the eyes of the human economic actors involved, the subjective costs outweigh the benefits. The reason no one lives in the north or south poles, and that population density in Siberia, Northern Canada, and the desert areas of Nevada is very low, is that the disadvantages are vastly greater than the advantages in those places.

However, if government subsidizes building in areas people on their own would not choose to locate, then the populace can no longer allocate itself geographically in a rational manner. Similarly, the government declares drought-stricken farmlands an emergency area, and heavily subsidizes agriculture in such locales, there is also misallocation of settlement in this regard.

The Federal Emergency Management Agency (FEMA), created in 1979, became part of the U.S. Department of Homeland Security only on March 1, 2003. The federal government has been doling out gobs of money to inhabitants of areas struck by tornados, storms, snow, and other inclement weather for years. Such declarations number in the dozens for 2005 alone. Southern Louisiana, Mississippi, and Alabama have already been declared federal disaster areas. Tons of money will pour into these political jurisdictions. Thus, locational decisions are and will continue to be rendered less rational than otherwise, if people had to pay the full costs of their geographical settlement decisions.

It may well be that with the advantage of hindsight, the Big Easy is like several of these other places: not too cold, or drought-stricken, but too low, below sea level, and thus too much in danger of being flooded.

Mises in Epistemological Problemsof Economics states this regard:

Suppose that, making use of our entire store of technological skill and our present-day knowledge of geography, we were to undertake to resettle the earth’s surface in such a way that we should afterwards be in a position to take maximum advantage of the natural distribution of raw materials. And suppose further that for this purpose the entire capital wealth of the present were at our disposal in a form that would allow us to invest it in whatever way was regarded as the most suitable for the end in view.

In such a case the world would certainly take on an appearance that would be very considerably different from the one it now presents. Many areas would be less densely populated. … The great trade routes would follow other courses.

At first glance, this does not support a New Orleans with anything like its close-to-one-half-million population at its present location. Yes, this city is situated at the mouth of a great river, and offers a world-class port to international shipping. On the other hand as recent events have so tragically demonstrated, these benefits may be more than offset by the fact that it lies below sea level.

Does this mean that New Orleans would be doomed under a free enterprise system? This is quite possibly the case, if we could do everything all over again, and start de novo, at the present time. But not necessarily, given that vast investment has already been made in streets, buildings, pipes, etc. Even though, perhaps, if we knew then what we know now, no city would have been erected south of Lake Ponchartrain, it does not logically follow that it should not be rebuilt at present, under realistic assumptions.

Given that New Orleans is now located where it is, it is entirely possible that it is economical for there to remain a large human settlement in that area. What cannot be denied is that when government enters the picture, economic calculation of this sort becomes impossible.

Mises continues his analysis:

With regard to choice of location … new plants appear most efficient in the light of the existing situation. But … consideration for capital goods produced in the past under certain circumstances makes the technologically best … (location) … appear uneconomical. History and the past have their say. An economic calculation that did not take them into account would be deficient. We are not only of today; we are heirs of the past as well. Our capital wealth is handed down from the past, and this fact has its consequences. … [S]trict rationality … induces the entrepreneur to continue production in a disadvantageous location …

That is, New Orleans might well be a “disadvantageous location” based on the assumption that we can with hindsight rearrange all previous locational decisions. But, we can do no such thing. Rather, capital (buildings, roads, pipelines, etc.) are bequeathed to us at a certain location. As it happens, lots of valuable capital is located in New Orleans. This fact would incline us to reinvest in that locale, storms be damned. But only private enterprise can make such a decision on a rational basis. When government muddies the waters, this cannot take place.

The best way then, to rationally determine whether or not the Big Easy should be saved, is to leave this decision entirely to free enterprise — to capitalist entrepreneurs, who, alone, can rationally make such determinations. As the Austrian side of the socialist calculation debate has demonstrated, only with market prices can this be done. Moreover, private owners make such decisions with their own money, or funds entrusted to them; if they err, they alone suffer. They do not bring the rest of us down along with them.

