How to make America more like Disneyland

David Cay Johnston takes a trip to Disneyland some 60 years after his first visit. It looks better than ever, even as America has declined.

broken fountain detroitEvery night Disneyland gets freshened up. When the park closes at midnight, the lights go up, and crews steam gum off the sidewalks, daub fresh paint where needed, water the flowers, polish the streetlights and examine the walkways. I had to look hard just to find unrepaired cracks on Main Street and the paved walkways. By chance, I got to walk backstage, where the asphalt and concrete surfaces were in near perfect shape, the walls painted, the handrails free of rust.

…Yet outside the gates, America fails to invest in its infrastructure, costing us lives from accidents, floods, sinkholes from water-main failures and explosions from faulty natural gas lines. Sidewalks buckle or heave after winter freezes, making many hazardous to walk on. America’s roads deteriorate, costing the economy in efficiency, though the front-end-alignment shops and tire dealers do well.

…The water fountains at Disneyland all worked, while in city halls and airports, many barely dribble because there is no budget to replace their filters before sediment clogs them.

Johnston’s piece is titled America should be more like Disneyland but instead of thinking seriously about what this means he fumbles on the 20 yard line and concludes that what makes Disneyland different is….happy thoughts. If only we were more like W.D., he says, “we could make America into a happy place.”

No, what makes Disney invest in infrastructure is not happy thoughts. Johnston is in fact clear about this:

The Walt Disney Co. invests in infrastructure because it makes the company money.

The problem with America is that our public infrastructure has been turned over to a fickle political process that is not governed by a rational calculation of cost and benefit, market test and experimentation but by a pursuit of power, glory and advantage that only rarely coincides with the public interest.

America should be more like Disneyland and to do that we need to develop institutions that allow more infrastructure to built by the private sector. Most ambitiously we need more cities as hotels, more proprietary cities. As Rajagopolan and I wrote in our study of India (in Cities and Private Planning):

The lesson of Gurgaon, Walt Disney World, and Jamshedpur is that a system of proprietary, competitive cities can combine the initiative and drive of private development with the planning and foresight characteristic of the best urban planning. A proprietary city will build infrastructure to attract residents and revenues. A handful of proprietary cities built within a single region will create a competitive system of proprietary cities that build, compete, innovate, and experiment.

Comments

The question of creating value vs capturing value returns over and over.

The value of infrastructure in Disneyland is captured - and not by the people repairing
the infrastructure each night.

Economic value capture might be approximated in some cities. Current residents have
forbidden new construction except at prohibitive cost - zoning, permits, hearings, etc -
and the cost of living (as well as municipal taxation) is sky high. These are the prices
of admission, paid to the owners. With COLA wages, currency is locally devalued, making
imports cheap compared to wages. Meanwhile, the people repairing the infrastructure are
kept out by high housing costs and are treated to long commutes each day - but they do
get to enjoy the high-priced restaurants on rare occasion.

On a national level, can a Disneyland strategy be executed? What does it mean to advocate
value capture in this way?

Alternatively, is there another way to encourage and protect value creation without relying on
value capture? Perhaps Main Street Disneyworld a hollow simulacrum of a community motivated by
something else? What would it mean to ape a shallow, fragile copy in an attempt to create the
original?

"The value of infrastructure in Disneyland is captured – and not by the people repairing the infrastructure each night." What, they're slaves?

Dwarves. They get paid in whistling.

So early, already the thread is won.

In Julian Barnes novel "England, England", egomaniacal entrepreneur Sir Jack Pitman buys up the Isle of Wight, along with its entire population, and turns it into a theme park.
I found the satire rather crude and flat-footed at many points, as for instance when Barnes has an American economist sing the praises of Sir Jack's plastic totalitarian micro-dystopia as a splendid triumph of the free market.
I was wrong.
Alternatively, "Alex Tabarrok" is a fictional character dreamt up by Barnes or possibly Houellebecq after an overly boozy dinner. I bet he loves Singapore too.

