The other day, as I was trying to extricate my vehicle and myself from one of the few traffic snarls in my town of some 30,000 odd people, I couldn’t help but ask why we had a traffic jam at all around the sole shopping center in more than sixty miles in one direction and two hundred in the other, especially in a town with more than enough open space. There have already been a number of accidents at the intersections adjoining the shopping center, where multiple streets converge all too closely within less than a block, including an interstate highway off ramp, and that’s before all the retail spaces have been filled.
So how did we end up with such a dangerous situation, and one which now requires a multi-million dollar relocation and rebuilding of the interstate access ramps and roads? The answer boils down to a free-market failure. The shopping center developers designed the shopping center to maximize the amount of retail usage for the amount of land involved. The town was happy with this because that also maximized the property tax revenues.
One of the defenses mounted by those who complain about government regulation of business is that businesses cannot stay in business if they create too many dissatisfied customers. While this is dubious at times, if not more often, it’s definitely untrue in several sets of circumstance that have become more and more common in modern society. The first case is where the “customer” has no way to track and no way of knowing who or what business has created the problem. The second is where a customer deals with the business only once or twice in a lifetime. The financial meltdown created by the housing/mortgage collapse embodied both of these circumstances
The dangers around my shopping center embody just the second, because the shopping center developers developed the only shopping center in my town and likely the only one, given demographics, for at least a generation. Once the land is planned, subdivided, and built, they’ve made their bundle, and because they can’t do it soon or perhaps ever again in this town, free-market economics press them toward making as much as they can, regardless of the consequences. Under the threat of having a badly designed shopping center or none at all, the town caves in… and the citizens are left with the mess, and the taxpayers (including those in cities hundreds of miles away, since the interstate ramp rebuilding will be partly funded by the state) will fund all the remedial measures.
Economists call those costs external diseconomies or negative externalities or the equivalent, but what it amounts to is that unchecked free markets, or those not scrutinized enough, have a disturbing tendency to foist way too many costs off on others, not to mention deaths at times – and certainly in the case of the financial meltdown, all those billion dollar profits and high bonuses were never recovered while the taxpayers picked up the tab, and no one compensated those whose lives were ruined.
While I’d be the last person to endorse government planned and directed economic development, because that’s just another road to ruin, I’d also be one of the last to endorse unchecked free markets. We need a balance between the two – and that’s something that none of the politicians or the multibillion dollar corporations seem to want, whether it’s in the planning and regulating of the design and operation of local shopping centers or the nation’s financial structure.