As a libertarian Urbanist, I have a love/hate relationship with the Atlantic Cities blog. On the one hand, it does often alert me to interesting new urban developments or deliver me my daily dose of city-porn. On the other hand, many of the posts are so ignorant, sophistic, and biased towards deeply flawed priors that they make eyes hurt just reading them.
Allison Arieff’s recent interview with Alex Marshall definitely landed in that other handed.
To be fair, Ms. Arieff’s interview was actually excellent. She did a great job of giving her subject ample space to elucidate his ideas and asked simple, pointed questions to steer the interview onto novel ground not directly related to her subject’s new book. The fault of this terrible post lies not at Ms. Arieff’s feet, but at those of her interlocutor, Mr. Alex Marshall. Mr. Marshall manages to cram impressive volumes of ignorance and bad thinking into a fairly brief conversation.
The ignorance begins right from the off when he states this deeply flawed premise: “Well, obviously cities are economic entities. To survive, a city or a region has to make money; it has to export more than it imports, in dollar terms.” This just an urban distillation of the classic protectionist horseshit that economists have been fighting against for hundreds of years. Mr. Marshall, let me introduce you to the principle of Comparative Advantage. Free trade improves economic conditions for both parties, even in the presence of “trade imbalances”. Put a different way, imports are not costs and exports are not benefits, rather both are trades that, in a free system, improve the lot of both people engaging in the trade.1
Mr. Marshall also commits a compositional fallacy here, apparently attributing to cities the sort of economic capabilities and requirements that human beings have. Cities, after all, are incapable of trade. What we mean to say when we talk about trade between cities or countries is that trades occur between the citizens of one such entity and the citizens of another. The “trade” that a city does is not on behalf of the city, but on behalf of some resident thereof. The benefits derived accrue to the people involved in the trade. The city thrives not as a result of the trade, but as a result of the prosperity of its citizens.
A more intellectually offensive notion occurs somewhat later in the interview when Marshall asserts the central thesis of his book: “Sure, this human interaction [in city economies] takes place, but it shouldn’t obscure what makes it possible, which is government. … Both cities and economies emerge as overt political acts. They are constructed things.”
Except that trade and “economic activity” predate government as we know it by tens of thousands of years. Evidence of trade in the Mediterranean (in the form of the shells of the snail genus Nassarius2) goes back at least 82,000 years. The trade in regional goods probably goes back farther. In fact, there’s good evidence and compelling arguments that patterns of specialized trade are one of the primary advantages that allowed human beings survive and thrive from their very earliest days.
So markets predate government and effects cannot predate causes. Additionally, markets exist and flourish even today outside government control. Black and gray markets (or “informal economies” if you prefer) makes up almost half the economic activity in some parts of the developing world (such as Pakistan) and over a fifth in many of the developed nations.
So not only do market economies predate their supposed cause, but even today they outside the purview of the entity which is supposed to be necessary for their existence. So far from being necessary for the existence of markets, governments are neither necessary nor sufficient for the existence of healthy markets.3
The final damning argument against Marshall’s thesis though, is that he commits the category error of assuming that governments have the ability to design markets. No person or organization has such an ability because the informational problems involved are completely intractable. Per Hayek, the information encoded in prices in a free market cannot be accurately replicated or divined in any other way. Any attempt to do so will, at best, make markets less efficient and may actually prevent them from functioning at all.
Marshall’s poor reasoning isn’t limited to markets, though. On the topic of cities, Marshall is in equally poor form. He makes much ado about the fact that cities are corporations, ignoring that, until very recently, the incorporation of a city was nothing like the incorporation of a company and that even today, the various “city corporations” like that of London, differ in both structure and intent from the sort of corporations Marshall seems to be talking about.
This kind of equivocation again leads Marshall to imagine government possessing far more power than it does, when he says: “I would like us, the electorate, to remember that corporations are entities created by the state, and which can be rearranged and reconstructed however we the polity decide.” Never mind that such a statement carries with it a morally repugnant endorsement for the tyranny of the majority, it has a deeper problem that he conflates the legal entity with the physical one. He then simply asserts that since the government controls the legal entity that we can restructure the physical entity (the city) to our whim. Marshall seems to think that incorporation breathes some kind of life into the golem that is the polis, giving the bestower of such life control over its actions.
Again, Marshall misses that the event that he wants to ascribe to government (the creation of cities) postdates the alleged cause by thousands of years. The city of London’s “corporation” (again, this meant something very different from economic corporation until very recently) was formed over a thousand years after the founding of Londinium by the Romans. When it was formed (by charter from William the Conqueror) is was explicitly a recognition of rights and powers already in place.
Markets and cities do not exist at the behest and behalf of government. Both, though they undoubtedly profit from good governance, need only the voluntary human interactions for which Mr. Marshall has so little apparent regard.
1 For more excellent refutations of this kind of protectionist claptrap, please checkout Don Boudreaux’s writings over at Cafe Hayek.
2 Cf. Matt Ridley, The Rational Optimist, pp. 53, 56 in the first Harper Collins hardcover edition.
3 Governments can improve the efficacy of markets in a variety of ways, but these ways do not include the direct control or regulation of the market. Governments that, e.g., ensure equal treatment under the law, strong protections for personal and property rights, and access to public institutions free of corruption do massively improve the health and functioning of markets.