With apologies to Yakoff Smirnoff:

In Tabarrok's America, YOU pay Soviet Russia to wait in line all day.

What is the substance of your argument (if there is substance) and/or what specific parts of this post do you take issue with? Or is this just sort of a snarky rhetorical jab?

What substance is needed when the post is so ridiculous?
If you are looking for an honest point of comparison why not choose Copenhagen, Amsterdam, or Canberra, rather than a theme park?
Because charter cities.

Complete aside from the private vs. public question, Disney's infrastructure has a very high utilization rate, so it makes sense to spend tons of resources keeping it in tip-top shape. Other infrastructure probably shouldn't be maintained to the same standard.

I agree. Most people would rather not pay to have cracks in sidewalks fixed. Personally I find Disneyland too perfect, it is just disturbing.

Not to mention the massive rodent problem.

Yeah, but Mickey doesn't crap all over my countertops, like real mice do.

I would say the highways in greater LA or greater NYC have as high, if not higher utilization than Disneyland. Anyone who has driven on those roads knows that they're pretty horribly (and in some cases dangerously) under maintained.

To be fair, they don't also have the benefit of being able to shut down every night. I think if you could shut down the freeways every night, they'd be a lot better maintained. Unfortunately, (I know because I'm one of them), people complain when roads are in disrepair, but REALLY FREAK OUT when lanes are shut down.

For a while, I had a girlfriend in Oakland and lived in San Francisco and the Peninsula. Several times a week, I'd leave her house after 11pm and drive across the Bay Bridge to come home.

They routinely had one lane of the bridge closed (I presume for maintenance) at that time of night, with workers doing something in the coned-off area.

What I'm saying here is that if you're talking about closing down one lane of 3+, for short periods of time well away from peak traffic hours, that doesn't seem so bad.

Leave her house after 11 pm?!?! That's precisely when the fun starts. (I kid, from what little I know of Bay Bridge traffic patterns, that seems prudent).

But yeah, after I posted this, I realized it wasn't an ideal analogy. Theme parks (I think Disneyworld was like this when I went ages ago) routinely shut down entire subsections of the park to make upgrades and repairs. That's a better analogy. If you can shut down entire parts of the highway system for a few weeks/months, they would generally be much better maintained.

Not that I've ever seen roadworks completed overnight, anyway because it takes them all night just to set up cones, usually. Then, usually about 3 months to take them down. Well after all the workers have left...

"Anyone who has driven on those roads knows that they’re pretty horribly (and in some cases dangerously) under maintained. "

Yes, but is that do to a lack of spending on infrastructure or is it do to an inefficient process for allocating the funds? I think it's probably more the latter than the former.

It has nothing to do with funding and everything to do with the fact that people value having every lane open infinitely more than they do smooth driving surfaces. You see this in Houston all the time. The roads are third world level bad but what can you do shut down Westheimer for two months and have people start shooting at each other.

Infrastructure is also social, and today's charter cities would also need to focus on this for complex services formation. However, any that would do so, by taking advantage of local time aggregates (full employment) and investment potential, would also be able to generate a unique equilibrium. Here's my response to the Disneyland article from a few days earlier
http://monetaryequivalence.blogspot.com/2014/12/primary-equilibrium-and-its-many.html

I don't want to live in Disneyland. There are plenty of citizens who have had enough of these public private partnerships "Disneyfying" their communities. There is often a lot of corruption and cronyism behind the scenes. They often put short-term corporate objectives before longterm public interests.

http://www.oregonhill.net/2014/01/04/how-tredegar-green-and-shockoe-stadium-proposals-are-similar/

"There is often a lot of corruption and cronyism behind the scenes."

This was my first thought, and would likely apply in spades to the successful proprietary city. My second thought was, what happens to the proprietary city that doesn't compete successfully, and the investors declare bankruptcy and walk away?

