Even under the most enlightened regimes it is sometimes hard to establish clear property rights. Indeed, government regulators often justify government interventions as corrections of ill-defined property rights or "market failure." To ensure clean air or good roads, it's too costly, they say, for markets to collect payments from those who enjoy such benefits. As such, it is easier to fund them through taxes.
But the costliness of transacting depends on the nuts and bolts of exchanging money for services. New technology is making it easier to transact, undermining the reasons for many government interventions. An enlightened regime would periodically reassess its policies in light of new technology.
Technology has long altered conventional thinking about public policy and property rights. Americans got wired for the first time not with the telephone but with barbed wire. Prior to 1870, the American West found itself abundant in rangeland and devoid of fencing materials. It was too costly to mark property boundaries and prevent trespass. A common practice was to let livestock roam and intermingle. But in the 1870s the spread of barbed wire, an inexpensive and effective fencing material, lowered the cost of delineating, protecting, and enforcing property rights. New technology changed institutions and policy for the better.
That same dynamic has great potential in areas of public policy today. Consider policy debates surrounding automobiles:
motorways have been financed by taxation and provided by government.
Old methods of toll collection involved inconvenience for motorists and
significant costs of toll collection. Though a portion of motorways are
toll roads, most of
Automobile Air Pollution. Monitoring and controlling air pollution from cars has seemed such a perplexing problem that few have advocated a property-rights solution. However, exhaust-sensor technologies have changed that. The sensors can be placed at roadsides and monitor the exhaust of passing automobiles. If the sensors are coupled with electronic license plate readers, the system can identify polluting motorists and send them "pollution bills." Such an approach targets the actual polluters, a fairer and more efficient program than traditional command-and-control methods such as smog check programs, alternative-fuel requirements, electric vehicles, and mandates on automakers.
Although remote sensing is a program for regional governments to undertake, it is nonetheless a property-rights approach to the problem. It protects the public air from violation and leaves non-violators undisturbed in the use of their own automobiles. It is like protecting public buildings from graffiti by setting up video surveillance, rather than by placing restrictions on who can buy spray paint at the local hardware store.
The inconvenience and unsightliness of the early parking meters helped
justify "free parking." But modern parking meters no longer require
motorists to pay with loose change for limited periods of time. For
instance, multi-space meters, now prevalent in parts of
Some might argue that, just as technology enhances the capabilities of the private market, it enhances that of public-spirited regulators and officials to do a better job regulating. True, governments can become more effective by virtue of technology. Government agencies, too, can run highways as toll roads.
However, if both free enterprise and the government are technically capable of, say, producing tomatoes, Adam Smith's logic of incentives and local knowledge argue for leaving the activity to private owners interacting voluntarily. As Milton Friedman says, we spend money most carefully and to best effect when it is our own money and we spend it on ourselves. The government, on the other hand, lacking such incentives and local knowledge, usually fails to match the market's capabilities.
In many areas of public policy the old rationales for government intervention are obsolete. Today's policymakers ought to pursue a policy regime in which institutions can keep up with technology.
Fred Foldvary and Daniel Klein, economics professors at