So now the news comes with the outcome both inconceivable and inevitable that the state is likely to shut down the Duquesne school system completely.   The city’s school district has already abdicated secondary education with its high school students shipped to nearby West Mifflin or East Allegheny. This is all more epilogue than news sadly.  Still feels like a story from the worse off parts of the third world. In security studies if you anonymized the name it would in part be indisinguishable from case studies in failed states and feral cities.

But that news story highlights again how little we understand our own problems.. how myth overtakes reality.  The section and quotes that caught my attention was the almost de rigueur logic on the impact of the steel industry. It goes by formula exactly like this:

Chepanoske points not to any person or government entity but to the loss of jobs and subsequent sharp population decline.

Census figures show Duquesne was home to 11,410 people in the 1970s when steel mills provided good-paying jobs. Today 5,565 people live there.

“When the mills were running full blast, things were really good,” Chepanoske said. “It started to deteriorate in the 1980s when people moved away.”

In other words.. it’s nobody’s fault.  Steel left.  Blame ’steel’.  Whatever that means.  That seminal year 1970 is the only horizon that matters it seems.

Did the decline of manufacturing cause Duquesne’s decline? Did it accelerate the population decline even?  When was the last time things were really ‘good’ in Duquesne?  Here is the city’s population over the century.  Can you identify any meaningful break in trend in the 1980s?  But if the problems are caused by the loss of steel jobs, and the decline in steel jobs are somehow beyond our control, then ergo..  this just isn’t anyone’s fault.

Is Duquesne’s plight unconnected to manufacturing? Of course not.  But the heyday of Duquesne came long ago at this point.  The workers in the mills along the rivers started abandoning those towns long before there was any conception steel was ever going away. The first hand memories people have of a growing or even stable Duquesne can only be among those receiving Social Security.  If we misunderstand our problems we can’t ever fix them and attributing the plight of many of the barely existing.

I have not even gotten into the joke that Duquesne with barely 5K population in 2010 is still a ‘City’ according to the laws of Pennsylvania.  Upper Darby Township in Delaware County, PA clocked in at over 82K residents in 2010. Makes sense somehow.  Goes back to what the real problems are in Pennsylvania.   Saddest part of the Duquesne story is that they just didn’t have any large bond payments to default upon.  If only they had been so irresponsinle as to build a garbage incinerator, the Commonwealth apparachiki might have paid some real heed.

If you want to obsess on on the stylized Duquesne history, don’t recereate the wheel.  Just jump over to DuquesneHunky. It would do the neighboring Tube City Almanac proud.  I actually can’t believe it’s author is not Jason’s alter ego.

A free market means that buyers and sellers can trade on any terms that they find mutually beneficial. They can trade whatever they want with whoever, whenever, however and why ever they want to. As long as fraud or coercion is not involved in the transaction, both sides trade because they believe they will be better off after the trade. It is a positive sum game.

The free market is based on property rights. People can use their property and dispose of it in any way that does not infringe on the rights of other people. Property rights are the key to economic progress in any country. Lack of strong property rights and economic freedom is the reason that less developed countries remain less developed.

The economic understanding of market failure is any situation where the allocation of goods and services in an economy is not efficient or optimized. The popular view is that any result in society that we don’t like is caused by market failure. Thus, depressions, pollution, homelessness, and shortages are examples of the infinite variety of things that can be blamed on markets.

There are many cases where the problem is a lack of adequate protection of property rights. In the case of pollution, people who’s property rights are infringed by the polluter should have the right to sue for damages. An appropriate justice system would make it expensive for a business to pollute or do other bad things because of the money it would have to pay to people who’s well being and property they damage.

The main problem with the market failure concept is the belief that benevolent politicians and bureaucrats should save the day. This approach has been energetically followed, but the reality is that the failures of government dwarf any failures of any market. In practically all cases, events that are demonized as market failures are the unforeseen and unintended consequences of prior government intervention in the markets, interventions that are invisible to everyday consumers.

The chain reaction will follow a few well worn paths. One such path is when someone perceives that prices are too high. Government then imposes price controls. The inevitable result of price controls is shortages. That means that rationing must be implemented. Black markets develop to supply the needs of consumers who can’t get what they want. Government programs are implemented to stamp out black markets, which invariably infringe on the rights of everyone. The string of cause and effect can go on for decades.

Another path may be when someone perceives that their income is too low. Government programs, such as the Agricultural Adjustment Act of the 1930’s and its many successors up to today, may destroy product and productive resources to keep prices high, subsidize the non production of crops and livestock, impose high tariffs and other protective measures. The net result is higher prices and a lower standard of living for all those not privileged enough to be in the protected industry. The protections and higher profits draw more people into production or discourage inefficient producers from leaving. The new producers increase production more, requiring further interventions.

These cause and effect chains can be followed in numerous industries, such as oil and gas, housing, banking and finance, agriculture, health care, automobile, and so on. When seen in isolation, an event looks like a random development. When taken together, they display a fairly understandable chain of events, emanating from some original intervention. The sad fact is that, even though this country is nominally free, and is still one of the more free nations , there is not one market that is not subject to massive government intervention at some level, national, state or local.

The current mortgage crisis and market meltdown are the unintended consequences of government induced inflationary credit, artificially low interest rates, lending and housing regulations and, in general, the lack of free markets in banking, housing and money creation. The present interventions of massive liquidity injections to preferred players in the market will have predictable consequences down the road. When those consequences come home to roost, people will forget about the cause of the failure and only blame the markets that failed by not being free.