I’ve been working in New York City for the past several months (taking the train in from Connecticut), and I must say I’ve been thoroughly unimpressed. It’s not that I dislike New York in general. I used to love coming for fun when I was younger, and there are still aspects of the city that I find truly unique. The food, for one, is superb. Never mind New York’s restaurant culture; what you can often get out of the side of a truck can be equally impressive.
But the day-to-day of commuting in and out of New York has been disenchanting. The air in the city sometimes smells awful. The people hustling to and from work are often rude. My walk from the train to my office is incredibly noisy, even at 7:15 in the morning (I usually listen to a podcast or the radio, and often can’t hear what’s going on with the volume cranked up all the way). And in the summer it can be oppressively hot and humid, especially in the train station, meaning that these days I’m damp with sweat by the time I walk in the office. I can already hear myself sounding like Mister Complainy Pants here, which I’m not proud of. I realize that lots of people have uncomfortable commutes, and I often remind myself of the need to be grateful simply to be employed. But I’d be lying if I told you that New York wasn’t starting to get on my nerves.
The thing that’s become a symbol of my commute into the City, which is the whole point of this post, is the escalator at the 47th and Madison exit from Grand Central that I take every day. It’s broken, and by that I mean that it is out of commission while it undergoes renovation… a renovation that is scheduled to take up to three months.
Lately I’ve been thinking a lot about this escalator (pretty lame, I know). Specifically, I wonder how many people must pass through that exit from Grand Central every day into Midtown Manhattan, and whose commutes are impacted in some small way by its unavailable status. How is it possible for this thing to be out of order for this long?
Taking the stairs isn’t a killer. Some of us (me) could use the exercise. But what I find interesting about this Grand Central escalator thing is that most people don’t actually end up taking the stairs now that it’s out of operation. Instead, they make a very small detour and use the JP Morgan building’s escalator, which takes you up to the building’s lobby just one revolving door away from the street.
The closure of this particular Grand Central escalator and the effective replacement of this public service by a functioning privately-owned one is emblematic of something that’s happened all over the world over the past few years. As the global economy slowed, the stream of tax revenue coming in to city, state, and national governments all over the world dried up. As these governments scrambled to continue balancing their budgets or avoid building huge debts, one of their responses was to slash spending on public services. In certain places (many indebted countries in Europe, most notably) the cuts have been draconian. But even here in the US, you can feel that things have changed.
You may ask, What’s the problem with a bank or another private company stepping in to provide services when a government cuts them, as seems to be the case with the JP Morgan escalator? After all, governments are often slow, plodding, and inefficient. By contrast, the free market is usually much more efficient at allocating goods and services. That’s all well and good. In most cases, I buy this argument; typically, when the government keeps its hands out of the things that the private sector does well, we are all better off.
So can’t private companies take on the responsibilities abdicated by the public sector? Unfortunately, no, not really. The reality is that governments do certain things very well, things that private companies either can’t do or have little interest in doing. Part of this is that governments have a mandate to do certain things that aren’t profitable (like, for instance, provide healthcare or housing to the poor), while another part is that the size of government can create certain advantages of scale or coordination. Sure, governments regularly partner with the private sector for various projects. But it is hard to imagine things like a public transportation system, a nation-wide vaccination program, or national security being left entirely to the workings of the free market.
There are two big problems with the current push to pare down public services and investment, and here is where the moral and the economic sides of the issue collide.
The first problem is that the poor and middle class disproportionately rely on these expenditures, and are thus disproportionately hurt when they are cut. To illustrate: If I’m wealthy enough to afford to drive into the city and park everyday for work, then the quality of public transportation means little to me. But if I rely on a particular city bus route for my livelihood and it falls victim to budget cuts, then I’m in trouble.
In many developing countries, where the public services are poor or nonexistent, the rich are commonly able to supplement or replace them. For instance, in places where the police are incapable of containing crime, these individuals commonly pay for things that are foreign to us here in the developed world: bodyguards, guard dogs, gated houses, etc. In that sense, private solutions are able to replace the absence of public institutions (in this case, security), but only for the wealthiest segment of the population.
Hence, there is a purely moral argument that we should make at least an effort at good public services, which is that presumably, we prefer to live in a society which actively seeks to help — rather than hinder — those at the bottom of the income spectrum, not just those at the top. (If you disagree with the statement above, then this is probably not the right website for you.)
But there is also an economic case, one that is in its essence the same as the moral case. Going back to the example of crime and security, if our goal is to ensure a safe environment for all citizens, the most efficient (cheapest) way to do that is actually to have a functional, honest, publicly-funded police force, rather than each individual spending money on his or her own bodyguards, guard dogs, and gated houses. (We may also want to spend public money on an educated population, for instance, as a way to reduce crime.) Here, the public sector performs very efficiently.
But let’s imagine a society that cares only about the welfare of the wealthy. In the short term, it may make sense not to spend the money on a decent police force. Why? Because it may be cheaper for 1% of the population to privately fund its own personal security, rather than to pay the lion’s share of taxes necessary to ensure the security of the entire population.
But even for the very rich, this strategy only pays off for a relatively short period of time. The reason why is that in the long run, the economy cannot continue to function — at least not well — without a bedrock of solid public institutions. If those institutions don’t exist, then no one in the economy is able to thrive, including those at the very top who can’t make money in an economic vacuum. Thus, slashing public spending on things that matter mostly for the poor and middle class eventually comes back to bite all of us in the rear end at some point.
