Bryan Caplan  

Only the Rich

Bombing Makes People Mad... Much ado about very little...
The government gives an excludable good away for free: roads, parks, education, medicine, whatever.  Then some economist advocates privatization of one of these freebies.  Technocrats may offer some technical objections to privatization.  Normal people, however, will respond with a disgusted rhetorical question: "So only the rich should have roads/parks/education/medicine/whatever."

A straw man?  Not really. As I've explained, a straw man is when you falsely attribute a silly argument to your opponents.  But "Only the rich..." is an argument the opponents of privatization routinely embrace.

But what exactly is so silly about the "only the rich" argument?

1. Some free government services would remain quite affordable after privatization.  These goods certainly wouldn't "only be for the rich."  This is especially clear if (a)  government subsidies are currently driving up prices or (b) privatization paves the way for broad-based tax cuts.

2. Suppose that after privatization, the formerly free goods become quite pricey.  The non-rich could still afford them by making their purchase a priority.  In the current regime, for example, boats are pretty expensive.  But many people of modest means still own boats because they make boat ownership a priority, sacrificing other goods and services to free up funds for the activity they intensely value.  Prioritizing is especially effective in the long-run because motivated people can and do save money to build up a nest-egg.

3. The market often offers expensive full-price products and affordable substitutes side-by-side.  In a free market, for example, driving during peak time would probably be very expensive.  But tolls earlier or later in the day would be far cheaper. 

4. If they plan ahead, the non-rich can often afford extremely expensive products by buying insurance.  Even if the rates aren't cheap, insurance is the classic way to transform devastating financial shocks into manageable financial burdens.

5. Where all else fails, the non-rich can turn to borrowing and charity.

Intelligent critics are likely to blame me for being overly literal.  Of course "Only the rich will have X" is hyperbole.  But it's a poetic way to lament the inequities of the market mechanism.  But I say the intelligent critics are interpreting populist rhetoric far too charitably. 

If literally true, the hyperbolic arguments would be powerful objections to privatization.  If privatization will genuinely deprive all non-rich people of all medicine, we probably shouldn't privatize.  But if the worst you can say about privatization is, "Rich people will have more and better medicine," the obvious retorts are: "Rich people already have more and better medicine," followed by "That's the whole point of money - to get more and better stuff."

In short, the "Only the rich" catchphrase isn't merely a childish overstatement.  Like most political hyperbole, it's effective because adults take it literally.  As I've said before:
Why are proponents of government action so prone to hyperbole?  Because it's rhetorically effective, of course.  You need wild claims and flowery words to whip up public enthusiasm for government action.  Sober weighing of probability, cost, and benefit damns with faint praise - and fails to overcome public apathy.
What would it take to transform "only the rich" populist demagoguery into serious policy analysis? Simple: Critics of the market could argue that the marginal improvement in incentives isn't worth the marginal costs of higher inequality.  Of course, once you frame the issue that way, it's a short jump from critic to agnostic.

COMMENTS (12 to date)
Peter Hurley writes:

I think the more charitable reading than "only the rich" will have these things is that "only the rich" will have security in their access to these things.

Security and certainty about future access to goods and services is highly valuable to people. The stress of not knowing if you'll be able to get something you very much want or need is significant. It's a big part of why people are risk averse in many circumstances.

By privatizing these things, you essentially are having the government remove the guarantee they have given explicitly or implicitly that people would have access to roads, education, medicine, parks, etc on certain terms. Now the new terms will be driven by a market, which is much more uncertain.

In that circumstance, only the rich know that they'll still be well taken care of. Everyone else has a higher degree of uncertainty, and they consider that bad.

Jacob Thompson writes:

"If they plan ahead, the non-rich can often afford extremely expensive products by buying insurance. Even if the rates aren't cheap, insurance is the classic way to transform devastating financial shocks into manageable financial burdens. "

You lost me.

WalterB writes:

Each excludable good mentioned is already provided privately as well as publicly, and the private versions are by no means available only to the rich. If there is a counterexample, I'd be interested to learn of it.

Peter, I would say that the guarantee of access supposedly provided by government is pretty shaky.

Musca writes:

Perhaps “only the rich” in the hyperbolic instance means “only the rich will have it for a price they won’t notice”.

Chris writes:

The government doesn’t give services and infrastructure away. We pay for them through taxes. Theoretically, as a democracy we have determined through policy what the best diversion of tax money for each government funded service should be. This is an ongoing discussion in which funding shifts according to public opinion. I’m guessing you know the difference, yet you still started with ‘free’.

1.b) in practice there is a huge gulf between what the government spends and what the government takes in as taxes. This is so much so that spending policy and tax policy aren’t even decided on at the same time in government, typically. Arguing that privatization will lead to lower taxes just doesn’t seem to have any real world backup.

