In any period of economic distress there is a renewed search for political solutions to unemployment. It seems obvious that jobs must be saved, and the government must be the key to preserving those jobs. So we get another round of government intervention: economic stimulus packages, scapegoating, bailouts, and protectionism.

One of the problems with this effort to keep unemployment down is its underlying assumption that the basic economic problem is a lack of jobs. The assumption seems reasonable enough; after all, financial hardship usually accompanies a layoff. Yet jobs per se are not the ultimate goal of the economy. Jobs are a means to an end. Even though a few of us may enjoy our jobs enough to be willing to work for free, we generally work so that we can purchase things or give to others with the income the job provides. Most people, in fact, look forward to a time around age 65 when their financial situation allows them to quit their current jobs and pursue other worthwhile activities.

Jobs by themselves are useless unless they are productive. People can appear industrious without actually producing something of value—it’s what we call “busy work.” Having someone vigorously make mud pies is probably not going to contribute very much to our standard of living, because mud pies are not usually thought to have any value. The price system, which includes wages, is the surest guide to what consumers want.

Because of the difficulty of changing from one type of work to another, there is usually a brief period of unemployment involved. The computer whiz, finding that the dot-coms are not doing quite as well as they once were, and made painfully aware of the fact by the appearance of a pink slip in his box, may discover after several weeks that the most valuable work he can now do is not even related to computers. During those several weeks, he may say something like, “There just aren’t any jobs” or “No one is hiring.”

What the computer whiz means is, more precisely, “No one is willing to hire me in my normal line of work for the wages I am accustomed to receiving.” Expressing the problem as a lack of jobs is not as accurate as saying that (a) the apparent value people place on the services dot-coms provide has fallen, and thus (b) the dot-com owners place a lower value on the labor services of their employees.

The hardship of job loss often results in a search for someone to blame. Frequently, that is a competitor. It is true that competition does bring about job loss on the individual level. If my mousetrap firm is not as efficient as your mousetrap firm, my employees and I may lose our jobs, as consumers buy your lower-priced mousetraps. Yet that is quite a different problem from job loss in the aggregate, or unemployment. After all, while my firm is laying off workers, your firm is adding workers. The alternative to this “frictional” unemployment is to end all competition between firms—a “cure” that would be far worse than the disease.

If the mousetrap industry as a whole is laying off workers, one of the potential reasons is that the buying public has decided that it prefers fewer mousetraps and more of something else. In that case, the industry that makes “something else” is probably hiring. It is also possible that a reduction in employment within an industry can come from a change in the production process that requires less labor. Using robots to replace some workers may mean fewer jobs in that industry, but, again, robot-making firms are probably hiring.

In either case, the workers being laid off probably do not have the skills to move directly into another industry. When a textile mill closes because of foreign competition, the mill workers can be expected to have trouble adjusting to the jobs that are available in auto manufacturing. To many workers, political action to eliminate the competition seems preferable. To serve these interests, a para-industry of job-savers, made up of community activists, politicians, and the owners and employees of threatened businesses, can arise to carry out attacks against trouble-making competitors.

Favorite Targets

“Big box” stores are a favorite target for the job-savers. Stores like Wal-Mart or Home Depot can usually offer lower prices on popular retail items because of economies of scale. The building construction is cheaper per square foot than smaller downtown stores, and the labor requirements are lower—a store ten times the size doesn’t require ten times the managers. Owners of small local businesses recognize that many shoppers will leave the congested downtown for the big box on the bypass. Their livelihood is at risk, along with the jobs of their employees. Fearing the competition, they get the local government to reject rezoning proposals, set restrictions on maximum building size, or otherwise prevent the entry of the national chain.

Some variant of this process is at work in countless towns across the United States. In Clemson, South Carolina, a small but vocal group has used job-saving rhetoric, combined with political maneuvering, to prevent a local landowner from using his property for a Wal-Mart.* The “anti-sprawl” group cited a study showing that for every job Wal-Mart created, one-and-a-half jobs were lost in other local businesses. (Other studies have shown negligible effects on employment.) If the study is accurate, it essentially means that Wal-Mart manages to use fewer hours of labor to provide the items people want to purchase. The fact that Wal-Mart’s labor-conserving approach is more efficient is reflected in the store’s popularity among shoppers. Even if the Clemson economy were isolated from surrounding areas, the loss in income would be more than offset by the lower prices. In other words, fewer dollars might be earned, but those dollars would buy more. Because Clemson is in fact not isolated from neighboring economies, the Wal-Mart may actually increase local incomes, as people from nearby towns choose to spend their dollars in a shopper-friendly Clemson.