III. Weather Socialism

But there is a third element we cannot ignore: weather socialism.

According to an old adage, critics of government can properly blame this institution for many things, but bad weather is not among them. Wrong, wrong. At the risk of sounding out of step with the mainstream (a new experience for me) the state is responsible not only for hurricanes, but for tornados, storms, typhoon, tsunami, excessive heat, excessive cold, too much rain, too little rain, floods, droughts, desertification, tempests, squalls, gales, rainstorms, snowstorms, thunderstorms, blizzards, downpours, cyclones, whirlwinds, twisters, monsoons, torrential rains, cloudbursts, showers, etc. You name any kind of bad weather conditions, and the government is to blame.

Why, pray tell? Because the state at all levels grabs off almost 50 percent of the GDP in taxes, and its regulations account for a significant additional amount of wealth not created. If the voracious government left all or even most of the property created by its rightful owners — those who created it in the first place with their own hands — the weather problem could undoubtedly be better addressed by private enterprise.

And for what wondrous tasks does the government waste trillions of our earnings? Let me count some few of the ways. It subsidizes farmers who ought to be allowed to go bankrupt when they cannot earn an honest profit in their industry. As the number of farmers has declined over the years, the number of bureaucrats in the Department of Agriculture has increased. Welfare for farmers and agricultural mandarins.

Speaking of welfare, this is but the tip of the iceberg. Our masters in Washington, D.C. distribute our hard-earned money to people who bear children they cannot afford to feed, and to corporate welfare bums. Then there is the Department of Education (weren’t the Republicans going to get rid of this sore on the body politic?) that presides over a public school system that warehouses and mis-educates our children.

And don’t get me started on our system of medical socialism that wastes yet other precious resources. We don’t have HillaryCare yet but we are well on our way. Then, too, we must count government throwing our money at the post office, the space program, ethanol, foreign “aid,” unemployment insurance, the list goes on and on.

The drug war incarcerates thousands of innocent people — who could be out there creating additional wealth — at a cost exceeding tuition and room and board at some of our most prestigious universities. Last but certainly not least, speaking of war, the U.S. has been bullying its way around the world for decades, creating untold havoc. Katrina can’t hold a candle to our armed forces in terms of killing innocent people. There are no truer words than that “War is the health of the State.”

Suppose that the “public sector” were not wasting untold riches. What has this got to do with improving weather conditions? Well, a lot of the money returned to the long-suffering taxpayers (and much of the additional wealth created by the ending of economic regulations) would be allocated in the usual directions: sailboats and pianos, and violin lessons and better food, and more entertainment, etc. But some of it would likely be invested in more research and development as to the causes and cures of unwelcome weather conditions.

Is there any doubt that in 100, or 1,000, or 10,000 years — assuming the government does not blow us all up before then — we will no longer be plagued by uncooperative clouds? I don’t say that if the state disappeared tomorrow the next day we would have clear weather (and rain to order from 2 a.m. – 4 a.m.), but surely the ending of the former would bring about the latter that much more quickly.

How would this work? Wouldn’t the problem of “public goods” rend the market a “failure,” as our friends from the Chicago so-called “free enterprise” school of economics would have it? Their argument is that if I come up with a way to stop storms dead in their tracks, or better yet, orchestrate matters such that they do not form in the first place, everyone else will “free ride” on my innovation. The other beneficiaries will simply refuse to pay me for this boon I confer on them, so I will not invest any money on this task in the first place. And neither will you. So the private enterprise system cannot handle such challenges.

Stuff and nonsense.