Good question. Considering what happened to most abandoned factories in the US, I imagine they'd shut the city down, evict the residents (presumably also destroying any investments said residents have made in the community in terms of time and money in the process), and leave it there as a wreck.

Seriously, what is this Tabarrok? It's almost ahistorically tone-deaf even for him. He writes a post about "proprietary cities" without even a nod to the fact that we had them before - they were called "Company Towns", and they were deeply exploitative places. But hey, clean streets! I hear Pullman, Illinois had clean streets, too, at least before the Pullman Strike.

Good point. Maybe we should all listen to "16 Tons" before we think so fondly of company towns.

"St Peter, don't you call me
Because I can't go.
I owe my soul to the company store."

Companies operating in remote locations without goods and services needed those things to attract and retain employees so they had to provide them. How could it have been any other way?

And how does Disneyland get the money for such nice infrastructure? Part of it is the entrance fee, but part of it is something AlexT hates: copyright extensions. Yep, it costs money to be happy.

No. Disney's revenues from DVD sales of Snow White & the Seven Dwarfs don't cross-subsidize Disneyland. Snow White is protected as a trademark, so competing theme parks would be unable to open a Snow White ride, even if it fell out of copyright.

@Andrew M - I think you are mistaken, unless you are a Disney shareholder and know better. I'm fairly sure Disney does not segregate theme parks from DVDs and other sales when it comes to the bottom line (though I could be wrong). Anyway my main point is that Disney, like MCI, was build on the backs of lawyers as much as content providers. And that's a good thing if you like original programming as opposed to what you find here in the Philippines, which is copy-catting. Viz, the John Legend pop song "Marry that girl" is used for local ads, in a corny way, and I'm sure Mr. Legend is not getting a peso from the unauthorized use of his hit single. You like that?

Would Alex be for loosening copyrights to the point where that kind of thing is not a violation? Let's not go skewering straw men if we don't need to.

Disney's parks are a cash cow.

"Disney’s theme parks provided the biggest boost, although one resort — Disneyland Paris — continued to slump. Operating profit for the company’s parks division, which includes Disney Cruise Line, increased 15 percent, to $571 million. Disney noted that higher ticket prices at Walt Disney World in Florida and Disneyland in California contributed to a 9 percent increase in per-capita guest spending at those parks. "

http://www.nytimes.com/2013/11/08/business/media/disney-and-netflix-in-deal-for-series-based-on-marvel-characters.html

I was going to make the same point. For years, when Disney animated and live-action films were tanking, the theme park revenue kept the company in the black. It is indeed a gold plated cash cow.

Disney most certainly breaks those numbers out separately. They show revenue and operating profit by segment. The segments are media networks, parks and resorts, studio entertainment, consumer products and interactive. There is a bit of a cross subsidy in that the studio creates the characters that draw people to the parks. However, there is likely also people that go to movies because of their experience at the parks.

http://www.statista.com/statistics/193150/operating-income-of-the-walt-disney-company-by-segment/

Like any modern multinational, Disney does indeed separate its different businesses into operating units and tracks their revenue and expenses separately.

Disneyland is part of their Parks and Resorts segment, so sales of "Frozen" DVDs don't subsidize it* but Disney Cruise Lines might. In 2013, the Parks and Resorts segment had $2.2 billion in income from $14.1 billion in revenue. Almost 16% margins, not bad at all. See their annual report, page 33 (43 of the .pdf): http://thewaltdisneycompany.com/sites/default/files/reports/10k-wrap-2013.pdf

*Certainly much of that revenue is due to the association with "Frozen" the park has, but that's a marketing synergy, not a cash subsidy from one branch of the company to another.

Well, that certainly looks like piling on. >.>

@Hadrubal--no, you are mistaken, as are my critics. What I meant is that there's a cross subsidy between Disney copyright activities and their theme parks. Put another way (and I could be wrong): it is unlikely Disney will spin off their theme parks from the rest of Disney, in the same way Coca-Cola spun off their bottlers from the rest of Coke corporation. My main point still stands.

