Tuesday, May 13, 2014


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?


Blogger Cyril Morong said...

I am certainly reluctant to disagree with someone from Edinburgh on Smith, but please try to see the context in which I wrote my article.

I did not draw Smith into this issue. Someone else did and I responded to their article.

An op-ed piece like this has a word maximum so I cannot go into every aspect of The Wealth of Nations.

"though local practices in San Antonio may conceive of justice rather narrowly - the cliched figure of a sheriff with a six-gun, etc"

That sounds like an offensive stereotype.

"Lastly, “beneficial public works” is insufficent to discriminate suitable public works."

Yes. That is why I said Smith would probably want to see a good study done on this (I am at my office and my copy of The WON is at home so I cannot supply a quote-I will try to later).

"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.”"

I brought that up because the article I responded to had just one quote on Smith that I thought was misleading and did not tell the full story.

And I was trying to point out that it was not the normal profit seeking behavior in the market that was always the problem. It was when businesses tried to get the government to take their side. You seem to be saying that and the man that wrote the original article left that part out and may have take Smith out of context.

Finally, I did say that maybe the street cars would facilitate commerce. The author I responded to did not make that case. Our city already has a bus system and it is not clear that we need to add street cars.

Putting in street cars will involve tearing up roads during construction that will hurt businesses, at least for awhile.

6:21 pm  
Blogger Cyril Morong said...

Here is the passage that, in my opinion, suggests that Adam Smith would want a streetcar system to put to a cost-benefit analysis. I never said that San Antonio should be prevented from building streetcar system based on Adam Smith. I only said that the author of the original article should not claim Smith as proof that one must be built.

"When high-roads, bridges, canals, etc. are in this manner made and supported by the commerce which is carried on by means of them, they can be made only where that commerce requires them, and, consequently, where it is proper to make them. Their expense, too, their grandeur and magnificence, must be suited to what that commerce can afford to pay. They must be made, consequently, as it is proper to make them. A magnificent high-road cannot be made through a desert country, where there is little or no commerce, or merely because it happens to lead to the country villa of the intendant of the province, or to that of some great lord, to whom the intendant finds it convenient to make his court. A great bridge cannot be thrown over a river at a place where nobody passes, or merely to embellish the view from the windows of a neighbouring palace ; things which sometimes happen in countries, where works of this kind are carried on by any other revenue than that which they themselves are capable of affording"

1:13 am  
Blogger Gavin Kennedy said...

Hi Cyril
Thanks for your comment and quotation from Smith on public works. I am not sure just what we are arguing about.
I tried to clarify Smith on justice as the general activity of government because it makes the laws that guide and protect society, even unequal ones common during Smith’s day and now more widespread across the world, with many counter examples of tyranny endemic still. Crime is only one part of justice; the rule of law is its prime purpose. My reference to the armed sheriff with a gun was a light-hearted reference to the common image of US Law and Order in most households over here but you considered to be “offensive”. It was not intended as such but if you were offended, I obviously apologise,
Now, I was impressed that you followed up and quoted Smith directly. However, I was not arguing that Smith had views on public and private investment in public works, but that he was sceptical of their performances once any investment was made by either form of investment. Both public operations of public infra-structure projects or private operations of them carry efficiency risks, in for example, road maintenance. Ideological advocates of either public or private provision of such projects contrast the alleged performances of state v markets but neither do not have proven records of being superior to the other.
You refer to “A great bridge cannot be thrown over a river at a place where nobody passes”. Smith spoke logically here but experience since shows differently. In England, the magnificent ‘Humber bridge’ over the River Humber (Yorkshire) is an example of a road bridge going ‘nowhere’, costing millions, funded by state taxation, commerically built by private enterprise, and was motivated by public policies.
Traffic is well under designed usage; the roads to and from the bridge are still minor roads; north takes a few motorists towards Grimbsy - a large provincial city and major harbour - and southwards to, well, nowhere that would justify current traffic or the designed capacity levels. Why? Politics!
Africa is littered with similar scandals of multiple million-dollar aid projects, including steel mills, irrigation works, and airfields, even modern city centres rusting to destruction - even supposing they were not inspired by corruption and a political leader’s self-glorification.
I am pragmatic too. I examine outcomes not ideological inputs for or against public/private intensions. In Smith’s day moral corruption was rife, with neither state nor commercial behaviours prominent in moral rectitude, and much experience suggests that modern day behaviours have not changed much.
Pragmatically, I say ‘markets where possible, state where necessary’. I believe Smith would agree, and there is much evidence in Wealth Of Nations and in his Moral Sentiments to suggest he would have agreed too. Into that context, I would put theSan Antonio City Street cars debate.

8:22 pm  
Blogger Cyril Morong said...

Thank you for your apology.

It seemed like you were taking me to task for my article. But I did not wake up one day and say "I am going to use Smith to argue against streetcars."

I saw someone use Smith to support streetcars by only quoting one incomeplete sentence and, in my opinion, taking Smith out of context. That is what prompted me to write an opposing view. I feel that you did not give what I was doing a fair look. If that original article had not mentioned Smith, I would not have either. I did acknowledge that under the third function of government of public works that street cars could facilitate commerce. It is just that the original article did not explain that

I think we have some common ground after your comment

10:33 pm  

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