Art Carden  

Scenes from the Political Economy: Scooter Regulation in Panama City, Florida

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I like free markets and don't like politics largely because free markets feature better incentives than the political arena. I came across a vivid example while vacationing last week. While flipping through the channels on TV, I came across what was apparently a local public hearing about new regulations on the rental scooter industry in Panama City, Florida, where we were staying. I don't know the details of the issue, but a few things struck me while I was watching parts of this hearing.

First, there were several speeches by people in the scooter industry. They did a good job, but it was clear that they were not full-time public speakers. These were salt-of-the-earth folks with a comparative advantage in running scooter rental businesses, not saying eloquent and flowery things in a public forum.

Second, I was struck by the spectacle of seeing people basically have to go before a local council and plead for their livelihoods. All else equal, I'm glad they had the option of questioning and resisting imposed regulatory standards through fairly peaceful channels.

Third, new regulations are a pretty heavy-handed way of dealing with a problem, which is presumably drunken Spring Breakers causing trouble on rented scooters. One of the speakers discussed the contracts his renters have to sign, and another talked about the instruction they give in safe and responsible operation. Nonetheless, problems still emerge. This seems like a problem that can be handled by the court system without the need for regulation.

Fourth, I found council members' and voters' incentives to be pretty interesting. A problem with politics is that it allows you to impose huge costs on others at a very small cost to yourself. Let's suppose the proposed regulations are a mistake. The owners of the scooter companies might have their lives wrecked, but what price do voters and council people pay for making a mistake? In a world where voters are rationally irrational, the price is probably going to be pretty low. Voters get the satisfaction of knowing that Something Was Done about the problem, and the members of the council get to go to their constituents and say they Did Something About the Problem. Note that this doesn't require malevolence on anyone's part. All you need for a perverse outcome is perverse incentives.

Bryan Caplan explains anti-market bias in a LearnLiberty video. He also discusses his book The Myth of the Rational Voter in a 2007 EconTalk podcast.

Obligatory disclosure: I've been paid to appear in LearnLiberty programs, but not to blog about them.

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COMMENTS (9 to date)
Granite26 writes:

Panama City has always had a love/hate relationship with it's tourist industry. You say 'what's the cost to the average voter' and think it's small, but there's a lot of people in PC who actively work to destroy the tourist industry as a whole by doing things like this. These people are retirees or lifers who've somehow missed that their entire economy is based on a shrinking air force base, an endangered paper mill, and the same drunken tourists they run out of town at every opportunity.

'Rational Ignorance' my butt. There's nothing rational about it, unless they're willing to accept their town fading back into obscurity and rural southern poverty.

Compare to places like Destin, which is what Panama City really wants to be, with its high end retirement communities and whatnot. Unfortunately, Panama City is never going to compete with the next town over for that.

Art Carden writes:

@Granite: I've never been to Destin, but we've been vacationing in PCB for years. I wouldn't have the town be any other way.

There was also a local publication I leafed through that had a lot of articles in it by Ron Paul, Will Grigg, and others that I think were taken from

Granite26 writes:

I did most of my growing up in Panama City proper, and couldn't get away fast enough. It's a wonderful place to visit, and it's a great place to have a childhood, but too many people I know grew up without any real opportunities, never left to seek more, and ended up stagnating.

I regularly hear about them making it harder for tourists or industry to come into town, while the whole place slowly rots.

The more time I spend in Houston, the harder it is for me when I go home :/

Glen Smith writes:

Based on my experience with regulations of this nature, my first thought would be to find out what business will benefit. Rarely have I seen any regulations that are not designed to benefit a select business or group of businesses. Any benefit the consumer gets is indirect, expensive and/or by-products of the regulations.

Pithlord writes:

This example shows how flexible "public choice" arguments can be. The conclusions are always "no regulation", but the premises can be completely contradictory.

The standard "public choice" complaint going back to Olsen is that concentrated interests will prevail over diffuse interests, even if the costs to the diffuse interests exceed the benefits to the concentrated interest. If that story were true, the scooter rental people would inevitably win.

But Carden's argumes from the opposite premise. Since the scooter rental people are outnumbered, they will inevitably lose, even if the costs they impose on the public are less than the concntrated benefit they themselves get from running these buisnesses.

Of course, Carden doesn't actually know the magnitude of these relative costs, or even what the result of the process he hates will in fact be. He just has a prior distaste for democratic processes, and applies this to the area of traffic regulation, in which libertarian anlyses are fairly obviously stupid. Doesn't the city own the road? Who is Carden, as a complete stranger who manifestly knows nothing about traffic issues in Panama City, to tell it what is should do with its property?

The bigger issue is that Carden, like Caplan, fails to recognize that every mrket transaction is a political problem solved. It is absurd to think you can have an economic system without some kind of political system. And the political system needs to be incentive-compatible. Which means it can't be totally libertarian, because libertarianism is bad news for most people. Since most people aren't rich, drunk frat boys on spring break.

Pajser writes:

Voters vote according to their vision of better society. They sometimes make wrong choice just like every individual does. Then they live in the worse society - and experience the consequences of their bad choice. On the other side, the capitalists chose profitable alternative even if they know it wrecks lives of other people.

Democracy didn't fell from the sky on heads of innocent voters, so they must vote although they do not care for issue. It is other way around: the voters have strong political opinions about few political issues, and that's why democracy exists. Less important decisions are delegated on professionals. Little space is left for "rational irrationality."

Tom West writes:

Of course we can turn the situation around. The concentrated gains may be on the part of the scooter renters that cost a huge population some small amount of welfare

I've found government is at least occasionally about providing a forum where those gains and losses can be measured, which could not occur in a commercial forum where such externalities would not be measured.

I imagine I'll find more than a few responses disagreeing, so I'll bring up required parking regulation in anticipation. (Freedom is freedom, but a man's gotta park :-).)

James writes:


People acting in markets as investors will sometimes, as you say, choose an option because it's profitable even though that option wrecks the lives of others. As bad as that may be, the alternative is far worse: People acting in politics will even choose politically expedient options that wreck lives and run losses, and then they will tax others to cover those losses.

Pajser writes:

James: "People acting in politics will even choose politically expedient options that wreck lives and run losses, and then they will tax others to cover those losses."

If political system works well, it shouldn't happen. The politicians who do that should be punished by voters or institutions built to control them. Do you see essential limitation of the improvement of political system, the point after which further improvement is impossible?

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