Negative externalities and why preemption is still a bad idea

Last month I outlined why I think the current proposal from Republicans in St. Paul to bail the voters of Minneapolis out of the consequences of their decisions with a preemption bill is a bad idea. “Speaking from principles,” I wrote:

…if you believe that as much power as possible ought to be devolved from the federal to state governments, it follows that as much power as possible ought to be devolved to local governments. As a general rule, political power ought always to rest closest to those whom it will affect.

A couple of people have pointed out that it isn’t only the voters of Minneapolis who will be negatively impacted by the City Council chasing Uber and Lyft out of the city. And, as I’ve noted previously, they are quite right.

Negative externalities and government intervention

The voters of Minneapolis are imposing what economists call “negative externalities” on the residents of places like White Bear Lake. A negative externality occurs when someone who gains all the benefits of an action does not bear the full costs of it: Cranking ‘The Nile Song’ all the way to 11 might be my idea of fun, but I doubt my neighbors would agree. Yet, assuming they don’t like Pink Floyd, they are bearing some of the cost of my enjoyment.

Negative externalities are one of the most commonly cited justifications for government intervention. By enacting a noise ordinance and fining me for breaking it, for example, the City Council of Lake Wobegon can increase the cost to me of listening to Pink Floyd at such a volume that it bothers my neighbors. The externality is “internalized.”

But we can find negative (or positive) externalities almost anywhere if we want to look hard enough. They can be used to justify almost any government intervention.

The recently deceased housing bill, for example, would effectively have preempted Minnesota’s localities from imposing zoning laws. The bill’s advocates argued that such measures impose a cost — a negative externality — on the rest of the state by increasing housing costs and that this justified preempting local zoning laws.

Education offers another example. Minnesota’s government schools are required to teach the new social studies standards, but this is a local control state so school boards are authorized to pick the textbooks and instructional materials. However, it could be argued that not teaching these social studies a certain way imposes negative externalities on oppressed groups and that, to prevent this, local school boards should be stripped of that authority: preempted, if you will.

The response to this is usually that this is a “special case,” but every case is special to someone. Where do you stop? The residents of Hudson, WI, will be negatively impacted by the Minneapolis City Council’s actions, does that mean the federal government should step in under the Commerce Clause?

When you are giving the government a power it doesn’t currently have so that it can achieve some aim you consider desirable, always consider the possibility that that power can later be used to achieve an aim you consider undesirable.