I'm curious what do you consider your area of expertise because you make a ton of really ignorant statements just about every day.

Filipina hookers.

+1 to Art. I would put his expertise on that topic among the highest in the world.

There's something else here Alex is overlooking: borders.

This is Econ 101 meets Business 101: once you've made it, you pull up the ladder behind you. So maybe there's a perfectly sane and salutary reason why people would want to keep their labor dear and their land cheap.

The theme pack is subsidized by a tremendous amount of free advertising in the from of Disney movies and the Disney channel.

And indeed this is protected by copyright.

Wasn't Jim Carrey great in the Truman Show?

Alex,
Can you show how a fickle political process that is not governed by a rational calculation of cost and benefit, market test and experimentation but by a pursuit of power, glory and advantage that only rarely coincides with the public interest is any different than a fickle shareholder appeasement process that is not governed by a rational calculation of cost and benefit, market test and experimentation but by a pursuit of short term share increase that only rarely coincides with the public interest?
Thanks

I might agree, but having grown up out West and moved East, it seems inescapably obvious that federal highways put the toll turnpikes to shame.

Did you control for traffic?

The important control is weather.

Yes, but the toll turnpikes are generally closer to cronyism than any free market capitalism. So a bad example.

Free market capitalism never builds roads and bridges. Or most of the infrastructure that makes the US the economy it is.

If free market capitalism were capable of doing so, there would be centuries of strong economies built on free market capitalism as the basis for all activity in a nation.

Central planning in the Soviet Union made for some very impressive infrastructure but I can't remember exactly what it was. Cuba has an impressive freeway system too, or so I've heard.

The electrical grid - as any good comrade would know.

'The GOELRO Plan was implemented during a 10- to 15-year period. According to the Plan, the territory of the Russian SFSR was divided into eight regions, with distinct development strategies due to specific features of each region: Southern Region, Central Industrial region, Northern Region, Ural Region, Volga Region, Turkestan Region, Caucasus Region and Western Siberia Region.[3][7] The Plan included construction of a network of 30 regional power plants, including ten large hydroelectric power plants, and numerous electric-powered large industrial enterprises.[8] It was intended to increase the total national power output per year to 8.8 billion kWh, as compared to 1.9 billion kWh in Imperial Russia in 1913.[3] Soviet propaganda claimed that the plan was basically fulfilled by 1931.[3][4] In reality, only three out of ten hydroelectric stations were built by 1930: the Volkhov, the Svir, and the Dnieper Hydroelectric Stations.[9] The goal of 8.8 billion kWh was reached in 1931,[10] and national power output continued to increase exponentially, reaching 13.5 billion kWh by the end of the First Five-Year Plan in 1932, 36 billion kWh by 1937, and 48 billion kWh by 1940.

Ivan Alexandrov later directed the Regionalisation Commission of Gosplan which divided the Soviet Union into thirteen European and eight Asiatic economic regions, using rational economic planning rather than "the vestiges of lost sovereign rights".[11]

The term "Ilyich's lamp" (лампочка Ильича) for an electric bulb, a reference to Vladimir Ilyich Lenin, is a reminder of the Plan period.' http://en.wikipedia.org/wiki/GOELRO_plan

This is the alternative to democracy I mentioned elsewhere: ownership.

An online friend predicts very confidently that the West will proceed from social democracy to socialism to collapse and chaos, and then to feudalism.

There is nothing new under the sun. Over time, these institutions to which people will turn as the demotic States become unwilling or unable to maintain the civil order will acquire a hereditary character.

Love the confidence!

"America should be more like Disneyland and to do that we need to develop institutions that allow more infrastructure to built by the private sector."

This is wrong in the sense that you are suggesting, Alex. We need to align the incentives. The sidewalks are fixed in Disneyland because the company, its management, and its employees make more money if they are fixed. Do politicians make more money if the sidewalks in Baltimore or Philadelphia are fixed? Would the sidewalks be fixed in Baltimore if politicians made more money as a result?

