The Half-Life of Policy Rationales: How New Technology Affects Old Policy Issues

Knowledge, Technology, & Policy, Vol. 15, No. 3, pp. 82-92, Fall 2002

11 Pages Posted: 19 Jan 2004

See all articles by Fred E. Foldvary

Fred E. Foldvary

Santa Clara University - Leavey School of Business - Economics Department

Daniel B. Klein

George Mason University - Department of Economics; George Mason University - Mercatus Center

Abstract

The justification for any public policies are dissolving as technology advances. New detection and metering technologies are being developed for highways, parking, marine farming, and auto emissions, making property-rights solutions viable. Information becomes more accessible and user-friendly, suggesting that quality and safety are better handled by the private sector, undercutting consumer-protection rationales. As for public utilities, new means of producing and delivering electricity, water, postal, and telephone services dissolve the old natural-monopoly rationales for control and governmental provision.

Most market-failure arguments boil down to claims about market mechanisms being blocked by transaction costs. But technology has trimmed transaction costs and made the old rationales for government intervention increasingly obsolete.

Besides trimming transaction costs, technological advancements accelerates economic change and multiplies the connections between activities. It brings fundamental upsets to even our best understandings of current arrangements and their shortcomings. Thus, by making the economic system ever more complex, it makes the notion that regultors can meaningfully know and beneficially manipulate the system ever less credible.

Technology sets what may be called an intellectual half-life on policies and their justification.

Keywords: Technology, transaction costs, complexity, unknowability

JEL Classification: O33, D23

Suggested Citation

Foldvary, Fred E. and Klein, Daniel B., The Half-Life of Policy Rationales: How New Technology Affects Old Policy Issues. Knowledge, Technology, & Policy, Vol. 15, No. 3, pp. 82-92, Fall 2002, Available at SSRN: https://ssrn.com/abstract=487682

Fred E. Foldvary

Santa Clara University - Leavey School of Business - Economics Department ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States

Daniel B. Klein (Contact Author)

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

HOME PAGE: http://economics.gmu.edu/people/dklein

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States

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