Thursday, December 29, 2005

More on the failure of market failure

Fred Foldvary and Dan Klein recently published The Half-Life of Policy Rationales: How New Technology Affects Old Policy Issues, which shows how new technologies continue to undermine the standard market failure chestnuts.

Foldvary-Klein are right and it's an important argument. Connecting auto drivers to GPS-data not only helps them navigate but also reduces transactions costs to the point where proper pricing is easily done.

In "Navigating future road charges", BBC reports:

"Motorists are already beginning to embrace the idea of satellite-navigation units in their cars.

"This week the first test satellite in Europe's 3.4bn-euro ... Galileo satellite navigation system blasted off in a Soyuz rocket from Baikonur Cosmodrome in Kazakhstan.

"The final global network of 30 Galileo satellites is crucial to prviding high volumes of time- and location-based data needed for new services such as advanced sat-nav, mobile location data, natural disaster surveillance and air traffic control.

"Powerful applications are expected on the roads; the Galileo network would allow a vehicle's exact movements to be tracked, presenting new possibilities fo road-user charging and tolling ... The time signal produced by Galileo would also allow different chanrges for driving at different times of day."

Not only will economists have to stop including highways as inevitable market failures but politicians may actually have to confront the idea that there is one less excuse for them not managing the road system -- as well as one less rationale for building useless rail transit systems or expensive "Big Digs".