Innovation

Free Market Principles Should Not End Where the Innovation Track Begins

Innovation always has detractors. Innovation inherently involves risk of failure and change. Change is hard, and generally, the status quo is comfortable. Taking a chance on something new, a product, service or an idea, can be daunting for those who are more comfortable with doing ways the same way. And sometimes that hesitancy gets projected by telling others that they should not venture, they should not risk, that there is no right to try, that we cannot allow the freedom of failure. And so it is with many of the critics of innovative ideas to begin to move infrastructure from projects wholly funded, controlled and operated by government to something strikingly more free market.

Take one example, the Texas Central Railroad. Merely calling it a new model that is more free market than how virtually all transportation infrastructure is done now elicits howls of contempt. One of the detractor’s arguments is about the funding. They are incensed that foreign investment might flow to an American run company located in Texas. If this is a principle of the free market it is difficult to see it. Presumably, these critics would oppose all investment in the U.S. from overseas in whatever form, whether stocks, bonds, factories or infrastructure, essentially arguing for an end to cross-border capital flow. One wonders about the argument in the reverse, would they allow Americans to invest in other countries?

Another concern they express is about the use of certain loans to finance, not fund, the project. In fact, there is a program set up by the federal government to provide financing for capital intensive railroad projects. While such loans are not uncommon from government they do interfere with a pure free market. But, if there are problems, then the argument should target the program, not those who use it in good faith. Similarly, we do not disallow kids to go to college because they need a Perkins Loan and yet we can still have a robust debate about whether government should ever be in the business of loaning money to students for college. We don’t deny flood coverage because the federal flood insurance program is suspect. Fix the program if that is the gripe.

Others hate the notion of eminent domain, and yet it is enshrined in the Bill of Rights. The amendment does require “just compensation” but otherwise grants an affirmative power to the government to take private property for a public use. A great many public use transportation infrastructure projects ultimately need to use eminent domain to be able to reach completion. And the truth is that trying to build a railroad (or highway) without some sort of eminent domain is nearly impossible. As soon as people come to understand the proposed route some will refuse to budge, simply as a negotiating tactic, to demand payment in the multiples of actual value realizing that they have been handed a windfall and a superior negotiating position. The whole situation can become complicated for free-market thinkers, as a privately-funded infrastructure project, a good thing alleviating a burden on the taxpayers, runs up against the also-important impulse to make sure eminent domain is constrained to things that are for public use.

But the Constitution is clear. Like the authority or not, eminent domain is a constitutional guarantee given to the government and assumed by the states. Constitution and Bill of Rights originalists—a conservative approach to understanding the authorities and protections—are correct in understanding that the power is legitimate as written.
Arguments aside, a new study reports that Texans are ready to hop aboard. The study estimates that six million will ride the train every year, with that ridership more than doubling over 20 years. The findings are hardly surprising given the route from Dallas to Houston, an area boasting five percent of the population of the U.S. (fifty percent of the population of Texas) and producing six percent of the U.S. gross domestic product.

To be fair to the critics, the history of high speed and light rail in this country has been decidedly less than market oriented. Their skepticism is warranted but so too should they be open to new, exciting solutions to infrastructure deterioration as well as to infrastructure innovation advances. Being mired in dogma, and relying on bombastic argumentation is at least counterproductive, and mostly demonstrates a lack of critical thought.

Opposing railroads is not a free market principle. Opposing infrastructure is not a free market principle. However, a market that is free, or moving one decisively in that direction is a free market principle. And in the end, if government is still somewhat involved, isn’t that better than nearly total government funding and control of infrastructure which generally has left us with failing bridges, rutted roads and busted sidewalks?


In Depth: Innovation

Whether improving processes, creating products or developing new ideas, the application of technology can enable real changes in how state government works, both in quality of services delivered to constituents, cost savings and quality of life. States have the opportunity in our national balance of government power, to address policy …

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Innovation