First of all, this task need not be accomplished on a for-profit basis. Non-profit organizations, too, are part of the private sector of the economy. Just looking at the charitable outpourings to New Orleanians from all corners of the country, we can see that there is no shortage of benevolence and good will for the victims of Katrina. I should single out for special mention in this regard that “evil” profit maximizing large corporation that grinds down suppliers, immiserates its own workers due to its anti-union policies, bankrupts small grocers, and just all around exploits everything else it touches. This hated corporation contributed $1 million to the Salvation Army for hurricane relief. More recently, Wal-Mart committed an additional $15 million for this purpose. As part of this commitment, Wal-Mart will “establish mini-Wal-Mart stores in areas impacted by the hurricane. Items such as clothing, diapers, baby wipes, food, formula, toothbrushes, bedding, and water will be given out free of charge to those with a demonstrated need.

In contrast, I do not recommend the American Red Cross. I still have not forgiven them for turning aside risks of spreading AIDS and infecting hundreds of people, many of them hemophiliacs. Unhappily, from my own point of view, Wal-Mart, sent another $1 million to the Red Cross. But if you want to really help the inhabitants of the Gulf Coast long term, support organizations that unveil government misdeeds and the state libertarian parties of Louisiana, Mississippi, or Alabama. But not the national party, until they deal with this issue.

The point is, if we the people had vastly more money at our disposal than we do now, thanks to government profligacy with our funds, we would be able to donate some of it to the not-for-profit sector to engage in research and development for weather control.

Second, the market has a way of internalizing the so-called externalities that supposedly prevent firms from providing storm-busting services. Within limits, and depending upon technology, the purveyors of flood insurance would be able to turn the rain and wind on and off like a spigot, depending upon the locational densities of their clientele.

For example, if in area A 90 percent of the landowners are members of Hurricane Busters, Inc., and in area B only 10 percent are, there is little doubt as to which will be better served by this particular firm. Then, too, there will be not only social pressure, but economic pressure, for large firms in any geographical area to sign up for such services. Those that do not (particularly in states stretching from Texas to Florida, and most certainly in New Orleans) will tend to find their customer base disappearing.

As but one small instance of this phenomenon, companies with large parking lots have recently instituted reserved spaces for pregnant women and new moms. No government agency forced them to do any such thing. (Prediction: the state will soon do just that, so as to garner credit for this very humane and profitable policy.) As this movement catches on, few will be able to resist. A similar situation is likely to arise with regard to protection from hurricanes. At the very least, if government would but get out of the way, it would clear the path for private enterprise to more quickly bring us to the day when the Katrinas of the future will be obviated.

To conclude, here is what I see as the libertarian position on the storm and its aftermath. No national guard or other representatives of the state should be brought in. They are in effect “murderers and thieves.” Instead, private police agencies, appointed by property owners, should deal with the looters.

Further, no tax money should be poured into New Orleans. These are stolen funds, and should be returned to their rightful owners, the taxpayers of the nation. Of course, this applies, in spades, to those victimized by Katrina. But the refunds should be in the form of money, not expenditures for rebuilding, which their proper owners may or may not favor.

Private enterprise alone should determine if the Big Easy is worth saving or not. Problems of “transactions costs” will be far easier to overcome than challenges presented by an inept and economically irrational government. Possibly a Donald Trump type might try to buy up all the buildings at a fraction of their previous value, and save his new investment by levee building and water pumping. He wouldn’t need to get 100 percent sales. A lesser amount, say, 90 percent, might do, and he would only make his initial purchases subject to reaching this level. That is, he might first purchase options to buy.

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Published September 3, 2005.

Chapter 18

Clean, Cool Private Water: Government Water Means Trouble

Two tragedies have recently occurred in Canada, one which has been given much publicity, the other only a little. As the wrong lessons have been drawn from both, we do well to reconsider each case, and to more carefully consider what they portend.

One calamity occurred in Walkerton, Ontario, where an outbreak of E. coli bacteria eventuated in the deaths of seven residents and the sickening of thousands of others. The Conservative government of Premier Mike Harris was widely blamed for this episode, since it had previously contracted out to private sources responsibility for drinking water in the province.

