A New Chicago School?

Consider America’s transportation system. I like to imagine that it ought to be a certain way. I imagine a world where a lot of freight travels competitive rail lines. And occasionally a transport truck traverses the country side, maybe to serve a new or small market without a rail road. I imagine a truck entering a town, passing some sort of device that alerts the local police that a vehicle has entered the town without the appropriate toll-paying transponder. Since this is the first time this has happened, the officer hands the trucker an application and signs him up on the spot. Oh! And there aren’t major freeways all over the place. Just a lattice work of efficient highways skirting the edges of towns and winding byways trailing through the country side. Perfect motorcycling roads and beautiful markets all in one.

My perfect world wouldn’t have much room for the fast modern engines we’re used to cars having. Planes and trains are fast enough for long distances and for shorter distances we simply don’t need to go so fast. The technology in those modern engines is malinvestment. That capital exists because interference with markets has skewed the relative financial benefits of different research (e.g. at the expense of investment in technology necessary for seamless and efficient toll-roads). This skewed capital structure also indirectly subsidizes fast-food while implicitly taxing the experience of traveling through, rather than past, small towns.

But what would actually keep it that way? It’s all a bit too good to be true. Am I being Utopian? Yes, but I think there might be some merit in that. My utopia can be thought of a limiting case; one of many possible best-case scenarios. We might conceive of a yard stick akin to Pareto Optimality but in a dynamic setting.

The world can be dynamically-Pareto optimal and have economic profits, but only those that arise as a result of productive entrepreneurship. Actions that create net value should be the only ones that generate profit. And externalities (whether pollution or politics) should be resolved by property rights and liability law. At least in the long run.

Such a world would serve as a benchmark in exactly the same way as Perfect Competition, and I would name it similarly. Perfect Markets (I’m open to suggestions) would be those that are simply too perfect to exist in the real world, but would offer a limiting case against which differing scenarios might be considered.

I suspect that something like this has already been offered but I’m only slowly working my way through one work and it will be a while before I get to another notable work. That first (from the Austrians) I suspect would be (justifiably) critical of what I’m discussing and perhaps it is a project best suited for applied mathematicians. It would certainly allow a good deal of theorem proving and other apparent mental master–… mastery (yes… mastery…). For some time there might be little apparent use or scientific merit in this. But number theory only became valuable with the advent of computers centuries after mathematicians started thinking about the minutiae of numbers. It’s not always for us to say that something doesn’t have a use just because we don’t see it yet. It’s a good idea to let some curious mathematical tinkerers doddle away at problems; they might turn out to have offered a valuable and useful gift to future generations.