One of the first things you learn when you study public welfare economics or public choice theory is that the private provision of public goods runs up against the problem of free riders — people who benefit but don’t pay. This is one of the core justifications for the governmental provision of public goods such as police and fire protection, and for the funding of those services through compulsory taxation. One of the things you learn later is that there is some debate over what exactly qualifies as a public good. And in some courses you also learn that rent-seeking businesses like to masquerade as suppliers of a public good in order to get subsidies they do not deserve.
Our modern experiment with gutting local, state, and now national government in the names of low taxes and privatized profit while simultaneously offering handouts to well-connected corporations provides telling reminders of each of these lessons.
The most recent of these is the Hallandale Beach lifeguard who lost his job for saving a life. Unfortunately for Tomas Lopez, he left his station in the lifeguard zone unattended in order to save a swimmer in distress in the no-lifeguard zone. As the nation now knows, Lopez got fired for that dereliction of duty (and then got offered his job back when the media howls began).
Lopez’s employer would have preferred Lopez act like the fire department in Obion County, TN that just watched while a home burnt to the ground because the homeowner hadn’t paid his household subscription fee to the local fire department.
And of course the Affordable Health Care Act’s ‘mandate’ raises similar issues, in that it tries to penalize free riders who might choose not to buy insurance, perhaps counting on public provision of emergency medical care.
Meanwhile, across the nation, we give corporate welfare to stadiums and other businesses that promise usually dubious local benefits. Here in South Florida, the latest example is Jungle Island. Once a great offbeat local attraction known as Parrot Jungle, the management sold their lovely grounds in Kendall for a development and with the fig leaf that it would be good for jobs, development, and tourism, they got the City of Miami to give them a loan not even a bank would have agreed to. They built an unattractive park in an out-of-the-way location, and overcharged to see it. Unsurprisingly it went bad, and as the taxpayers are the last to be paid rather than the first, we haven’t seen any of our money back. Instead they’ve gotten further subsidies. Equally unsurprisingly, the Jungle Island people have a proposed solution: the city should double down and give them more land and more money so they can build a hotel. At least this one isn’t going under the radar.
The moral of the story is that we need the government to support true public goods: police, fire, basic health care — but not tourist attractions. How sad we so often have it backwards.
Incidentally, to an economist, the lifeguard question is harder than it may seem: one optimal solution in a basic microeconomics textbook would probably be to charge admission to the beach and use that to pay for the lifeguard. Second-best would be to make clear where was protected and where wasn’t (which is what Hallandale Beach did), and let people choose, so long as there isn’t a risk of gratuitous rescue.
In a public welfare frame, though, we’d ask if there’s a public cost to letting people drown — if it makes us feel bad maybe it’s not worth the financial savings. Or, if we think that swimmers can’t be trusted to make good decisions about their safety, we might make a parentalist decision to provide lifeguard services whether swimmers know enough to demand them or not. Alternatively, if we think beaches are a public good and charging for them would depress their use below the optimum, then it would be wrong to charge for access them in which case it makes sense to treat lifeguarding as a public good too.
