Hey Ohio, Capitalism starts at Home

Capitalism starts at the local level. The federal government is an economic macro player with large impact, but this fact does not excuse localities from acting in a manner that maximizes the creation of wealth through grassroots entrepreneurial activity.

One of the amazing universal lessons I learned from Social Psychology was that all groups in our society experience “Diffusion of Responsibility”.  This phrase is a technical way of saying “Someone else will take care of it” or if in the workplace “That’s not my job”.

The result of this failure to take personal responsibility is the delegation of our local duty to advance our community’s economic well-being to the federal government.  After all, the national government casts a huge economic footprint with many of its decisions leading to the creation or demise of entire companies or small communities.  (Doubt me, remember the dire forecasts for the demise of companies or communities, when defense contracts are threatened or military bases even rumored to be relocated.)  (See San Diego Tribune Article: http://www.sandiegouniontribune.com/news/politics/sdut-military-base-closures-looming-again-2012may16-htmlstory.html)The federal government is an economic macro player with large impact, but this fact does not excuse localities from acting in a manner that maximizes the creation of wealth through grassroots entrepreneurial activity.

How does this apply to local capitalism.  Since and even during the national election, emphasis has been on creating jobs for our citizens.  Please notice the phrase “creating jobs” is not the same as generating wealth or increasing our gross national product.   Let’s start our conversation with a controversial statement. Creation of some jobs may actually impair real economic growth.  It is simply a method of wealth distribution.  Doubt me, witness China building empty shopping malls and unoccupied residential buildings.  Please review this article available at Forbes.com.(http://www.forbes.com/sites/kenrapoza/2015/07/20/what-will-become-of-chinas-ghost-cities/#70b1a2b0751b)   This is misallocation of resources on a grand national scale based upon the strategy of fulfilling a national plan.

Would it surprise you to learn that many US localities exercise this same economic folly?   It is done with the best of intentions and utilizes zoning laws as well as eminent domain to impose the vision of local elites upon its populace.  Why is it so widely accepted?    Individuals in our society seek to control their physical and economic environment. We are taught, since childhood the value of planning for the future, so it is counter intuitive to allow for the seeming chaos that is true capitalism.  Finally,the freedom that capitalism allows promotes uncertainty of outcome.

Residential and Commercial property owners seek certainty in their lives.  Property owners seek to grow the value of their investments by restricting the property rights of others.  How is this accomplished?  Use zoning laws to restrict competition by limiting the number of commercial sites available.  This is supply and demand at work.  If by using the force of government,  (government is majority force: witness the effectiveness of laws without consequence if you doubt this) you restrict the number of commercial sites available, then you raise the price and thereby the investment value of the already existing sites.  (fewer sites equals higher price.  More sites means greater competition and a lower price)  What is amiss here is the role of government in limiting the market by depriving property owners of use of their property as they see fit.

Does this mean there is no role for community control of its environment?  No, what it means is that the power of government should be used only in circumstances, where safety is at risk.  No property owner has a right to impose a real nuisance upon its neighbors.  This idea has been corrupted to mean that any use, which lowers property value is sufficient reason to restrict property rights.  We now have government elites crafting master plans for communities.  These are planned communities.  ( Sounds like well meaning Soviet economic planning and suffers the community with the same result.  i.e. ( use shortages, resource misallocation.)  When the local government is asked to select winners and losers, the result is no better than when the national government does so.  Why, because choices  made are based upon limited existing information and with built in biases.  Capitalism is based upon a  different idea.   Individual choices made in the property owner’s best interest will result in maximum economic benefit for all.  The net result of master plans is misallocation of local resources and lost opportunity for economic growth.

Why is this capitalistic idea so universally opposed by so many?  The answer is simple.  The community believes in control and planning has been promoted in all aspects of life, so surrender to capitalism is counter intuitive and threatening because it allow uncertainty.  Residential property owners fear that a “biker bar” or a “convenience store” will be placed on their block threatening the safety of their children or a factory or commercial property increasing traffic or other pollution to a dangerous level.  These are real concerns.  Coping with them requires creation of  a more flexible method of adjudicating nuisances.  Courts and lawsuits are too slow.  Zoning boards are too easily swayed against the proposed use in our modern democratic society.  Remember NIMBY (Not in my back yard) This is why here we have a limited republican form of government.  Democracy can be as tyrannical as any dictator.  It is merely tyranny by many rather than by a few or one.  (Please think about that!  The will of the many can be as restrictive as any despot).

Zoning laws must be crafted to be minimalist in scope.  It must impose use restrictions only when there are greatly increased (demonstrable)health and safety risks.  There will be errors as with any human system.

Why do I say greatly increased risk?  Consider how past break through inventions might be perceived today in our risk averse culture.  There would be no automobiles, if a risk free environment was sought.  Who would sanction high speed projectiles hurtling through population centers with a volatile payload.  (gasoline)  Remember all economic activity engenders some risk.  The only truly risk free life is conducted under a rock in a cave with limited human interaction.  (this assumes your cave and rock are structurally sound.  Life is short, measured in days, but certain and relatively risk free).

Sure, there are now and will be errors. Please remember the community can be damaged greatly not just by the results of economic activity.  i.e. car accidents or diminished air or water quality.  Some may even lose their lives as a result of lost economic activity.  The scope and extent of this loss by decreased economic activity is indeterminable and as such is dismissed out of hand.  i. e.( it is impossible to account for the number of deaths caused by the failure to mass produce a beneficial product i.e. a pesticide or more food).  I postulate that property owner’s right must prevail absent a showing of greatly increased risk.

This sounds cold compared to the liberal platitude, which states if it costs one life the risk is too great.  The fallacy of this statement becomes evident, when it is considered in historic perspective.  Consider the number of lives that would have been lost had this standard been applied to building projects, (Yes, people die in construction) automobiles ( a big killer) or electricity production.(ever hear of an electrical fire or electrocution)  So what is right.  There is not always a clear good or bad.  I am suggesting we weigh with a presumption in favor of the property owner’s rights.  That presumption of benefit from economic freedom can only be overcome by a demonstration of greatly increased risk to the public health or safety.  Wherever possible where real concerns exist compromises should be crafted to accommodate the use, while reducing the risk to the public.  (This is not an endorsement of the status quo, where property owners are subjected to community exploitation for more parks at the owner’s expense or outright seizure by the public of a portion of the property owner’s land in exchange for a use.  Demands should be directly related to the diminution of the demonstrated risk (not just perceived risk)(remembering that some risk will always be present.)

What will result from the absence of a master community plan is growth, which will inure to the community’s benefit.  This is controversial and I expect many parents and residential property owner’s will be opposed because this approach, while promoting economic growth also promotes uncertainty of value and use.  As I indicated earlier, certainty is always the easier path and economic growth requires risk taking.  Remember along with growth comes the many benefits of a modern society.  i.e. more food, more shelter and even cleaner air and water

Your comments are welcome, whether in agreement or opposed.  No judgement here!