In the broader economy, more efficient competition can be shut out through trade barriers such as tariffs or quotas. Supposedly, tariffs can save jobs by protecting an industry that is being outperformed by foreign firms. Certainly, tariffs can preserve jobs and increase incomes in that industry. Yet the overall picture is not so favorable to trade barriers. When we impose tariffs on, say, steel, foreign steel sellers are unable to acquire dollars from us. The only way to buy Americans’ exports (say, wheat) is to have dollars to offer in trade. Thus, exports decline.

Dollars, after all, are only a medium of exchange. They allow a foreigner to buy wheat with steel, just as dollars allow me, as a college professor, to exchange economics lectures for housing. If steel producers succeed in obtaining a steel tariff, their jobs are saved—at the expense of jobs in industries that export to foreign countries. Because the United States may be a relatively low-cost wheat producer but a high-cost steel producer, the tariff misallocates labor by discouraging people from doing what they “ought” (in an efficiency sense) to be doing—moving from steel production to wheat production. The domestic economy that is really better at wheat production is producing steel, and foreign economies that are better at steel production are producing wheat. This implies that the net impact of the tariff is a lower standard of living worldwide. Wheat producers are still producing wheat, and steel producers are still producing steel, but the total amount of wheat and steel being produced is lower than it would be without tariffs.

Despite the clearly harmful effects of this sort of “job-saving,” politicians still bow to special-interest groups that are able to muster an important number of votes. It was particularly disappointing to see President Bush impose tariffs of up to 30 percent on imported steel last year, since he has historically sided with the anti-tariff wing of the Republican Party. Though Bush has more recently granted numerous exemptions on certain steel products, the effects are still likely to be seen in reduced exports, even without retaliatory trade barriers imposed by the European Union or Japan. Steel manufacturers in Ohio, Pennsylvania, and West Virginia win, while exporters of farm products, computers, automobiles, and other goods will lose. Because the effects of foreign competition will be muted, Americans will not be induced to move away from steel toward industries in which they are comparatively more productive. Protectionism in the steel industry could reduce overall incomes in the U.S. economy—an untimely blow, to say the least.

A change of focus is needed. Instead of concentrating on preserving jobs in this industry or that downtown area, we should pursue the satisfaction of human needs. Job-preservation, by itself, is a red herring. Too often the media and political figures can use the concept misleadingly, because the gains to the beneficiaries are highly visible, while the losses are largely concealed. The connection between foreign steel imports and jobs lost at a domestic steel mill is easy for most people to see, while the link between foreign steel imports and jobs gained in farm machinery manufacturing is almost invisible to the public. We will probably never see a bumper sticker saying, “Save American farmers; buy foreign goods.” But maybe we should.

—

*See my “Stopping Government Sprawl,” Ideas on Liberty, February 2001, pp. 17–19.

In a scene that is repeated countless times each year in cities all over the world, a local government is preventing a landowner from building a legitimate business on his property. Tom Winkopp, owner of a 50-acre site in Clemson, South Carolina, wants to put a Wal-Mart Supercenter on his land. Last year, citing nonconformity with the Comprehensive Plan for the town of Clemson, the city council denied him permission to build the superstore.

Behind the petty tyranny of the city council are over 30 local businesses and an interest group called Citizens for Responsible Growth in Clemson (CRGC). Their motives are understandable. The story of businesses’ using government to suppress more efficient competition is an old one. In the end, consumers lose. Even though consumers are more numerous than business owners, their disorganization and less intense personal interest in the outcome hinders their defense against anticonsumer politics.

The small but vocal CRGC has rallied opposition to Wal-Mart (dubbed “Sprawl-Mart”) by coupling a fear of large firms with a misunderstanding of economics. Remarkably, the Wal-Mart opponents take some of the economic advantages of superstores and turn them on their heads.

