Saturday, December 18, 2004

The Folly of Universal Service

After reading the New Yorker article "Green Manhattan," (see my earlier post) I've been wondering why places aren't more like Manhattan already. The article was about environmental factors, which, as externalities, don't cause enough cost pressure. However, even without the externalities, some cost pressure exists. For example, the article mentions how heating apartments is cheaper than heating houses. Now, if the full cost to the environment (the externality) were factored in, heat would be more expensive. This would make the cost difference between heating apartments and houses even greater. (Funny how global warming makes heating more expensive.)

Even without internalizing the externality, though, there is some cost difference. Heat is just one example; the article listed many things that were more efficiently done in an urban setting. These efficiencies should translate to cost savings, which should act as a huge incentive for moving to cities. The market should lead us to organize our populations in cities, with rich folks having the luxury of owning comparatively expensive country houses to vacation in. Instead, rural areas are often poor.

The truth is that we've done a lot to insulate people from these cost pressures. Take phone service. If you look at your phone bill, we pay a tax towards Universal Service. This money is collected to wire up rural customers at a great expense. Phone companies wouldn't ordinarily do it, because it is a money losing venture. So all of us who live in an efficient manner pay a penalty to subsidize the (in a way) extravagant lifestyle of our rural cousins. Utilities often employ rate averaging so that customers everywhere pay a "reasonable" price. The urban dwellers don't feel the benefit, and the rural folk don't feel the pressure.

This is harmful on several levels. In a way, it seems "progressive." The people that can easily afford phone service subsidize those for whom it is more expensive. Really, though, there's nothing progressive about urban poor subsidizing rural rich; it's just the opposite. Cities aren't uniformly rich, and rural areas aren't uniformly poor. If providing cheap rural phone service is important, it should be funded out of general (progressively taxed) revenue, rather than a regressive fee paid by rich and poor alike.

But perhaps people in rural areas should feel the cost pressure. Cheap phone service is not a universally guaranteed right. They should be encouraged to move to cities where utilities are so much cheaper, after city dwellers are no longer forced to pay subsidies. If cities are the most efficient way of living, let us live that way. In practice, of course, everyone has phone service already. That universal service money just goes to developers who are building new housing developments, to subsidize laying new wire, and to the mob.

Phone service may not be guaranteed, but certain other services are. Voting booths, for example. With the current welfare state, public schools. But imagine, for a moment, what the country might look like under bleeding-heart libertarianism. There is no public school system. There is no post office. There is no universal service. There are people with more money looking to spend it on cost-efficient services. Where will they find them? They will be drawn to cities.

It is difficult to imagine what the country would be like if it were mostly urban. There is a correlation between cities and liberals, but causation isn't clear. Some conservatives believe liberals are drawn to cities for the anonymity, where they can follow their perverse proclivities without interruption. Some liberals believe cities turn people liberal, as the diverse range of experiences opens their minds. If the liberals are right, their own beloved welfare state and their distrust of market solutions for pollution may be the obstacle to opening everyone's minds. Of course, if they kept the open mind, but not the welfare state and the distrust of markets, they would no longer be liberals; they would be libertarians.


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