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"This isn't a political, cultural or social failing." - Wrong this is 100% a political failing. This doesn't happen in the private sector.

wahern 10y ago
The author chooses to describe the phenomenon like, Psychologists call this temporal discounting. Humans are predisposed to highly value pleasure today and to deeply discount future pain, especially the more distant it is. I'm not sure that's the best way to describe it. And there are other ways to describe the basic phenomenon. But in any event the private sector is not at all immune. But because the tasks we delegate to private companies are different from those we delegate to public institutions, manifestations of the phenomenon tend to cluster into seemingly distinct categories. In the private sphere a similar phenomenon (if not conceptually identical at some level of abstraction) more often encountered is pollution. Or in Silicon Valley think of "technical debt". Both of these are costs that private actors accrue and that, because they do not need to internalize them immediately, are discounted inaccurately because of the temporal bias of the agents. In both cases, when the private actor eventually goes belly-up, other actors (public and private) are often left holding the bag to clean up the mess. And thus the original private actor has effectively imposed a hidden cost on others, intentionally or unintentionally, producing globally suboptimal results. It's easy to see how an enormous network of pavement and pipes could be created and then left to rot and blight the environment by both private and public entities. Detroit is a prime example of both. It's worth pointing out that like phenomena described by prospect theory, this temporal bias likely evolved as a heuristic device. Nothing in the future is certain--not even in probabilistic terms--and so it's not possible to foresee and accurately price all future costs today. There's no obvious alternative to the bias as a general matter, only in specific circumstances. At the end of the day, to aliens arriving on planet earth and watching the machinations of our civilization, distinctions between private and public would really be quite artificial and perhaps not even the most informative axis on which to bifurcate our economy. Both private and public actors are subject to market forces, just like both boats and airplanes are subject to gravity. The normative mechanisms we choose in our attempts to optimize how actors respond to preferences and to internalize costs are different, but rarely singular--it's always some mix of policy and currency, among other things. The so-called "free market" approach is hardly, if ever, the best answer alone.

wahern 10y ago

The author chooses to describe the phenomenon like, Psychologists call this temporal discounting. Humans are predisposed to highly value pleasure today and to deeply discount future pain, especially the more distant it is. I'm not sure that's the best way to describe it. And there are other ways to describe the basic phenomenon. But in any event the private sector is not at all immune. But because the tasks we delegate to private companies are different from those we delegate to public institutions, manifestations of the phenomenon tend to cluster into seemingly distinct categories. In the private sphere a similar phenomenon (if not conceptually identical at some level of abstraction) more often encountered is pollution. Or in Silicon Valley think of "technical debt". Both of these are costs that private actors accrue and that, because they do not need to internalize them immediately, are discounted inaccurately because of the temporal bias of the agents. In both cases, when the private actor eventually goes belly-up, other actors (public and private) are often left holding the bag to clean up the mess. And thus the original private actor has effectively imposed a hidden cost on others, intentionally or unintentionally, producing globally suboptimal results. It's easy to see how an enormous network of pavement and pipes could be created and then left to rot and blight the environment by both private and public entities. Detroit is a prime example of both. It's worth pointing out that like phenomena described by prospect theory, this temporal bias likely evolved as a heuristic device. Nothing in the future is certain--not even in probabilistic terms--and so it's not possible to foresee and accurately price all future costs today. There's no obvious alternative to the bias as a general matter, only in specific circumstances. At the end of the day, to aliens arriving on planet earth and watching the machinations of our civilization, distinctions between private and public would really be quite artificial and perhaps not even the most informative axis on which to bifurcate our economy. Both private and public actors are subject to market forces, just like both boats and airplanes are subject to gravity. The normative mechanisms we choose in our attempts to optimize how actors respond to preferences and to internalize costs are different, but rarely singular--it's always some mix of policy and currency, among other things. The so-called "free market" approach is hardly, if ever, the best answer alone.