Was it the middle class that favored infrastructure investment in 19th century England?

Jonathan Chapman, a job market candidate at CalTech, has a new paper (pdf) which suggests that was the case:

Many theories of democratization suggest that extending the right to vote will lead to increased government expenditure (e.g. Meltzer and Richard, 1981; Lizzeri and Persico, 2004; Acemoglu and Robinson, 2000). However, these models frequently assume that government can engage in transfer expenditure, which is often not true for local governments. This paper presents and tests a model in which government expenditure is limited to the provision of public goods. The model predicts that the poor and the rich desire lower public goods expenditure than the middle class: the rich  because of the relatively high tax burden, and the poor because of a high marginal utility of consumption. Consequently extensions of the franchise to the poor can be associated with declines in government expenditure on public goods. This prediction is tested using a new dataset of local  government financial accounts in England between 1867 and 1900, which captures government expenditure on key infrastructure projects that are not included in many studies of national democratic reform. The empirical analysis exploits plausibly exogenous variation in the extent of the franchise to identify the effects of extending voting rights to the poor. The results show strong support for the theoretical prediction: expenditure increased following relatively small extensions of the franchise, but fell following extensions of the franchise beyond around 50% of the adult male population.

It is perhaps too quick a jump from 19th century England to contemporary advanced economies.  Still, it is an interesting hypothesis that the current thinning out of the middle class will decrease the political support for infrastructure investment.

Comments

What about if you sell infrastructure investment as a big jobs program?

Wouldn't that tend to increase support among the blue collar working class and decrease support among the professional middle class?

Seems ripe for mood affilitation: "The middle class sounds warm and fuzzy [and I like many people are terrified of falling out of it] therefore they're the fount of all goodness and civic virtue."

Though the abstract implies a distinctly European vision of a middle class whose lower bound is the median.

"and the poor because of a high marginal utility of consumption": I'm not sure I follow that. Does it mean that the poor will want the rich taxed but the money splurged on them, not on infrastructure? Or, indeed,the middle-class taxed but ....

Any of the above. I doubt any voter really makes a rational calculation about personal taxes burden vs. infrastructure; but as decades pass by people who can't afford long distance travel will be unimpressed by railway lines, airports etc. In the meantime if they feel the cost of living is high, they will get grumpy.

You could take a poll and ask people how much importance they put on infrastructure spending, and then sort by income.

Or you could come up with a convoluted model and torture 30 years of data from one country two centuries ago.

"Public goods" equals "infrastructure"??? I've spent lots of time with local government budgets, and generally the largest item in the budget (50% to 60% typical) is public safety, which is largely the public goods of police, fire, and emergency medical services. This is virtually all operating and maintenance (O&M) expenditure, mostly for salaries. Capital budget (which captures most infrastructure) is normally a single-digit percentage of the operating budget.

Things are a little different with roads, sewer, and water, but even there O&M dwarfs capital.

It is possible that a diminishing middle class will translate into less demand for public goods, but infrastructure spending is a poor measure of that.

Aren't most major infrastructure projects handled at the state or federal level? Seems to me that anything more complex than adding a swingset at the local park is beyond the scope of most municipal governments.

Education is the highest expense of our local govt. Then comes public safety.

Steve

Yes, I should have qualified that, most but not all US local governments separate education into districts which are distinct political and funding entities from municipal government. As education is arguably a public good, and educational services have a similar proportion of infrastructure to O&M as public safety, this simply adds to my argument that infrastructure spending is a poor measure of public goods provision.

More generally, most people tend to overestimate the proportion of federal spending relative to state and local spending.

The study probably covers years when English municipal governments were paving streets, putting in sewers and water supplies, and building primary schools. It may have been a particularly suitable period for his study.

Gas Works - they were often municipal. And therefore street lighting too.