First, CRGC frets about the impact a new Wal-Mart might have on local employment. The group cited a study showing that for every job Wal-Mart created, one-and-a-half jobs were lost in other local businesses. (Other studies have shown negligible effects on the level of employment.) Even if the study were analytically sound, this would be something to be applauded, not condemned. It means that Wal-Mart can sell what people want and use fewer resources in the process. We must remember that jobs per se are not the ultimate goal of the economy. We want what can be purchased with the income from jobs. Even if Wal-Mart’s efficiency produced a slight decline in the demand for labor (and consequently, wages), the offsetting effect of lower prices might allow people to enjoy higher living standards.

Second, the proposed 30.1 acres of paved surface that would allow customers adequate parking is condemned as an eyesore and a cause of slightly increased temperatures in the surrounding area. The neighbors will have a case only if they can prove strict causality (that the Wal-Mart itself is responsible for any increase in temperature) and show that they suffer actual harm from the heat or the new view of the Wal-Mart. Most important, the neighbors’ claims are best taken up in a court under tort law and not as a problem a city council can regulate around. In any event, Wal-Mart is not likely to over-pave. At $75,000 an acre for the property, Wal-Mart has no incentive to purchase and pave more parking lot than customers want.

The very size of the Wal-Mart is listed by CRGC as one of the top ten reasons to prevent the superstore from being built. It would be 204,000 square feet, larger than the entire downtown commercial district and four times the size of the largest retail store currently in Clemson. Here the Wal-Mart opponents are portraying a strength as a weakness. Wal-Mart is efficient partly because it puts a wide variety of goods under one roof so that people don’t have to get into and out of cars and wait in several stores’ check-out lines. Physically handicapped individuals, pregnant women, and families with small children can appreciate the benefits of reducing the number of stops.

The bottom line is that consumers love Wal-Marts. If they didn’t, you can bet that existing businesses (fronted by “concerned citizens”) wouldn’t be putting up such a battle in city council meetings to stifle the competition.

Infrastructure Questions

The only point we might concede to Clemson’s anti-Wal-Mart group centers on the provision of adequate infrastructure. Building a Wal-Mart would require improvements to the adjacent roads—which in our system of socialized roads means passing a burden on to taxpayers. Road work alone could cost over $10 million, and Wal-Mart agreed to pay only a fraction of that (of course, one could argue that the $600,000 in sales taxes and the $35,000 in property taxes that Wal-Mart would pay every year might entitle it to some services). Ideally, the public dispute over who will pay could be sidestepped by privatizing the roads. Economist Walter Block and others have shown that private ownership of roads would produce a healthy competition among road owners that reduces congestion and accidents. (See his and Michelle S. Cadin’s “Privatize Public Highways,” The Freeman: Ideas on Liberty, February 1997.)

Ironically, CRGC claims to be supporting the free market as they simultaneously fight for government restrictions on private property. “Our group does not object to the free market. We support it wholeheartedly as the foundation of the American economy,” its Web site proclaims. Yet CRGC attacked Wal-Mart using one of the most egregious governmental assaults on the free market in the post-1865 United States—antitrust law. Wal-Mart, it pointed out, was found guilty of predatory pricing in its home state of Arkansas. But this, too, is a groundless concern. Antitrust authority Dominick Armentano has shown quite succinctly that predatory pricing is a “benign process,” and that “there is no obvious reason why antitrust regulation should restrain such occasional practices that clearly benefit consumers.”

Apart from the definite benefits to consumers, what would a Wal-Mart do to existing Clemson businesses?

Building a Wal-Mart in Clemson could help the local economy in general by allowing its retail sector to compete more effectively with the neighboring towns. Currently, many people in Clemson eschew the parking difficulties of the downtown area for a 15-minute drive to Wal-Marts and other stores in the neighboring towns of Seneca, Easley, or Anderson. People who might be drawn to a Wal-Mart in another town are also going to patronize other businesses in those towns—like restaurants and gas stations. Furthermore, the presence of a Wal-Mart may attract some new residents who like to have convenient shopping nearby. This has a spillover effect on other businesses. In the interests of protecting certain existing businesses from competition, the city council could be hurting the broader Clemson economy.

