Friday, October 22, 2010

The Smithian Economics of Car Parking

Ryan Snyder write that there is ‘No such thing as a free parking spot,' on City Watch, Los Angeles from ‘City Hall’

As an economist, I don’t believe in Adam Smith’s theory of the invisible hand of the market satisfying all social needs.”

As an economist, Ryan Snyder, should know that Adam Smith never had a “theory of the invisible hand of the market satisfying all social needs”, but obviously does not.

Presumably he has not read what Adam Smith wrote about ‘an invisible hand’, either in Moral Sentiments (1759), using feudal landlords as his example, or in Wealth Of Nations (1776), using some, but not all, capital owners choosing to keep their capital in Britain, rather than risk it abroad, where they believed it was less secure.

In neither case were his examples related to markets. In fact feudal society was a long way from being described as a ‘market’, and 18th-century Britain was totally dominated by mercantile legislation that dominated its economy with tariff protections and outright prohibitions, domestic Guild monopolies, the Statute of Apprentices, the Settlement Acts, Primogeniture and Entail laws, supported by the Navigation Acts monopolizing all shipping to and from Britain, and policed by the Royal Navy.

The ‘theory’ that Smith’s use of the metaphor of ‘an invisible hand’ was a theory of ‘markets satisfying all social needs’ is an invention, mainly from Paul Samuelson’s otherwise excellent text, Economics: an introductory analysis, 1948, page 36 (and through its 19 editions to 2010 and 4.5 million readers ).

Smith noted that domestic investments increase domestic output and revenue, which Smith considered a public good, because it spread ‘opulence’, particularly to the ‘poor majority’. It was a simple arithmetic rule of quantity – whole is the sum of its parts. No mention by Smith of ‘satisfying all social needs’. That last part was part of the invention of the myth of ‘an invisible hand’, credited to Adam Smith to give the proposition a wholly undeserved credibility.

Charging individual owners who park their cars is a sensible way to place the cost on the polluter and congestion contributor. Whether that charge is managed by the market or by the state is not the issue.

Smith believed in markets, where possible, and the state where necessary.



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