I design sewer and water works and most clients are at the municipal level in California. They are usually paid by connection fees (capital cost) and rates (operational/increased regulatory capital cost) and not out of the general tax fund. State and Feds provide low to zero interest loans for capital expenditures, and if your project is in fashion, maybe even outright grants. In factoring in increased regulatory cost affordability the State metric is that if rates (after all forms of aid) fall below about 2% of the served communities' median household income (MHI), its affordable. A more informal metric is that if its less than a cable bill for clean water and sanitation than its affordable. Typically directly subsidizing the lower income users is prohibited in rate structures...but volumetric billing can soften that a bit.

Of course even if the resultant rate to comply with new regulations and lack of collection of funds to replace aging infrastructure converges in a perfect storm rates could double or triple and that never sits well with the local electorate, even if its still less than 2%, or a cable bill.

The big qualitative change over the course of my lifetime has been less in the amount invested in infrastructure than the expense of infrastructure projects. Around 1969 in California there was a phase change from quick and dirty infrastructure construction to slow and expensive and maybe never.

California went through a radical transition in how fast infrastructure plans could be realized from the governorship of Pat Brown 1959-1967 through his son Jerry's first 2 terms 1975-1983. The elder Brown built aqueducts, freeways, and campuses like crazy. By the younger Brown's first couple of terms in office, environmental impact statements and the like had dramatically increased the cost to build.

My impression is that environmentalism / NIMBYism spread from wealthy communities outward. For example, Dean Martin's new Beverly Hills Country Club foundered in the late 1960s first on opposition by wealthy neighbors to the city building a four lane road up to the golf course. This opposition was not at all expected by the developers. Since the Depression, any kind of project involving bulldozers could be pushed through on the grounds of being "good for the economy." But the homeowners of Beverly Hills were among the first to rebel against infrastructure projects.

As Beverly Hills residents started poking around in the enormously expensive project, they then found out it was totally mobbed-up and the Teamsters and mafia were skimming.

Besides Beverly Hills, Santa Barbara and Malibu come to mind as leaders in making opposition to infrastructure construction.

In general, if you are looking for a fundamental distinction in conservatism v. liberalism over the last 45 years, from my Californian perspective, conservatism tends to be cheap and liberalism tends to be expensive.

thanks. a very interesting historical note.

what are the most significant causes of California's now slow and expensive infrastructure construction model?

* environmental impact studies that drag on and sometimes stop all development forever

* higher rates of pay & expanded benefits for the unionized labor force

* anything else? safety rules?

I don't think unionization changed much.

Zoning and historical preservation might be grouped with environment.

Safety in construction is a factor. Probably a bigger one is that there's inevitably more concern now than in the past about breaking already built things, which slows everything down. In my San Fernando Valley neighborhood, the LA DWP is putting in a new giant water main to be ready to replace the 100 year old William Mulholland built across the Valley around 1913 to bring Owens Valley water to LA. They've been working within a couple of miles of my house for about 7 years now, which would drive Mulholland crazy. But the old man just installed his across open farm fields while these guys have to be worried about not cutting all the other stuff that has been installed in the ground over the last 100 year.

Rich areas have turned down infrastructure to prevent more people from coming. Santa Barbara turned down being connected to the California water project to prevent development of all the ideal vacation areas out west of Santa Barbara along the beach that remain ranches. Henry Waxman (D-Beverly Hills) blocked the LA subway in 1986 from going down Wilshire Blvd. through Beverly Hills to make it harder for poor people to get to Beverly Hills.

In general, Life Is Good for people in Beverly Hills and Santa Barbara and they don't want to change.

I do concur with the "do not break the other stuff" element.

I was born in Ostrava, which was an industrial city since the 1820s. Recently, some of the oldest parts of the industrial sector in Vitkovice were redeveloped, with the old (and beautiful) industrial buildings remodelled for other use (look here: http://www.dolnioblastvitkovice.cz/default/index/index/lang/en/site/56)

It took about 2 years to build a road of approx. 1 km (0,66 mile). The reason? The ground was literally full of old constructions, unstable, some of them still live (high-power transmission cables, gas), some of them poisonous. All going to depth of at least 20 feet. Many obstacles were not mapped, or perhaps were mapped 130 years ago in German-annotated maps written in Fracture, lost since then.

