The Joys Money Could Buy
Money-making seems a meaningless exercise for it does not buy you the much sought delights of everyday life. At best, more it saves you the agony of deteriorating quality of life. Most of the higher incomes are spent on exorbitantly priced real estate. Yesterdays convenience of an inexpensive bus ride on spacious streets is barely replicated by the sleek cars winding their way through clogged streets. The market price for education and medical care moves to higher levels but the service quality remains suspect.
Only a few decades back, capitalisms ability to meet basic human needs of food and shelter were in question. Absurdities of rising stockpiles of food while the masses suffered left many convinced that capitalism is heartless. None of these images will wash in the state of contemporary mind. The grouse of the day is civic services capitalism seems incapable of efficiently serving social needs with an overriding influence on the quality of life.
Holcombe questions the rationale for state intervention in civic services. He builds a plausible case for incentives for private provision of public services. As in other aspects of economic life, the governments role should be confined to vesting property rights and enforcing them.
Regulation, according to him, is an inefficient mechanism compared to common law in checking socially damaging practices. The kind of difference that this makes is illustrated by a case of dumping of toxic waste by a chemical company brought before the Environment Protection Agency in the US. On the basis of existing environment standards, the chemical company could defend its case. However, the community challenged the company in the courts on the plea of public nuisance, and won the case. Unlike regulatory bodies, the courts of law can take into account specific circumstances to assess the damage done to the community. They are not constricted by a straightjacket to regulatory rules.
Common law, moreover, leaves sufficient latitude for individuals to weigh the trade-offs in individual situations. Private owners of environmentally-sensitive property, such as the Audubon Society in the US, opposes oil exploration activity in its parks. However, in specific instances like in Louisiana, when oil companies agree to acceptable rules for not disturbing wildlife, exploration rights are granted. In the bargain, the Audubon Society acquires resources to buy more environmentally-attractive property.
A potential role for private efforts at regulation of markets is repressed because of an elaborate system of government rules which are rarely implemented. Private agencies like Best Western Motels and Underwriters Laboratories choose less costly methods like branding to enforce standards of quality. There is no reason to believe that more such agencies will grow if they are not crowded out by government departments.
Holcombe unearths shocking information about monopolistic practices in the regulation of the health system in the US. The American Medical Association (AMA) was formed in 1900 to govern the quality of physicians. Thereafter, the supply of doctors fell from 68 individuals for every one million citizens to 37 per million in 1950 even as technological changes increased the demand for medical professionals. Moreover, the AMA required pharmaceutical companies to advertise their drugs to doctors and not to the general public. Moreover, restrictions on the disclosure of information on drug packs were imposed. Unsurprisingly, the costs of healthcare have zoomed in the US, suggesting careful adoption of such models in developing countries like India.
Finally, a central aspect of urban planning are the zoning laws which segregate residential areas from commercial centres. In reality, such rules increase the distances that people have to travel between their places of work and residence. Little room is left for real estate developers to make their own judgements about planning land use policies appropriate to living habits of people. Small wonder that most cities leave their residents dissatisfied. Holcombe recommends restrictive cov-enants written in land sale contracts which let the buyers know about the planned design of their neighbourhood.
The bane of much of regulation, according to him, is that regulatory rules can be bent by politically influential lobbies. Common law, on the other hand, leaves sufficient room for contending parties to make mutually beneficial adjustments to changing situations.
An influential section of opinion in India has cultivated the myth that effective regulation is at the root of the superior quality of life in developed countries. The fact is that much of regulatory practice overseas is being subjected to searing criticism and India could better than to walk into the same blind alleys.