In Auburn, Alabama, another southern college town very similar to Clemson, a prosperous downtown peacefully coexists with two nearby Wal-Marts. In fact, Auburn’s downtown has staged a remarkable turnaround since Wal-Mart’s arrival. Clothing stores, restaurants, bookstores, variety and gift stores, and barber shops thrive and even maintain some quaint small-town traditions. (Don’t try to get a haircut in downtown Auburn on a Wednesday.)

To be sure, some town governments have been able to hammer out downtown “revivals” by spending millions on renovations. Funnel enough tax dollars into any area and the appearance might improve. Yet the alternative uses of that tax money would almost certainly have produced greater benefits.

In many respects, downtown businesses rely on a tight relationship with the local government for their prosperity. Superstores have a lower degree of dependence, which may explain Wal-Mart’s difficulties with Clemson’s city council. Downtown businesses typically rely on government-provided parking, sidewalks, landscaping, and lighting, and a higher-than-normal concentration of police protection. In contrast, superstores and shopping malls provide their own parking lots, lighting, sidewalks, and even some degree of security.

It’s not hard to discern which system works better. While downtown areas are notorious for their parking shortages and, in many larger cities, their crime, superstores and shopping malls typically have ample, well-lit parking and a generally peaceful shopping environment. Consumers vote with their dollars, often leaving a decaying downtown propped up by protectionist city councils beholden to local “old money.” New stores are more likely to appear just outside the city limits, where taxes are lower and zoning is less restrictive or nonexistent.

A city council wishing to support a downtown renewal consistent with free-market principles could do so by relinquishing two things for which city councils have an insatiable appetite: tax money and control. The key could be lowering taxes on downtown businesses and turning over the parking space and other infrastructure to private firms. Perhaps an association jointly operated by downtown businesses could take responsibility for maintenance and improvement of downtown infrastructure. Or, in a small town like Clemson, perhaps a single company could purchase the entire downtown—buildings, streets, and all. This would give a downtown area some of the qualities of a shopping mall that are evidently so pleasing to consumers.

With the incentives that private ownership and management would provide, market forces could produce a downtown revival without the bungling protectionist intervention of local government. At the same time, freeing property owners like Tom Winkopp to build what consumers demand would increase living standards—and distinguish city councilmen who are true friends of liberty.

Most of us learn early in life to despise tattlers. Sometimes this revulsion results from a desire to avoid punishment for a serious offense, such as an unauthorized redecoration of the guest bathroom wall with a permanent marker. Often, however, the tattler is complaining of an offense that is no legitimate concern of his: “Bobby and Sarah are making ugly faces at each other.” Such a complaint might meet with a parental response along the lines of, “What’s it to you?” It is an appropriate question for a parent to ask of an unharmed child complaining of a sibling’s petty annoyances.

Imagine a parent, however, without a sense of proportion in meting out punishments or the common-sense ability to distinguish between serious and trivial offenses and with 30 feet of shelf space devoted to complex rules and regulations (which are sometimes mutually contradictory and may be inconsistently interpreted) and a standing offer of goodies for tattlers. Imagine now how a “litigious” child could abuse the system if this parent agrees to hear frivolous complaints from unharmed tattlers.

One of the most important U.S. Supreme Court decisions this year concerned whether just anyone may sue if a law has been violated. In Friends of the Earth v. Laidlaw, the high court granted a group of environmentalists standing to sue after the group claimed it had been harmed by an incinerator’s disposal of waste into a river near Roebuck, South Carolina. Even though there appeared to be no evidence that Laidlaw Environmental Services’ emissions-permit violations actually caused any environmental damage or health risk, the Court’s 7-2 majority held that “concern” about possible damages was sufficient to show harm and establish standing. While we can appreciate the possibility of subjective harm to a plaintiff, it would seem reasonable to place the burden of proof on the plaintiff to demonstrate the nature of that harm.

Significantly, there is nothing but the erratic whim of the court to limit the application of this principle outside environmental cases. In antitrust cases, for example, the concern of monopolization could be enough to warrant standing. We may well see, in coming years, a flood of suits alleging various vaporous “harms.”

The background for the Laidlaw decision includes a number of cases dating from the early 1970s that broke from the common-law tradition requiring the would-be plaintiff to prove some reasonably observable harm, or infringement on a property right, before appearing in court with a lawsuit. A 1973 case, U.S. v. Students Challenging Regulatory Agency Procedures (SCRAP), is probably the most notorious. In this case, George Washington University law students were granted standing to sue the federal government’s railroad rate-setting bureau on grounds that a surcharge on shipments of freight produced a price differential between recycled and nonrecycled products. This, the students alleged, would lead to decreased use of recyclables. Through a long chain of events, environmental harm could result in the form of increased litter in public places and air pollution from having to manufacture new materials.