It was one huge exercise in industrial archeology.

The middle class pays most of the taxes, and to keep support they have to see something in return. The rich are fine, the poor dysfunctional anyways.

Alas, the middle class pays very little taxes, on account that's where the votes are. Redistribution in the US today is from the rich to the middle class, with a bone left for the lower strata.

Was the British Navy a middle and upper middle class infrastructure project that enabled productive colonial investments by the very wealthy.

We have to define what infrastructure means. Is infrastructure something that facilitates trade or development of resources "infrastructure".

We typically think of infrastructure as roads, bridges, schools...but some spending (military) facilitated as much trade (and could be considered infrastructure) as did roads but the distribution of benefits from this type of infrastructure might be different if you owned stock in the East India Company or not.

Hmm. The Navy was probably originally built to protect the British business interest in the Flanders. This is in contrast to Japan, which, although situated very close to continent as well, never had such extensive business contact with it, and didn't build a large navy until the Meiji era.

A nonsense study. A lot of commentators don't seem to realize this is a model, where the assumptions are: The model predicts that the poor and the rich desire lower public goods expenditure than the middle class: the rich because of the relatively high tax burden, and the poor because of a high marginal utility of consumption - so you simply fit the data to this model and voila it works. When there's lots of poor and rich, you get crumbling infrastructure like you do in California. When you have a prosperous middle class, less, like you do in Virginia. You can equally say this is simply due to lack of wise fiscal policy, i.e., spending too much on unwise investments, not having a good tax base, and the like. Nothing much new here.

Or is it that the current thinning out of infrastruvute will decrease the political support for the middle class?

If only the middle classes snd higher have the franchise, presumably the unenfranchised classes can be excluded from public facilities, or not allowed entry unless they make themselves indistinguishable from the enfranchised classes. Thus the public ammenities will become much more attractive to the lowest enfranchised class, not just because they are exclusive and markers of their social stus but also because they will be "nicer" and "better maintained" without the helots running them down.

Or we could look at the decline of public amenities in the South since the end of Jim Crow. I don't know about Virginia, but states like Alabama and Texas had excellent and well maintained public amenities untill they were forced to share them with the other. When I was a kid just after the segregation era rest stops, public baths, swimming pools, etc... Were as nice, if not better, than anywhere in the country, though my elders often complained they were falling apart. Today throughout the South they are awful beyond belief. About the last place I would go to the toilet would be a Texas rest stop.

Or maybe this is an independent variable and nobody cares about public facilities anymore. After all some of the worst public toilets I have ever encountered anywhere, including third world hell holes have been in Canada.

As I'd think from the abstract

- the Poor have choices between either consumption, no consumption and very poor quality consumption. That is, for the Poor, in the time of study, the choices are between a house or no house, bread with sawdust and grit in or bread without sawdust and grit in, a new pair of boots or the same boots for ten years, any booze in the cupboard or no booze in the cupboard, etc. So they'd prefer the money, thanks very much. "high marginal utility of consumption"

- the Rich have the choice to use their wealth to circumvent the unpleasantries of low public infrastructure, or view public infrastructure as a competitor. so they'd rather have the money again, thanks.

- while the Middle Class, in this period, have enough money that their consumption of reasonable quality "cost of living" goods is ensured, and don't have any feasible way or intent to profit from private infrastructure. Consumption at their level of wealth would be spend the money on increasingly fine and status competitive goods (not just a pork pie, an M&S pork pie, not just some old plonk, some sufficiently aged plonk in the right barrels from the right grape, not just a house but a house with particular la-di-da architecture). As status competitive goods are, like fine distinctions of grammar, spelling, etiquette, a silly and annoying game for the Middle Classes, at least some of them recognize this and would rather spend it making their cities civilized places to live.

(for whatever thresholds the Poor, Middle Class and Rich are set)

"not just a pork pie, an M&S pork pie": do not mock, these are easily the best pork pies I've eaten, save for those baked on a Saturday morning in a Yorkshire village where I used to live.

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