Stop abandoning Adam Smith every time talk turns to politics. Draw the simple conclusion from your own line of reasoning.

A couple days old, now, but that NYT article about the WTC Train Station had got me thinking that there should be cost-oversight people (committees?) who are paid massive bonuses depending on how much under budget and over time (with very very strict quality constraints) they can shepherd projects through.

Imagine if public employees had as much prestige, job measurement, and incentive to serve the public as Wall St. bankers had to serve their firms.

http://nytimes.com/2014/12/03/nyregion/the-4-billion-train-station-at-the-world-trade-center.html?_r=0

Governments do not get to walk away. If a fire burns a building, who cleans it up. The owner. But what if the owner can't or won't pay? This has gone on in many cities and old towns. If the bank has a lien on the property and the jobless "owner" walked away and the house striped while abandoned, the bank does not take title to avoid being billed. The tax authority places liens on the property and eventually those exceed the best price the property can fetch. The house burns and is put out leaving blight, Finally the government cleans it up, and forecloses and puts the property on its books with all sorts of taxes, fines, cleanup costs in case someone claims it. And the government maintains it every year, sometimes to the benefit of all, and other times in ways that destroy the value of surrounding property leading to the same result for them.

The bank got to walk away and cut its losses. It might harm other bank holdings but it does not need to care about the neighborhood.

And when "government" decides to abandon parts of towns after disasters, to cut costs like businesses do, that gets used as an example of how corrupt government is by most conservatives, often those who are losing out by the effort to cut losses in parts of towns.

Perhaps what are needed are Republicans demanding to be inconvenienced and forced to pay more by having services shutdown so their individual sacrifice will benefit millions of other taxpayers:

"But the governor fully supported the Metropolitan Transportation Authority’s desire to keep the newly rebuilt No. 1 subway line running through the trade center site, instead of allowing the Port Authority to temporarily close part of the line and shave months and hundreds of millions of dollars off the hub’s construction. That, however, would have cut an important transit link and angered commuters from Staten Island, a Republican stronghold, who use the No. 1 line after getting off the ferry."

Bloomberg is clearly part of Wall Street and he had lots of incentives that led to cost increases.

"Governments do not get to walk away."

Maybe they don't "walk away" but they can and do ignore problems sometimes.

In Los Angeles, the sidewalks are in a bad state of disrepair in many areas, and the government is well aware that it is falling further and further behind on sidewalk maintenance and repair tasks. The backlog keeps growing. And most elected city politicians simply insist that additional sources of tax revenue must be raised before anything can be done. There have also been proposals to force homeowners to shoulder the cost of repairing sidewalks in front of their homes. There is no guaranteed end in sight. The government is free to ignore it forever, as far as I can tell.

This is the key - money making (and the flip side - money losing, aka liability). A cracked sidewalk in a residential area may have 200 people walk on it in a day.
I sidewalk in disneyland may have 200 people in a minute - so its getting maybe 1000 times as much use. And, as a closed theme park and business, Disneyland is an invitee, and faces premises liability for any slip and fall claims. Keeping things top notch reduces that liability exposure. A public entity often has immunities from claims, and a dangerous condition claim against a public entity requires a much higher burden of proof. And the maintenance funds come out of park fees - so is paid by the users.
The federal gas tax is only 18 cents a gallon, and was last raised in 1993. It is not indexed to inflation. In 1993, gas was cheap - averaging $1.10 a gallon. If federal gas taxes were 18% of the cost of a gallon, they would more than double, providing a lot more revenue, from users, to make repairs.

Other avenues of consideration:

1. What is Disney's repair cost structure? Are they repairing sidewalks cheaper than municipalities? What is Disney's contractor bidding process like?

2. Does Disney have legacy costs comparable to US municipalities? Many US cities have huge unfunded pension obligations because of a retiree cost structure implemented 40-50 years ago.

