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.