AlterNet.org’s Lynn Stuart Parramore is helping me solve the streetlight free rider problem

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Watch out, libertarians.  Lynn Stuart Parramore is about to make your head explode.  In her article published today on both Salon.com and AlterNet.org called 3 inconvenient facts that make libertarians’ heads explode, Parramore discusses one of the more pressing issues in the libertarian community: streetlights.  She’s talking about public goods and the free rider “problem” (I don’t consider free rides a problem, I love them myself).  In her own words:

In the libertarian utopia, you would find nothing but individuals making private transactions in private markets. Those exchanges between individuals would always be fair, because the laws of supply and demand would make sure that you got the things you need at a fair price. You want a pizza, you buy a pizza from a pizzeria, which makes it for you at a reasonable price. Everybody’s happy.

Only, what if you want to buy your pizza in the evening, and you need streetlights in order to walk to the pizzeria? Now you’ve got a problem, because you can’t go out and buy a streetlight.

Public goods like streetlights, fresh air and defense systems are not pizzas. They are fundamentally different because you generally can’t go out and buy them all by yourself. Unlike pizzas, they aren’t consumed by one person or group of people. For example, once they are built and working, every person who walks down a street benefits from the streetlight, and there is no way to take the light away from one particular person. The streetlight is a common, or public good.

Libertarians will try to argue that many things considered public goods can, in fact, be supplied by private markets. How would this work in the case of streetlights?

Let’s say you that somehow you, or a group of people, got a lot of money together and could actually go out and buy a streetlight. Now you’d have the problem of free riders, because people would be using your streetlight who didn’t help pay for it.

Things like streetlights have to be supplied off-market. The costs have to be shared, because public goods benefit huge groups of people. One of the core functions of government is to supply public goods that markets either fail to provide or cannot provide efficiently, and this is one of the reasons libertarians get into a tizzy about them.

Let’s ignore the fact that we’re able to access this article for free that she wrote and that someone else paid her to write and take a look at this issue of streetlights not being able to be handled by the free market because of their alleged public good status.  Before I analyze this too much, curiosity is going to get the best of me.  I’m going to just do an Amazon.com search for “streetlight.”  Oh, wow, look at that first result!  You can buy your own little “Streetlight-style” light for just $84.99!  And goodie, it uses LEDs and solar power.

It sure is a thing of beauty.

Libertarian utopia

Okay, so I get it, that’s more of a backyard garden item, so I’ll get a little more serious about this.

Would a bunch of neighbors actually have to get together and buy a streetlight or two?  In some areas, they don’t even use streetlights and if there are businesses around, there’s an incentive for the business to provide the lighting in order to make their potential customers feel safe at night.  Parking lots of businesses are always well-lit, so it’s not inconceivable for businesses to set up a few more lights along the road as well.  And since we’re in Parramore’s so-called libertarian “utopia” where businesses won’t be forced to pay taxes, they’ll have the money to do it.

What happens in situations where there are no businesses around and neighborhoods are collections of single family homes?  Again, we’re in libertarian “utopia,” so the road company that owns the residential road would want to install streetlights if they felt it would make people feel safe and be willing to use their roads under the night sky.  Maybe there would be more homeowners associations (these already exist) that would foot the bill.

Finally, a person could put one up himself.  Before revealing how this could happen, let’s look at the free rider problem.  If you want to put up a streetlight in front of your house, you’re going to realize that anyone traveling by your house is going to use it.  Why would you go ahead and take on the costs to do it and not wait for other people to do it?  The reason is because you believe that you have more to benefit from the streetlight than the people who are able to use it for free.  Or you simply don’t care if others benefit from the streetlight because you believe that you have more to gain by installing it than not installing it.  Home improvements generally raise the property values of the surrounding homes, but that never prevents a homeowner from pursuing the projects.  The benefits received by the performing the action (e.g. making home improvements) create more utility than not performing the action.  That’s not to say that the benefits that others receive cannot weigh into the decision, but the claim made by anti-market advocates that it would likely serve to prevent the action is absurd.

Now I will show you how a person could put up a streetlight himself even if purchasing it “off-market” (as Parramore puts it) is out of the question.  We want to build a streetlight that stands 15 feet in the air.  We’re going to need 20 feet of conduit so that 5 feet is buried in the ground to secure the light.  We’ll need two pieces of 2” EMT 10-ft conduit ($15.93 each) and a 2” EMT coupling ($4.27) for a total of $36.13.  To have 5 feet buried, we need to of course dig a 5-ft deep hole and properly anchor it with some concrete.  Since we’re terrified of one more night in the dark, let’s splurge and use fast-set concrete.  To be safe, we’ll buy two bags ($10.07 each) for $20.14.  If you’re not comfortable with a 2” piece of conduit holding a light 15 feet in the air, tie some rope or something to the top and anchor it into the group for extra support.

We have our pole, so now we need to look at some lights.  I did some quick research on streetlights, and according to the Institutions of Lighting Engineers, 2004, the power rating of typical streetlights is between 35 and 250 W.  For the ease of this discussion, we’re going to pursue a 150 W light.  Here’s a nice little pole-mounted lamp with a light sensor that automatically turns on when it gets dark out.  It costs $134.  Wait, 150 W isn’t enough for you?  You want to be really annoying to your neighbors?  Here’s a 1500 W light.  The lamp, the bulb, and the pole mount together cost $100.83, which is cheaper than the 150 W option.

So we have two options (I’ll add 10% to cover the costs of shipping and handling of the materials):

  • 150 W Streetlight: $210.29
  • 1500 W Streetlight: $173.80

While it is cheaper to make the 1500 W street light, it’s going to cost more to operate it.  Let’s assume that the lights will be turned on for an average of 9 hours per night and the cost of electricity is $0.1172/kW-hr.  That makes the 1500 W cost $577.50 per year while the 150 W option only costs $57.75 for the year.  So it would make sense to use the 150 W streetlight.

I think that most homeowners could afford to spend $210.29 for the light and then another $60 each year to keep it lit.  Maybe they’ll invest in some solar cells to bring down the electricity costs.  Hmmm…this gives me an idea.  Maybe I should create the Rollo McFloogle Streetlight Company just in case our goal of a truly free market without the restrictions of the state ever becomes reality.  Clearly as per Parramore’s remarks, there would be a demand for streetlights and I think I have a pretty good plan to create a nice supply (I can bring down the price if I order the materials in bulk).  The curves are in my favor.

I’m sure Lynn Stuart Parramore would be my first customer.

Update: Lynn Stuart Parramore responded to me on Twitter where she admitted a massive contradiction.  Here is the follow-up article.

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Cornwall Hoggins
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The same goes for headlights on a car. I use my headlights when I drive at night, but other drivers and pedestrians also benefit from me having my lights on. Can’t say I ever thought that those people should be paying for my headlights. All these years I’ve been taken advantage of by free riders. Darn.

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