Monday, February 1, 2016

The Flint Water Crisis and Accountability

There is no question that the Flint Water Crisis is a human tragedy. The city of Flint, Michigan decided to switch its water supply from the Detroit municipal water supply to the contaminated Flint River as part of a purported desire to cut costs. The end result was that the water delivered to Flint residents became contaminated with lead, leading to a myriad of health problems.

In response to this crisis, many people are understandably demanding accountability. Most of these calls are directed at the Republican governor of Michigan, Rick Snyder, and the emergency city manager he appointed. This is entirely appropriate. However, this is not primarily because Snyder's "private-sector theology" put profits over people, as the issue is commonly framed. On the contrary, it now appears that the decision to switch Flint's water supply was terrible on the basis of both financial and public safety considerations. New evidence indicates that the governor had reason to know that keeping Flint on the existing Detroit system was less expensive and had fewer risks associated with it. Apparently, Snyder's administration decided to switch Flint's water system as a kind of public infrastructure project and stimulate the Flint economy. Based on this reporting, it appears the decision on primarily political, not fiscal considerations.

But whether you believe that reporting or not, the basic facts of the case remain unchanged. The government made an awful decision that potentially jeopardized the health of Flint residents; the new water system was online as of April 2014. When residents immediately complained about the quality of the new water in May 2014, the government ignored the problem, and the mayor insisted there was nothing to worry about. In October of 2014, General Motors announced that it had switched back to the Detroit water system because the Flint River water was too corrosive to use even for industrial purposes. The government still failed to take any action to fix the water quality of the city's residents. And when other evidence emerged throughout 2015 that the water was indeed unsafe, months passed before any corrective action was finally taken, in October 2015. Ultimately, the solution was to switch Flint back to the Detroit water system, where it probably should have been all along.

It is indeed difficult to overstate the magnitude of the failure that took place here. And it occurred at many different levels of government, including the governor, the city, the EPA, and the Michigan Department of Environmental Quality. We should hope for accountability--that the individuals that were negligent at least lose their jobs and perhaps get prosecuted if the details of their actions warrant it.

But we probably should not get our hopes up. The government isn't good at prosecuting itself, and there's no reason to think it will be different in this case. Maybe the outrage will prove sufficient to force a recall election or a few more resignations. But it would be shocking if anything more substantial than that occurred.

Which actually brings us to what should be the most important lesson of Flint. The government is never going to be as accountable* as a private enterprise, and thus, we should want the government to do as few things as possible.

I realize this may seem counterintuitive at first. We vote for politicians that control our government, but we don't have any say in who runs local businesses. This is true, but it's not as important as you might think. Common sense tells us that accountability only works if it is timely and clearly linked to a particular action. If you reward a dog immediately after it does a trick, there's a good chance it will get the message. If you commence punishing it while it is chewing on your shoe, it is likely to understand that shoe-chewing is frowned upon. But if you give the dog a reward at the end of the week, after netting all the dog's positive actions against its negative ones, it will have no idea what is going on.

The same basic theory holds true for politics and economics as well. Voting every couple of years for a politician that controls many different things, is a little like sitting your poodle down for a weekly performance review. It doesn't work because it doesn't convey much useful information. Yes, a common language and a mass of polling data might help us determine the main reasons a particular candidate wins or loses. But even if we can successfully figure that out, it would still tell us nothing about how people feel about the other issues. For example in 2008, it is widely believed that then-Senator Obama won the Democratic Primary over Hillary Clinton because he opposed the unpopular Iraq War and she voted in favor of it. But did Democratic voters also prefer Obama's stance on healthcare, gun control, the economy, etc.? We don't really know. 

Similarly, voting for a mayor or governor is generally going to be a pretty useless way of communicating your thoughts about the city's water management practices. In most cases, other issues will take precedent. In Flint, the incumbent mayor Dayne Walling of Flint actually did get voted out in 2015 because this crisis was such a scandal. But it took a year and a half, people got poisoned in the process, and we don't know if other programs sponsored by Mayor Walling might actually have been effective.

In other words, our periodic voting system suffers from two key limitations. It's not timely at all, and it bundles many unlike things together into one all-encompassing decision. It's no stretch of the imagination to say that such a system isn't usually going to produce good outcomes.

Now, let us briefly contrast that with how it works for private enterprises. If Pepsi had a water supply problem and started selling yellow-tinted Aquafina bottled water, the feedback in the market would be swift. No one would tolerate patronizing assurances from Pepsi's management that the Aquafina water quality was perfectly fine. Customers would just stop buying the water immediately and get it from a competitor instead. Pepsi would begin losing money and would either make the corrections it needed to or else discontinue selling bottled water altogether. Either way, the customers would be able to have clean drinking water with limited interruptions throughout.

The market's feedback mechanism works more effectively because it is both timely and specific. If people stop buying Aquafina but continue buying Pepsi's other products, Pepsi will quickly know that there's some sort of problem with its bottled water. The workers and managers at Pepsi will have a clear incentive to solve the problem because they risk losing their jobs if they do not. But in government, people rarely get fired and politicians know that most elections don't hinge on water quality. The workers' only incentive to care is their own work ethic and personal integrity or compassion, all of which clearly proved insufficient to the task in the Flint case.

Of course, it's tough to know exactly what a more privatized solution to municipal water service would look like in the US setting. Would there be two or three sets of competing companies' pipes underneath every city's roads? Would there be water tanker trucks delivering water in cities where the existing provider increased rates too much? Would private companies forsake all water conservation efforts in an effort to maximize short-term profits?

We can't know the answers to those questions in the abstract. But we do know, from theory and history, that the feedback mechanisms in a competitive market are more effective at producing positive outcomes than the mechanisms in the government. Private companies have mostly satisfied customers, and governments have mostly dissatisfied constituents. There's a reason for that: one group is accountable, and the other is not.

* It's worth clarifying here that I'm not suggesting private companies never do bad things. Obviously, there are plenty of examples of that. But in general, I'm suggesting that issues that occur in a competitive private sector will be remedied more rapidly for the customer.

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