The second disaster took place at an artificial lake at Birds Hill Provincial Park in Winnipeg, Manitoba. This was the drowning of 18-year-old Katarzyna Zarzecki, who died while swimming and was unable to be rescued by the beach patrol. This comes hard on the heels of the drowning deaths of two small boys at the same facility during the summer of 2000.

As with the Walkerton cases, these deaths were also widely blamed upon privatization by the leftist media, because the life guarding responsibilities at this lake were also contracted out by provincial authorities to a for-profit corporation.

My claim is that these tragedies in Ontario and Manitoba occurred not because of these privatizations, but in spite of them; that the lesson to be learned from both episodes, paradoxically, is not that we need less involvement with the free enterprise system, but more. I say “paradoxically” because in the minds of most people, particularly the journalists who have written about these two stories, the case seems very straightforward: at one time these facilities were both under the control of the government, and all was well. Then there came a time when each was privatized, whereupon difficulties broke out. The lesson seems obvious: re-provincialize both amenities, and while we are at it, nationalize pretty much everything else, because if the government is more efficient than the private sector, why should we have much of the latter in any case?

Does anyone see a difficulty here? What passes for “common sense” amongst the Canadian chattering classes has been tried elsewhere, and found wanting. Very wanting. Now, let’s see, where was that? Oh, yes, now I remember: it was the Soviet Union and its satellite countries, which all went belly up, economically speaking, late in the last century. And now we are seriously considering a “made in Canada policy” of nationalization that is a pale carbon-copy emulation of the failure of communism? For shame!

But it is not enough to know that greater reliance on the public sector will fail; if we are to eradicate this sort of thinking we must know why as well. Otherwise, people will continue to think that what happened to the USSR was an accident, and that “it can’t happen here.”

So why is it that markets typically outperform governments in providing services such as paper clips and corn and wrist watches and milk, and also water quality and life guarding at beaches? It is due to the profit motive and competition. If the pizza in my restaurant is lousy, you go elsewhere. If you do, I am given a strong market signal to mend the error of my ways, and if I cannot, to get into a line of work where I can make a contribution to society. Contrast this to Pizza Canada, based on the same economic principles that have long endeared us to Canada Post. Here, if you don’t like the food product, you can go elsewhere, but Pizza Canada keeps on going and going, just like the energizer bunny, courtesy of tax payments mulcted from consumers unwilling to give this operation their dollar votes.

For some reason, there is a fetish in Canada about water. Yes, other things may be safely left to the market, but not this fluid. Water is special. Nonsense on stilts! H₂O is just another liquid. Free enterprise supplies us with high quality milk, soda pop, beer, wine, liquor, fruit juice, and every other liquid under the sun. Why should water be any different?

It might be objected that the quality of these other substances is controlled by the state apparatus; but the same could apply to water. In any case, which do you trust more: a government monopoly bureaucratic certification agency, or a competitive industry dedicated to these same ends? Realize that the same weeding-out process that applies to pizza also encompasses quality assurance. Thalidomide for morning sickness, after all, was approved by a government agency that by its very nature could never go bankrupt. We ought to more greatly appreciate the profit and loss system that automatically encourages success and penalizes failure. The Soviets, lacking this feedback mechanism, fell victim to economic arteriosclerosis. We do not get good burgers from McDonalds, high quality pizza, pure beverages from Coca Cola, wonderful cars from Rolls Royce, because of government oversight, which is subject to bribes in any case. No, these things come to us, and also Kosher foods another private institution of quality control, from the market sector.

Yes, private enterprise is not perfect. There will be injuries and even deaths in areas under its control. A few people drown, and others drink impure water. More would suffer these fates under bureaucratic management. Consider the some 3,000 Canadian motorists and pedestrians who lose their lives each year in traffic accidents on roads owned and managed by various governmental jurisdictions (the number is roughly ten-fold this in the U.S.). Why is there no hue and cry to privatize these properties? Could it be that due to the fact that under the veneer of appreciation for capitalism there is still a strong subterranean yearning for the Communist way of life?

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Published August 3, 2001.