quote:
The private sector refused to go into certain rural communities because the returns weren't there, so the public sector ran utilities on its own with the help of tax subsidies. I think few people in those communities would prefer not having electricity to being taxed for those services. We are arguably seeing this same principle play out today with rural broadband.

Great points and thanks for the historical reference. While Hazlitt does a great job of breaking down economic principles to simple concepts, I do wish it was supplemented with more real world context and examples. My question here would be more related to what was the impetus to infrastructure investment in the first place. If people already live in the rural communities prior to government providing certain services, then aren't those people in essence valuing their current living situation better than the convenience and costs associated with governmental services such as electricity? Otherwise they'd migrate to a city/town that taxes and affords them such services.

However if there is an expansion of infrastructure to enable people to live in the rural communities where it was previously uninhabitable for one reason or another, then the use of public dollars seems in this case to be a much better use of capital than the former example.

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Posted by RedStickBR

Member since Sep 2009

14577 posts

Posted on 6/14/17 at 8:48 pm to GregYoureMyBoyBlue

It all goes back to farming. Farmers owned lots of acres of uninhabited land, which meant less population density, which meant fewer potential customers per electrical, water or gas line mile, which meant sub-par returns for the private sector. They couldn't move to the city because there livelihood was in the country; however, there was still a tremendous need for electricity. And so the public utility or co-op model was born.

Today, it's even less extreme with "rural" broadband. Rural, in the broadband context, can mean towns of 30,000 or 40,000 people. While these towns would likely be profitable for the large multi-nationals to serve, they simply have better investment opportunities elsewhere. That's why you see such a heavy push towards municipal broadband in many small-mid size towns (see Chattanooga, for instance).

I'm not opposed to public investment in these instances; but when the government starts doing things like buying real estate and offering below-market rents to attract development that competes with local real estate entrepreneurs, or when they start developing special tax-free districts for places like Chili's or Wal-Mart at the expense of locally-owned establishments, I get uneasy. And I really start to have a problem when governments do things like start "proprietary funds" to supplement their general fund with the stated intention of operating like a for-profit business, especially when there are private-sector alternatives in the area.

The question is how do you address anti-competitive abuses without hindering public sector investment where it's really needed.

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