Traffic Jams are Breadlines

You don’t want people to starve. So you collect all the bread and parcel it out to everyone. If someone wants bread, they need to wait in the breadline. This may take a very long time that they’d rather spend doing something else, but they don’t have a choice – the breadline is the only way to get bread now.

You want everyone to be able to get places. So you build a road and open it to the public. If someone wants to get somewhere, they need to wait in the traffic jam. This may take a very long time that they’d rather spend doing something else, but they don’t have a choice – the road is the only way to get there.

The moral of the story is that making something free is not a great way to help people. It’s generally better to just (1) send money and (2) let prices rise and fall to meet demand. That way everyone gets what they most want, and have the option to do something else if they find they want it more than the free thing you were offering earlier.

3 thoughts on “Traffic Jams are Breadlines

  1. The breadline collects all the bread in a way that a single road construction does not.

    I am not quite sure I follow what you are trying to get at here, ultimately. I concur that markets can be more efficient than centralized distribution and assignment, since multiple competitors then have an incentive to become more and more efficient. But there are also reasons why this competition can cause broader systemic issues – the formation of a cartel can cause prices to remain artificially high, or the aggregate gain in productivity from making a resource publicly available can be greater than the aggregate gain from privatization and competition. For example, the disincentive to travel from a toll road (or series of toll roads) might be less efficient than the situation where the road was freely available and travel increased.

    And in situations where a resource is a bona fide need, opting for the strict market route can lead to really awkward situations. We frown on circumstances like profiteering during a natural disaster; providing emergency supplies from a centralized body is usually preferable.

  2. Free markets and competition are one way to get an efficient allocation of resources, but not the only way; even when markets are unavailable, efficient allocation is still a good thing to have. “Free (libre) market” and “Literally free (gratis)” are not the only options.

    Roads are like most utilities in that they can’t usually be offered competitively – you can’t have two parallel roads offering different rates, at least not realistically (usually). Bu you still have a finite resource, and you still don’t want deadweight loss in the form of people sitting around in traffic when they could be doing something else. If I was in no hurry to get to PointBville but Miss Hypothetical needed to get to PointBville ASAP, it would be good for her to have a way to express that preference.

    Back to alternatives to libre markets and gratis public utilities – congestion pricing is the thing to use with roads. The ICC in Maryland implements a version of this, with prices varying by time-of-day to reflect traffic patterns. This allows people to express time preferences, pretty much eliminates traffic jams, raises funds to offset construction and maintenance costs, _and_ it can even be switched off in an emergency (which has happened several times).

    Also on the subject of gouging: I’m increasingly convinced that gouging is (usually) a good thing – or at least a less-bad thing. The optimal thing would be to allocate all resources based on who needed what, but in the absence of a reliable way to do that price gouging allows the people who most need resource_x a way to express that preference – imperfectly, since a lack of money in this case prevents someone from expressing their preference. It’s still better than nothing.

    This is why I’m loudly in favor of a generous cash welfare state – spending $x on foodstamps and $y on subsidized housing and $z on free roads is strictly worse than sending the less-well-to-do $(x+y+z) and letting them decide what they need most.

  3. But gouging doesn’t allow for expression of who’s got the most need, especially in a crisis situation. It just allows for expression of who’s got the most resources beforehand, as you note. And it allows folks who control a crucial resource to extort a captive audience without any control or regulation (if those were there, it wouldn’t be gouging).

    How familiar are you with Coase in this context? (I have some exposure from 1L year, but it’s been a while; I suspect there may be some relevant thoughts there re: externalities and government intervention.)

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