Externalities, Time, and Why the Public Interest Often Loses Out

The Gist:

On any given issue, 'the public' interest is diluted by the many, many issues out there in which everyone has a small, but real interest. Each person is affected in a relatively small way by most decisions. Except for a few special interests that will be greatly benefited or harmed by the new policy or statute or action.

Most people say: "The variance to allow an apartment building in a single family home neighborhood doesn't affect me because I live far from there." "The changing of school boundaries in that other neighborhood won't affect my kids." So we do nothing, until it happens near us. But then no one else comes to help us out, because they aren't affected.

So the few highly affected people spend a lot of time and money to pursue their vested interest, while the public-at-large is either unaware of the issue or sees the impact as minimal.

But collectively, all those nibbles (and sometimes big bites) into the public interest, have a large impact and soon there is nothing left but a bit of core and maybe a few seeds of the public interest. Those seeds may dry up or may be nurtured to bear more public interest fruit in the future.


The Long Version

Mountain View Forum has an important post today on the dumbing down of Title 21 - the land use planning section of the Anchorage Municipal Code. There's a chart which shows how public space requirements for developers have, year after year, been watered down until they no longer exist. And how private open space has shrunk to almost nothing.

There are pictures of this kind of development springing up in Anchorage. Anchorage will be voting for a new mayor in less than a month. Read the post and start developing questions to ask mayoral candidates.

But why does this sort of thing happen?

"The public interest" is a vague phrase. It refers to a theoretical communal best interest. The dominance of the market system in the US society has led to the point where some people deny that there is such a thing as a communal interest. After all the dominant economic and political theories in the US have offered a story that posits such a communal best interest is the result of everyone fighting for their own personal interests.

But except for the most extreme anarchists, everyone seems to find something that is a communal public interest. Minimally it is national security or public safety. And, of course, individuals can't buy roads and bridges so we build those collectively too. And one of the most revered institution in the US - the various branches of the military - are highly communalized organizations where people defer many of their personal freedoms to a perceived collective public interest that they serve. Even to the point of giving their lives for that greater public good.

So, why does the public interest often lose out? While there are many factors, there's one that is structurally pretty basic to the problem, though articulating it isn't quite so simple, but I'll try.

"The public interest" is something that we all enjoy (or lose) collectively. There are many things that we have a collective public interest in:

Clean air
An educated, active, and responsible citizenry
A safe environment (safety from crime, dangerous situations, health hazards, terrorists,etc.)
As convenient means of transportation as possible
A monetary system that enables us to raise money to buy a house, start a business, pursue an education, etc.
Protection of collective goods - public recreation areas, our wild resources like salmon, natural resources, cultural heritages, etc.

I'm sure you can all think of other things that we enjoy collectively, but individually could not create, buy, or protect. In Anchorage we have some unique collective goods - easy access to wilderness, spectacular scenery, wildlife that connects us to nature in special ways, lots of space for each person, to name a few.

But the problem with collective goods include:

1. We each have many of these collective goods to enjoy and protect, too many for each of us to monitor on a regular basis.
2. Many of these things we take for granted and don't even realize how much we cherish until we lose them.
3. There are people with very specific interests in personal gain which often conflicts with our collective public interests.
4. These people stand to gain considerably (in the case of open space, developers will make more profit from their investment) if they are allowed to diminish the collective good.
5. Thus, these people are focused on a very specific issue where they have a highly concentrated vested interest.
6. While most people's collective public interests are so widely dispersed that they can't track what is happening in every area.

Thus individuals focusing on their own private benefit spend more money and time in pursuit of their interests, the side effect of which is to lessen our public collective good. Often these are nibbles at the public good, which, collectively, over time, result in significant loss. Anyone who has lived in Anchorage for 20 years or more has seen how our views of the mountains keep disappearing as open space is filled in with larger and larger buildings.

There is a name for this in economics. Externalities.  Externalities are identified by market economists as one of the failings of the market system. Tutor2U explains it this way:

Externalities are common in virtually every area of economic activity. They are defined as third party (or spill-over) effects arising from the production and/or consumption of goods and services for which no appropriate compensation is paid.

Externalities can cause market failure if the price mechanism does not take into account the full social costs and social benefits of production and consumption.