Cases such as SCRAP, along with numerous new statutes permitting “citizen suits,” have substantially weakened the requirement that concrete and particularized harm to the plaintiff be a prerequisite for appearing in court. The historic principle that the legislature should address harms inflicted on the general population and that the courts should address harms to individuals or minorities was implicitly scrapped.

Generous Reimbursement

In addition to the satisfaction the plaintiff/tattler receives from destroying the property rights of landowners, the environmental group is usually reimbursed generously for its services in bringing the violation to the attention of the regulatory agency.^[1] There are two chief forms in which this compensation comes.

First, if the plaintiff prevails in court, he is usually reimbursed attorneys’ fees and litigation costs at the “community market rate” for for-profit legal services. This might not seem inappropriate, until it is pointed out that the suits are generally brought by public-interest law firms that charge fees considerably lower than the market rate.

Second, many settlements in environmental citizen suits include “supplemental environmental projects,” or “mitigation projects,” which require the defendant to fund certain projects set up by environmental groups. Though the plaintiff organization is itself excluded from among the group of recipients, these credit programs benefit the environmental movement as a whole. It is not unreasonable to expect that environmental advocacy groups might collusively seek out this project money for their mutual benefit. The sum of these transfers to environmental groups is so substantial that Michael Greve of the Center for Individual Rights has referred to citizen-suit provisions as “an off-budget entitlement program for the environmental movement,”^[2] and compared environmental advocacy groups to bounty hunters with incentives to over-enforce the law.^[3]

Both the tattler analogy and Greve’s bounty hunter comparison can go only so far, of course. In addition to suing private parties for alleged violations of the law, some groups often sue the government if they believe some regulation has not been enforced with sufficient vigor. The citizen-suit provisions present in almost all federal environmental statutes explicitly grant this privilege to “any person” who perceives a violation of the law. Yet the EPA can’t lose, even when its “opponent” wins in court. As Ben Lieberman of the Competitive Enterprise Institute pointed out recently, these “sweetheart suits” result in an expansion of the agency’s power, as well as the usual pecuniary rewards for the plaintiffs. “In reality, EPA often wants to be sued by environmentalists and agency records indeed reveal that it hands out millions of taxpayer dollars to the very organizations that routinely take it to court.”^[4]

In the early 1990s it appeared that the Court might be moving in a more reasonable direction. Justice Antonin Scalia, one of the soundest minds on the Court, wrote several majority opinions, including Lujan v. National Wildlife Federation and Lujan v. Defenders of Wildlife, which appeared to restrict the ability of undamaged parties to complain in court. According to research I conducted in 1998, after the second case the EPA seemed less vigorous in its enforcement of environmental regulations.^[5] Property owners were somewhat more secure from the threat of legal assaults by environmentalists. However, in Laidlaw the high court backed over these previous decisions and gave environmentalists virtually unlimited standing to sue.

The problem of standing is essentially a problem of allocating a scarce resource—judicial decisions—to the highest and best uses. Judges in any appellate court face what Bertrand de Jouvenel called a “chairman’s problem,” or rationing problem, when deciding which cases to hear.^[6] Judges are attempting to make these allocations without benefit of crucial price information. Calculation by judges of the total costs and total benefits of deciding specific cases is impossible. An altruistic judge might attempt such a calculation, but as Ludwig von Mises would point out, the hope of consistently producing efficient outcomes is quite dim.^[7] Liberalizing standing rules may increase the probability that those outcomes will be inefficient. Judicial decisions always exist on the basis of certain presuppositions, and one traditional presupposition has been that those who are objectively and individually harmed have more at stake than others, and should have priority when limited court time is allocated. Furthermore, those who have suffered harm that is common to the general population traditionally have been referred to the legislature for relief.

