May 13, 2010

Manitou Springs & Natural Monopolies: Give Me a Break

"The streets of Manitou Springs are twisty, narrow and steep, so why, city officials ask, should trucks from three waste haulers rumble down them every week, running the same routes with the wear-and-tear equivalent of 1,500 cars?"

It's a fair question. Trash hauling is one of those things that looks kind of like a public utility but is usually not. So to me, it is not clear as to whether it renders a greater benefit to society as a free-market, laissez-faire sort of good or as a natural-monopoly-type good. (I assume that natural monopolies exist and are mostly legitimate and best dealt with by the government; I believe this as an axiom that is as obvious and as logical as any Austrian-school tenet that we have learned about this semester)

So, let's analyze it: it's a homogenous good. It's a network-orientated good. And, since there's no real way to differentiate service in any meaningful way, and the good is mostly homogenous, it is subject to the phenomenon of confusopoly, which I have cited before as being an "group of companies with similar products who intentionally confuse customers instead of competing on price."

However, I will stop short of claiming that trash hauling is on par with other public utility-type goods, which, in addition to the characteristics above, is where the up-front costs of building and maintaining and growing infrastructure are so high that they render infeasible multiple, private providers.

So, I will call trash-hauling a "semi-natural monopoly" sort of good. Which means that I would subject it to a burden of proof for operating as private, laissez-faire that is higher than for goods such as iPods, but lower than for goods such as water or electricity.

So, how does this apply to Manitou Springs, and to any given city in general? Well, it means that I would probably favor trash hauling in its current status-quo form as a private, free-market good except under special circumstances where the costs to society and to the public are obviously far greater than the benefit of having private competition.

And does Manitou fit the bill of those special circumstances? Well, let's see.

Its roads are such that the typical private trash hauler cannot operate their usual fleet of trucks on them; it must have custom, smaller trucks. Also, the costs for maintaining the road infrastructure in Manitou are higher than they are in a typical city, and the road-to-person ratio is very low. And Manitou has less money to pay for its roads than the typical city, which is usually either much larger in size or which resides in a county that has a tax revenue that isn't a complete and total pittance (the property tax in El Paso County is 4 mills, one of the lowest in the nation by far).

So any given trash hauler operating there will probably not be operating very efficiently, since catering to Manitou necessitates special services and trucks to provide those services. And the more haulers that operate there, the more damage they will exert on the roads--the public infrastructure--by an order of magnitude more than each additional hauler would probably exert on a typical road system in a typical city. And also, each additional hauler of necessity decreases efficiencies across the spectrum, since with each one comes more back-tracking and redundancy of routes for multiple private companies doing the exact same thing: providing a completely (as close as you can get) homogenous good.

And due to confusopoly dynamics, the more fractured the market gets, the more costs will go up per customer in addition to the cost increases due to inefficiency in this micro-market. And finally, no private company will be especially suited to adapt to the special dynamics of Manitou unless they operate specifically and only in that market alone; something that does not apply to any of the three haulers currently operating there.

So, as far as I can tell, it easily meets the criteria for those special circumstances that would tell me that the net cost to society (and to individual customers) of having multiple haulers operate under the "free market" in Manitou is far greater than the cost of losing an artificial and meaningless "choice" of whichever hauler you choose as a customer.

Yet ignorant dolts are up in arms about it.

According to the article:

“I feel like I live in the United States and I have the freedom of choice and I won’t be told what to do,” said 78-year-old Anna Damm, a Springs Waste Systems customer.

She and others urged town officials to let a public referendum decide the single-hauler proposal.

Rick Johnson, also a Springs Waste customer, said, “It’s an issue of government kind of sticking it’s nose where it doesn’t belong and legislating intelligence.”

Yet with the new single-hauler system proposed, customers who currently use any hauler other than Bestway, the bidder for the single-hauler system, will save money and gain recycling. The city will get a $48, 000 lump sum payment every year to help with repairing the roads, which will experience far less wear than they did before. And residents won't have to deal with the constant roar of trucks coming throughout the week to do the exact same thing under the veil of "competition."

Yet still people complain because this is just another example of that pesky Manitou Council trying to "impose its socialist agenda" on the helpless citizenry.

Give me a break. The single-hauler system in Manitou makes so much sense.

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