Any thoughts are appreciated.

The retiree cost structure was pay into pension funds as the benefit accrues which is invested in Wall Street by professional money managers, because Wall Street will return 8-10%. Which means the contribution is lower than a rational one. Then when the stock market craters, rather than increase the contribution, the government says, A) we can't afford even the too low contribution and B) Wall Street will bounce back and the fund will be bigger than ever.

But what government has done is what the private sector has done over and over.

And when you look at IRAs and 401Ks, 90% of individuals have done even worse than governments have in providing retirement savings,

In the end, no one opposed to government has come out and called for the homeless and hunger to be euthanized and their body parts sold to recover costs, so they become a burden on the welfare system.

Disneyland gets to drive its welfare cases out of the park and to the government which then pays for everything if required.

"... when you look at IRAs and 401Ks, 90% of individuals have done even worse than governments have in providing retirement savings ... "

Are you saying that governments have done a better job at managing their investment pools in the bond and equity markets than individuals with 401Ks have? If so, where is this information available?

Thank you.

Disney isn't a great example here -- I certainly wouldn't want to pay (in any form -- taxes, tolls, HOA fees, whatever) to have every crack in the sidewalk fixed as soon as its forms and chewing gum steam-cleaned off the pavement every night. Not to mention that the 'America's infrastructure is crumbling' meme is self-serving nonsense promoted by those who stand to gain from an infrastructure spending-spree:

http://www.cato.org/blog/wapos-bridge-story-structurally-deficient

Yeah, those stories of bridges failing are all lies. Those bridges suddenly closed is just government and crony capitalists forcing government spending.... And no one finds road congestion except when the crony capitalists and pols create traffic jams like Christie.

I note that Cato's solution is local taxes and tolls which are totally opposed by the Tea Party because the Federal government should pay for it because the traffic is interstate so why should local taxpayer pay for things to benefit taxpayers in other States?

Maybe Switzerland would make for a better – and more challenging, from a public choice theory point of view – case study than either Disneyland or Indian charter cities.

This week I'm in San Francisco. Firefighter crews stop at buildings not in fire. I wonder what kind of emergency needs a huge truck and 4 people.

I think Disneyland's secret is not the greater investment but a smaller waste is money. I wonder how many police , emergency crews and other services are in Disney per 1000 people.

Obviously, Disney is not comparable with outside. It's a little dictatorship that runs cheaper than most cities. They don't spend on regulating urban planning, DMV, alcohol, etc.

I'm deeply skeptical that Disneyland and DisneyWorld run more cheaply than a typical city. The budget for running their parks is huge, and you can readily see the difference when you go to another theme park that doesn't have those deep pockets, and that also doesn't have generations of committed (brainwashed?) consumers. Disney captures 100% of the spending inside their parks, so they can make it profitable to pour tons into infrastructure. Every bite of food eaten, every stuffed animal and piece of clothing bought all contribute to their bottom line. And for the many people who book travel through Disney, and stay at their hotels, it goes even further. A cheapskate day at Disneyland for a family probably costs about a grand. And spendy week for the family, staying at the Disney hotels, is many thousands.

For a proprietary city to do what Disney does, they would need to find a way to take ALL the profits and pour the majority of that money right back into the city. The minute the money doesn't go back in, and the place starts getting doughty, they would lose the revenue stream and go into a negative feedback cycle.

Using Disneyland as a model is like using 'Titanic' as a model for successful filmmaking. Ignoring all the failed Disneyland-wannabes doesn't seem logical to me.

"Every bite of food eaten, every stuffed animal and piece of clothing bought all contribute to their bottom line."

Are there theme parks for which that is not true?

Fire crews are mostly mechanics and engineers these days as fire fighting is far less required thanks to good building codes developed by insurers and enforced for insurers by government technocrats.

