Let Them Eat Pie

Noah Smith has a great take on the social structure of Economics vis-à-vis resource allocation, in Bloomberg. His premise, which can not be disputed by anyone with a social conscience, is that it takes good government policy to grow the economy as much as economic factors.

Yes, Smith wants to grow the pie, and it’s pure irony that I wrote about growing the pie earlier. I read Smith’s article after the fact. Call it a “psychic moment.”

However, Noah Smith does make a statement that requires deeper sociological thought, something most economists cannot do: that business will not take on the role of creating things for the public good, either through externalities or explicitly. That it takes government to create things for the public good and use.

Which makes me think about the privatization craze. Somehow, in the neocon illogic, business was more suited to run things that were meant for the public good than government was. The theory was that “markets” run things much more efficiently (fiscally) than government can. However, what business is not good at is doing things in the public interest. Their concern, not wrongly so, is profit – not people.

The results have been sociologically devastating, or in economic terms, piles, and piles of negative externalities.

Private prisons have continuously been charged with violating people’s human and constitutional rights. Privatized “public” schools (an oxymoron in itself) have completely failed education by providing no measurable results. Cities privatizing roads and public works have seen a loss of quality of service, price increases, with record corporate profits.

If we really want to see the crossroads of sociology and economics come together in an apocalyptic way, we need look no farther than South America. This is a place where many countries, under pressure from the IMF, were forced to privatize public services to global corporations. The results were not only things like a 6000% increase in the price of water in Chile, but rioting in from Brazil, to Bolivia to Argentina.

And some cities want to privatize their fire departments. Imagine paying a “fee” to the fire department, whether or not you actually need them. This essentially turns the fire department into an insurance company – the rentier class.

I’m hard pressed to think of externalities more negative than this.

Yes, we need to grow the pie, and yes, we need a social structure to allocate the pieces of that pie that are meant for the public good. But the last thing society needs is to be left to eat pie by market forces.

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