2. Should the lower class prioritize driving to work on the private toll roads you argue for, or the dinner they could buy instead? Your argument assumes that there are not millions of people that don’t have enough to make ends meet and who would suffer from privatization of many of the basic infrastructures they must use in a day just to live and currently get at a reasonable rate due to progressive taxation. Your boat analogy is incorrect because almost none of our taxation funded infrastructure and services are one time purchases you can save up for. They are day to day uses that are indirectly beneficial: I need roads to shop and work; I need school to get a job, etc. what could a family living on $30,000 a year possibly give up in in order to fund an education that is worth 10-50k a year easily? How should they prioritize?

3. Driving during peak times would be expensive; like when people need to go to work. Privatization of roads with peak time rates would just be an additional tax on people that commute. Many wealthy people would pay it in order to live in nice areas away from their work; vastly more poor people will pay this tax in order to find housing that is affordable outside of the city center. This would end up being a regressive tax and one that people can’t really prioritize around because the cost of housing is likely to be so much more of a factor in their finances.

4. Your insurance argument ignores the reality of what cheap insurance actually covers: almost nothing. It may keep a family from going completely in debt over a heart attack, but it’s useless against long term issues like cancer that are far more likely to affect people.

5. Any economic argument that relies on charity to serve some unknown quantity of the population is pretty weak in my opinion. As Peter noted, financial security is very important for wellbeing and future financial abilities and charity is the least secure form of income. You might as well say “if all else fails, they can beg”.

There are legitimately services that would be cutoff or significantly limited for the non-rich if they were privatized. Many of these are things that are necessary to access other essential services (roads for jobs, internet access for almost anything) so while rhe argument may be hyperbole in many instances, it really is the truth for a large number of people for any given service or infrastructure.

john hare writes:


1. Privatization can be a blessing or a curse depending on the implementation. If it is a true free enterprise solution, it is likely if not certain to reduce waste and cost. If it is a fig leaf for crony capitalism, it can be as bad as you suggest

2. I argue here. Private toll roads will be affordable so the product can be sold. If they are too expensive most of the market disappears. Most of the people without enough to make ends meet suffer from either poor life choices, costs driven by regulatory over control, or both. Education can be obtained for very little cost, schooling with credentials is the expensive part.

3. I prioritize my driving for low traffic times without tolls. Leave early, stay late, do something productive in the dead time. I often do paperwork in the truck waiting for traffic to become reasonable.

4. Let insurance and medical care become true free market commodities and see what happens. Right now it is nearly impossible to know what a medical bill is going to look like beforehand. I don't buy items unless I know the price in advance in almost any other field. Many would respond to transparent pricing and a convenient quality information. As it is, it is difficult to know the whole story on an individual providers' QC. I once had a prescription that was $1,200.00. I asked for a cash price on a cheaper alternative and got acceptable results for $25.00. Many stories like this as providers like cash on the barrel head.

5. Somewhat agree. My disagreements are based mainly on the poor results I see from so many government funded systems. There are so many cases where costs are artificially high due to regulatory issues that many lower income people are squeezed.

Robin writes:

Are there actual examples of privatised parks systems, with no public parks? I worry they are a good where the social benefits are poorly recognised by individuals, but generate significant savings in terms of healthcare and wellbeing costs. So people will not pay for private parks, they will simply lack access to green spaces unless they earn enough to have a garden or something (in a city, where gardens are expensive).

robc writes:


This is the closest I know of off the top of my head. It was originally built with some public funds, so it isn't a perfect example. But it is owned and run by a private org and gets no public funds for operations.

robc writes:

Some details, for those no wanting to dig into the FAQs (bolding mine):

21st Century Parks raised more than $120 million in its Capital Campaign in order to acquire land and construct the park system. This includes $70.5 million from private sources and $49.5 million from public sources. The public money includes $38 million from the federal government, $10 million from the state and $1.5 million from Louisville-Jefferson County Metro Government. The annual funding of The Parklands, expected to be about $4 million per year, will be supported by annual membership, private donations, in-park revenue and an endowment. The Parklands will not receive tax-payer support for annual operations.
Dan jennings writes:

Parks? Oh, how govt needs to provide parks.
I lived in a subdivision where the developer provided a park as a perk to encourage sale of the properties. Of course, to keep up with costs of upkeep of the park, a homeowners association was created and residents paid quarterly fees. Nonetheless, this eliminated govt taxing people to pay for the Park. I would like to add that several local businesses wanting to have good relations with the community made regulars donations to the park. Of course they wanted to be rbe recognized by having something on any park upgrades with their business name. Big deal.
Nonetheless, govt not needed. Market provided.

Spencer Bosma writes:

I think it's important to mention that goods or services that were previously only for the rich become more affordable over time.

It's also a point that removing certain goods or services from the market removes the incentives to consider or innovate alternatives. Why need roads if entire, privately owned, city districts together with their roads are transformed into something you can imagine from science fiction?

Chris writes:


Your homeowner association acts as a government over a very small community. Your association dues are as good as a tax in that they pay for services you use and you cannot stop paying them (they borrow real government power to enforce that part).

Also, the park in your neighborhood is nothing compared to the parks managed by state and federal government, nor does your specific example work in every situation; in dense areas there is little incentive to waste land on a park.

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