One solution to de Jouvenel’s “chairman’s problem” is, as Murray Rothbard put it, “recasting the concept of rights in terms of private property rather than in terms of freedom of speech or assembly.”^[8] That is, a chairman facing a number of would-be speakers “could ask for price bids for scarce places at the podium and then award the places to the highest bidders . . . . There would then be no shortages, and no feelings of resentment at a promise (‘equal access’ of the public to the column, podium, or microphone) reneged.”^[9]

But beyond this, as Rothbard pointed out, the owner of the meeting place (for example, the court) must be the ultimate allocator of permission to speak. Therefore, as long as the owner is concerned for his own well-being, he will attempt to make such allocations as maximize his satisfaction.

A private arbitration firm would have the incentive to choose those cases that would provide it with the highest profit, presumably, those that either enhance the reputation of the firm or offer high compensation from the litigants. Each arbitrator would then have to establish standing criteria. One can imagine many versions of the standing doctrine that might evolve through different arbitration decisions, but we would expect private arbitrators to come up with something similar tothe traditional, common-law restrictions on standing.

This is because a restrictive standing policy has a unique element of efficiency. It limits the set of potential plaintiffs who may be approached by a potential offender for bargaining. Without some limitation of plaintiffs to those who are concretely and particularly harmed by an action, there would be no way for a potential defendant to approach each one to secure permission or offer compensation for the offensive act he is considering. Possibly profitable exchanges could not occur, and potential wealth could not be created.

Avoiding Nuisance Suits

For instance, suppose a forester is considering harvesting activity that would add silt-bearing runoff to a stream and possibly harm those owning the stream or property along the stream. To avoid a potential nuisance suit, he approaches the stream owner or property owners along the stream and offers compensation in exchange for permission to pollute. If he succeeds in obtaining these rights, and has not omitted a property owner, he is secure from legitimate lawsuits. If anyone can sue, including those claiming a “concern” about pollution, there is no way to contract out of the problem. An anti-logging group in another state could assert an “aesthetic or conservational” interest in the purity of the stream’s water and succeed in enjoining the forester’s harvesting. Certainly members of such a group could actually suffer psychic harm from the forester’s activity. However, the need for predictability in all our activities seems to promote a conservative view of standing.

Currently, there is little expectation that state-run courts will give way to private arbitration on anything like a large scale. However, there is a way to sidestep the entire standing issue. Reducing the need for adjudication would reduce the need to decide standing issues. It is no coincidence that standing has come to the forefront of judicial controversy at the same time that government regulation has exploded into almost every area of human decision-making.

Citizen-suit provisions are now a fixture in federal environmental regulation, and professional “tattling” is big business for environmental advocacy groups. If it is not politically feasible to eliminate citizen-suit provisions, and if the courts continue to downplay the “What’s it to you?” question, then reducing regulation would eliminate some of the fuel for standing controversies. “Concerned citizens” cannot sue for the enforcement of a property-right destroying statute that does not exist.

“He who passes by and meddles in a quarrel not his own is like one who takes a dog by the ears,” says the Book of Proverbs, chapter 26. Some of us learned as children to stay out of matters that were no legitimate business of ours. Thanks in part to citizen-suit legislation and the U.S. Supreme Court, those children who didn’t learn that lesson have grown up to make a career of tattling. []

Notes

1. Michael S. Greve, “Private Enforcement, Private Rewards: How Environmental Citizen Suits Became an Entitlement Program,” in Michael S. Greve and Fred L. Smith, Jr., eds., Environmental Politics: Public Costs, Private Rewards (New York: Praeger, 1992).
2. Michael S. Greve, “The Private Enforcement of Environmental Law,” Tulane Law Review 65 (1990), p. 341.
3. Ibid., pp. 343-51.
4. Ben Lieberman, “Environmental Sweetheart Suits,” October 21, 1999; http://www.cei.org/UpdateReader.asp?ID=823.
5. Timothy D. Terrell, “Rent Seeking and Standing to Sue in Environmental Policy” (doctoral dissertation, Auburn University, 1998).
6. Bertrand de Jouvenel, “The Chairman’s Problem,” American Political Science Review, June 1961, pp. 305-32.
7. See Ludwig von Mises, Economic Calculation in the Socialist Commonwealth (Auburn, Ala.: Ludwig von Mises Institute, 1990).
8. Murray N. Rothbard, The Ethics of Liberty (New York: New York University Press, 1998 [1982]), p. 115.
9. Ibid., p. 116.