ADAM SMITH NOT ON STREET CARS!
Cyril Morong, Ph.D., an associate professor of economics at San Antonio College, writes (12 May) in My AntonioTHE EXPRESS-NEWS, HERE
“Streetcars on road to government overreach”
“Bill Barker claims that some have hijacked the term “American dream”
to block projects like the San Antonio streetcar project for their own
selfish reasons (“Opposition co-opting the American Dream,” Another
View, April 24). But it looks as if he attempts to hijack economist Adam
Smith and Pope Francis in support of streetcars.
He quotes Adam Smith about private interests in “some respects” being the opposite of public interests. “Some respects” is not in all respects, and Smith mentions this in the context of businesses trying to get taxes or regulations imposed on the public. Smith says when a merchant pursues his self-interest, it “leads him to prefer that employment which is most advantageous to society.”
It is well known that he was suspicious of business, but he also worried about government going too far: “There is no art which one government learns” more quickly than “draining money from the pockets of the people.”
Smith listed three major functions of government: national defense, crime prevention and beneficial public works that could not be profitable for private firms to undertake. The latter had two ends: facilitating commerce and education.
Barker does not explain how streetcars will facilitate commerce. Maybe they will. But for a project like this, we need cost-benefit analysis, and Barker provides none. Adam Smith suggested such public works need this. … It is not even clear that we have been relying on the invisible hand of self-interest in this country. Yes, some industries have been de-regulated in the past 35 years, but regulatory spending by federal agencies is about nine times higher today than it was in 1970, adjusted for inflation. We add thousands of pages of new regulations each year. That is not an invisible hand at work. In the 1950s, about 5 percent of jobs required a license. Now it is about 30 percent. Now some people face marginal tax rates of 50 percent or higher when both federal and state income tax rates are considered. Again, it does not look like the invisible hand in action.” …
So let's take a good look at streetcars before we give the OK.”
Dr Cyril Morong draws Adam Smith into a simple local story of interest to the good folks of San Antonio. Now, it may be that Adam Smith (1723-90) had something useful to contribute about people choosing or refusing to have a street-car system (in Scotland, known as ‘Trams’) built in their town in the 21st Century.
Assuming that is the case - though when Smith was alive there were neither street-cars nor trains situated in Scotland (or anywhere else in the world). So what else does Dr Morong think Adam Smith favoured as suitable for public expenditures. We knowSmith favoured public expenditure on local pavements, refuse collection and disposal, harbours and main roads.
Dr Morong suggests “three major functions of government: national defense, crime prevention and beneficial public works”. The first duty of government is ‘defence’, but I would question whether the second duty was “crime prevention” as being too narrow. Smith called it “justice”, an altogether much wider remit that “crime prevention”, though local practices in San Antonio may conceive of justice rather narrowly - the cliched figure of a sheriff with a six-gun, etc. Justice is a much wider idea, where differences of opinion among the citizenry do not only or necessarily involve criminality. Lastly, “beneficial public works” is insufficent to discriminate suitable public works.
Smith was a pragmatist, not a zealot. It was a matter of finding what worked and what didn’t. Privately built roads could be well managed and superior in construction - they could also be poorly run or repaired by poor public management; publicly built and managed roads were not immune to the same weaknesses. After a road is built it has to be maintained for many years. Much experience of large-scale public projects and private ones in much of the world suggests the rapid deterioration of public roads, bridges and buidings is common, in rich as well as poorer countries.
In projects for “facilitating commerce and education” there is vast historical experience. Scotland had an ambitious education system from the mid-16th century onwards of a “little school” in every parish, partly funded by charties, public expenditures, and parental contributions that gradually spread basic literacy across generatiions of young children and provided a route to university for 14 year-old boys (girls were left to their parents efforts to the 19th century). Scotland had four universities for its small population, while England had just two for its many times larger population.
Dr Morong says that Smith said: “when a merchant pursues his self-interest, it “leads him to prefer that employment which is most advantageous to society.” Smith was always careful both directy and by implication from context not to equate “self interest” by any section of a community” with being “most advantageous to society.” It always depended on the nature of a merchants, or anybody else’s, self-interest. Smith argued that “self-interested’ actions - lobbying for tariffs and prohibitions, laws against “combinations” of labourers, monopoly product licences, local trade monopolies, apprentiship laws, the ‘settlement’ laws, restrictions on trades, judgements by local magistrates (often local businessmen) and such like, that suited the self-interests of the beneficiaries but were against the interests of consumers and residents.
In short, Dr Morong’s linking of truncated versions of Adam Smith to the “street car” controversy in San Antonio is quite unsound historically and, I suspect, in detail. Incidently, Adam Smith gave over 60 examples in Wealth Of Nations of the negative consequences of “self-interested” actions by individuals experienced by those affected by them. OK?