Signals v Causes: Rome

This gave me a chuckle, from this week’s EconTalk with Charles Marhon about what makes a strong town:

I like to point out that Rome didn’t get the Colosseum and then build Rome. The Colosseum was the byproduct of centuries of success. And you know, you can look and say Rome was successful because they had a Colosseum. And go out and build a Colosseum and then say, why isn’t Rome appearing here?

I recommend the podcast. Marohn makes a lot points that I am sympathetic to.

He thinks we’ve gone overboard on infrastructure due to the belief that more is always better for growth.

Because of that thinking (similar to thinking on housing and education) and distorted incentives (we don’t directly pay for all that infrastructure) we’ve pushed into the diminishing returns part of the curve and cities that have built infrastructure to try to stimulate growth (rather than build to keep up with growth) are getting to the point where they may not be able to pay their bills.

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6 thoughts on “Signals v Causes: Rome

  1. The idea that building infrastructure will spur economic growth seems to mirror the Supply Side idea that production generates its own demand. Interestingly, opposite sides of the political/economic spectrum claim one as “true” and the other as “false”. I haven’t been convinced that either is absolute, though the real world seems to modestly support both ideas.

    On the negative side, widening the roads where congestion is not an issue will not improve economic interchange any more than doubling the production of bubble gum will improve the wealth of a society.

    But sometimes, “the bridge to nowhere” will greatly benefit a community (though mocked by the rest of the country) by improving transport between the town and their airport. Or even better, building water transport infrastructure into a desert produces great cities where none existed before (Los Angeles and others). Similarly, sometimes an innovation that seems ridiculous at the outset (who wants a camera on their phone?) will spur numerous other innovations and become almost indispensable.

    Perhaps Say’s Law works for both ideas in the long run.

  2. The Colosseum is an interesting example. Many other cities around the roman empire built smaller colosseums as well, some of which have partially survived to this day and others which were cannibalized when they fell out of use. A different question may be: why did Rome’s Colosseum survive almost intact? Perhaps it was preserved as a monument to Rome’s past glory, and the others had no such nationalistic baggage.

    Secondly, the Colosseum isn’t infrastructure, it’s an entertainment venue. It doesn’t enable wealth generation and production, but rather consumption and wealth destruction. Rome’s infrastructure included their fantastic roads, aqueducts, and forts. Those things enabled production and trade which grew the wealth of the empire.

  3. Seth,
    Thanks for the link. I listened to the EconTalk and looked at some of Marohn’s other stuff. Something I particularly liked is Marohn’s idea that, instead of accepting as axiomatic that all infrastructure is a growth engine, we need stronger feedback mechanisms that analyze and loudly proclaim the projects that fail the ROI test. We have been able to get away with not doing that so far, largely I think because we are so rich.

    • I agree. We do this because we can afford to.

      Just as a small example, I have several athletic fields near my home in parks and on school grounds. They can be packed during some peak times, though empty most of the time.

      There’s plenty of space during peak times someone would get creative about space allocation and scheduling. Where two teams practice, three or four could easily fit. If we put up lights, the fields could be used more during the week once we lose sunlight in the fall and winter.

      But, no…it’s just easier to build more fields to satisfy that peak demand.

  4. http://online.wsj.com/news/articles/SB10001424052702304422704579574390961658638#printMode

    During the ObamaCare debate, one argument made by the progressives was that those of us with insurance were paying higher premiums because our premiums had to cover the cost of expensive emergency room care for the uninsured. Disregarding for a moment the fact that under ObamaCare those of us who actually work for a living and are still paying for our health insurance are now paying even higher premiums, I have made an argument – based on years of experience as the medical director of an emergency room – that seeking care in the ER for problems that could have been taken care of in a doctor’s office is less a function of having or not having insurance and is more related to one’s level of personal responsibility.

    Let me be clear. I stated “for problems that could have been taken care of in a doctor’s office.” That excludes problems that are truly acute emergencies that come about unexpectedly. It does include both non-emergent problems as well as “emergent” problems that result from the expected progress of a disease that is neglected. People who demonstrate responsibility in other aspects of their lives seldom show up in the emergency room because of the latter whether they have insurance or not. On the other hand, irresponsible people don’t bother to plan ahead and make and keep appointments for medical care. Showing up in the ER for non-emergent problems or because a problem that should have been dealt with before it became emergent is not caused by lack of insurance. Rather it is a signal of the high likelihood that the person lacks responsibility.

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