The study of externalities by economists has become extensive in recent years - not least because of concerns about the link between the economy and the environment.

Tutor2U goes on to give more details. This is a market version of the axiom often attributed to Oliver Wendell Holmes,

The right to swing my fist ends where the other man's nose begins.

But with externalities, the harm to others is often not immediately or so tangibly noticed.

For instance, if a car repair shop dumps used vehicle oil into a stream instead of paying for the legal disposal of the oil, there is the extra cost of pollution cleanup for the collective public, but that shop's costs are reduced. So they can charge less, hurting shops who pay the price of legally and safely disposing of waste. The rest of us collectively pay for the clean up. And we may individually pay for the health side effects too. And legitimate businesses may lose customers.

If a new development of 200 housing units is built, there will be additional traffic in an area, greater demand on the local school, loss of the vegetation and open land which served to clean the air, buffer noise, and serve as a natural drainage system, among other things. All these problems place extra costs on the collective public good as well as on neighbors whose basements may be flooded, so that the developers actually do not have those costs as part of their costs and so can sell the units for less than the actual total costs.

Determining the costs of externalities is something that economists and others have worked on and can calculate with some, but not complete accuracy. What happens, though, is that the developers have a vested interest in changing the law to minimize the requirements for them to absorb these externalities as part of their costs. So, after the initial public interest and excitement over a land use planning document is over, the developers continue to pick away at those provisions that serve the public interest and cut into their profits. The public is generally unaware, or their individual personal loss may seem relatively small compared to other issues, and so they don't keep track, and the laws get changed. And one day that buffer of trees they thought was protected by the Municipal Code is gone and their backyard looks into a parking lot.

That's why we have public interest groups, where a group is dedicated to keeping watch of the public interest in a specific area and warning people when that area is in danger. Such groups are all over the political spectrum from the National Rifle Association and the National Right to Life to the American Civil Liberties Union, the Daughters of the American Republic, and People for the Ethical Treatment of Animals.

Some people say there is no such thing as the public interest. Others that there might be, but it can't be measured. Or that there may be a public interest but 'public interest groups' are all seeking their own private interest. There are legitimate questions about details, but I would argue those organizations that work on behalf of the public good and that do not gain any benefit that isn't available to everyone else, more or less falls into the public interest group category. More or less allows for some disputes on the edges, but not much in the center.


So, go to the Mt. View Forum website. Read the post. Look at the pictures and the table. Write your questions, and send them to all the mayoral candidates.

Some questions I have for candidates include:

How do you calculate the cost of loss of views, loss of sunlight (from tall buildings on the south of your property), increase of traffic and noise, loss of animal habitat and drainage, of new developments?

How do you propose to raise money to deal with the externalities (side effects) of the changes in Title 21 over the years? New taxes?

At what point do you think that the quality of life in Anchorage will be so degraded by increased traffic, loss of public space, loss of wildlife, etc. that we are simply a colder version of Seattle and Los Angeles?

Given what we know about the need to change to sustainable living, the effects of global warming, and Alaska's inability to feed itself because of the short growing season and the limited amount of wild game per capita, how many people can a place like Anchorage hold ultimately?

What plans do you have to make Anchorage more energy and food efficient, and increase our reduce our dependence on Outside suppliers? (I recognize that we will always be dependent, but to what extent can we be more self sufficient? And how do we do this?)

I write this from northern Thailand where, in a serious emergency, a huge portion of the population could sustain itself by growing their own food and simply go back to less oil dependent machinery. But Thailand is also a place with almost no zoning and officials who are easily persuaded to look the other way if someone wants to violate what little there is. And the delightfully wooded neighborhood I live in - a mix of large houses as well as small ones - is being seriously degraded by the sprouting of more and more high rise apartments, flooding the tiny alleys (they really can't be called streets) with more and more traffic and noise.

Anchorage needs to have a healthy balance between reasonable development and reasonable environmental protections. Right now, those who do the developing stand to make immediate and significant profit while those who value the natural environment do not stand to profit monetarily from their stance. So that means that the odds are stacked in favor of the developers. Unless the rest of us become vigilant in protecting the factors that make Anchorage a special place with qualities that no longer exist in the rest of the United States.