To take it back to Grand Central and the microcosm of the broken elevator… Does it make sense for New Yorkers to pay taxes towards good transportation into the city? For the poor and middle class, the answer of course is a resounding yes. But for the wealthy business owner, there’s an incentive as well, even as you’re asked to pay the necessary taxes: Namely, that it’s hard to run a successful business when your employees can’t get in to work.
I’m picking on Grand Central, of course, and that’s pretty unfair. Escalators break, and it can’t be easy to cool off an underground structure so old and massive when it’s a hundred degrees out. I get it. The primary goal of public transit is to get people to their destinations, which Grand Central and the whole MTA seem to do well for a tremendous number of people. Getting there on time and not covered with sweat, I suppose, is more of a luxury.
But the current battle over public services, not just in the US but in many places, is more than just an issue about minor inconveniences. The argument for dismantling certain public institutions isn’t just a product of the global economy and our budget constraints, but also an economic fantasy of noble individualism, where we all pull ourselves up by our bootstraps without the help of anyone else. It’s easy to see why this vision of the future is less than a fantasy for those near the bottom of the income spectrum. It’s much more difficult to see how it fails even in the case of the wealthy and powerful, but it’s no less true.
Like I’ve written before, the economy is an ecosystem. One individual’s lack of ability or opportunity to function properly in that ecosystem impacts the entire economy, like a failing organ afflicting the whole human body. That’s why I feel something as mundane as public services — things paid for by taxes that have a large impact on the welfare of the poor and middle class — can be both a moral and an economic issue. Either we recognize our interconnectedness and the value of all individuals, or we risk a hollowed out economy that ultimately benefits no one.
6 thoughts on “The moral case for good public services”
Great connection between the every day and the world economy. I love, “the economy is an ecosystem.”
Good post, although I think it’s important to make note of how difficult it is for a city, state, or national government to balance a budget without cutting spending. And there’s just not that much spending to be cut other than these discretionary things that you’re talking about. This is not a black and white issue, that’s the point.
In general, however, I agree wholeheartedly with the main theme here: You can’t just keep cutting things that regular people rely on (especially infrastructure, or what you’ve called “institutions”) and expect the economy to keep chugging.
I’m not a Baha’i but I get the point… We’re all better off when everyone is well off. Seems pretty basic to me. Now, why do some people resist this truth? It’s not that they simply arrived at a different conclusion based on the same facts. It’s that they have an emotional attachment to what you call an “economic fantasy of pure individualism”. I actually think it’s easier for the theme of we’re-all-in-this-together to triumph by appealing to people’s hearts rather than their intellects. I suppose you would agree considering the nature of your blog. If everyone here in the US did 5 minutes of meditation per day, for instance, do you really think we’d be thinking of cutting food stamps? Hard to be that callous to the poor when you’ve centered yourself spiritually.
I am glad that you are making this argument in favor of strengthening public goods. I am frankly pretty tired of hearing this free-market fundamentalism constantly being spouted off, which seems to suggest that privatization and commoditization of everything – healthcare, education, transportation, etc. – is always better than the alternative, government-run option. I think people that do economics, whether in business, government or academic settings, must refrain from only defending this free-market absolutism and instead thinking about which mechanisms actually benefit all of society. If they can show that the market can better distribute the positive benefits of something, then so be it. But if something like a police force or healthcare system can benefit more people if it is publicly run, then we must accept that. I would like to see some economists take a stand in favor of a more egalitarian way of thinking about economics rather than an obsession with market efficiency and equilibriums that often have little value outside of academic circles.
The overwhelming majority of economists (from my experience, and I’m talking about here in the US) think like you do. That is, they believe that generally speaking, a free market-oriented system produces the best economic outcomes, but that markets fail in many cases and that these failures require the government or some other non-market entity to intervene.
There is a community of economists out there that thinks that the market is so perfect that these failures are utterly nonexistent, or at best extremely rare. But among PhDs, I think they are a tiny minority. So why does it seem like they’re so dominant? Because their ideas are much more beneficial to powerful and well-funded interests, giving them a much more visible platform to communicate their ideas.
I am not in the business of naming names on this blog, but there are news outlets — print, radio, TV — for which their business strategy involves more heavily representing one side of a particular scientific debate. Economics is not an exception here. This is the most innocuous and diplomatic way I can put it.
So when you hear a talking head on TV make the case that government revenue is likely to rise by cutting tax rates; that US labor mobility is higher than that of its peers; that US companies are overly regulated vs those in other developed countries; that the Fed is intent on “debasing” the dollar and that hyperinflation is around the corner; that policy uncertainty is the cause of the sluggish (until recently) pace of recovery; that monetary policy worsens, rather than helps, volatility in the business cycle; that harsh austerity is likely to get an economy growing again by inspiring confidence; or that progressive taxation drives up unemployment by punishing the “job creators”; know that you’re probably watching a second-rate economist who’s famous only for being sexy on TV and not for any genuine academic achievement.
There are legitimate brilliant people on the evangelical, hyper-free market side, but my point is that they are a small minority. But regardless of credentials or talent, it’s much easier to have a voice if you preach this message, simply because there’s plenty of money out there willing to help get the message out.
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