The truck carries their tools, like "jaws of life", jacks, levers, blocks, plus the men are fit and able to carry together a lot of weight in tight spots. Thus they accompany EMTs on calls to certain addresses, buildings with multiple floors without elevators, for example, and will move the victim while the EMTs care for the patient, if that is required. They will remove doors to provide access.

While it seems logic to use a smaller truck, by taking the big truck, they can quickly go on a fire call directly. For car accidents they provide the immediate control of hazardous waste until clean up, fire crews have training in proper methods.

Fire crews and trucks are the multi-tool of emergency response.

"fire fighting is far less required thanks to good building codes developed by insurers and enforced for insurers by government technocrats."

New buildings are built of essentially non-flammable materials but are still required to have sprinkler systems. Who knows how many buildings are NOT built because of the exorbitant cost of fire sprinklers that will never be used?

Ever thought about what is inside the building? A simple example would be a warehouse built of nothing but steel and concrete. If we ignore the 5 thousand tons of paper inside, why, it wouldn't even need a fire alarm system.

A building with 5 thousand tons of paper inside more than likely contains the files of the Nuclear Regulatory Agency or perhaps the Federal Popcorn Inspection Department.

The answer is clear: Disneyland charges an exhorbitantly high amount of taxes in the form of admission!\

If cities collected the daily revenue of Disneyland, they'd be able to maintain themselves well, but they don't.

Part of that is that Disneyland discriminates: if you can't afford or don't want to pay the price of admission, you don't get in!

The closest equivalent would be congestion pricing and/or mileage-based road use fees. If you want to use the roads you have to pay. That currently free-to-the-user infrastructure could cross-subsidize repair of the things like the water mains and gas lines. And no, cities should not let the private utilities be responsible for their gas lines because they will simply let them get as close to broken as they possibly can. Cities should proactively maintain them and the charge it back.

Privatization isn't the answer. In reality they way that shakes out is that the best thing for the bottom line is to minimize maintenance costs by simply dodging them as long as possible. I get it, there are oligopolies (sometimes artificially selected and maintained by the government) that cause part of that. But take cable... a new competitor can come in and lay down new fiber and compete with Comcast or Time Warner, but it never happens. The barriers to entry and entry costs are too high, and the market maintains its own cabal. This is particularly true in anything involving infrastructure such as the cable companies.

What makes Disney work? They charge a high (and therefore also discriminatory) fee for entry, maintaining a certain type of "tax base", and they centrally control all infrastructure maintenance and enforce high standards. I am curious whether the work is bid out to private firms or done by in-house crews (I am certain that it started with in-house crews), but it doesn't really matter as long as the central "state" enforces standards and is willing to pay for it. This is a case for strong government. It just has to be well-run, which is the kicker.

You've made the case that privatization is a good substitute for strong government.

Strong government is government that makes it illegal to be poor in town and drives them to the next town and dumps them in dark of night?

TMC is only concerned about good governance for those who can pay to get in the door...(also draconian curfews - no one allowed out after midnight except cleaning crews!)

Disney is probably more uniformly effective in its collection of entry fees than cities are in their collection of taxes. In the case of city administration, it's as if there are well known holes in the park's fence which no one ever bothers to repair. If we want a city to be more like Disneyland, one task on its todo list would probably be reducing the rate of tax evasion.

It's difficult to see Disneyland as much of an exemplar of anything.

Why? It may be well maintained but it's also crowded, expensive, and old.

CROWDED: all the major attractions require absurdly long waiting times, making it all but impossible to see all of them in less than a few days. Even though one day would be more than sufficient without the crowds. Think of it as an interstate highway engineered for 70mph which actually flows at 5-10mph with stop-and-go on a good day.

EXPENSIVE: Not just the admission, but everything inside. Yes, I understand "captive audience" but it does get tiresome to cough up $tens and $twenties every time one gets thirsty. Some expensive things are well worth it, but, if you're going to be expensive you'd better also be good.

OLD: Tomorrowland has long been more nostalgia than tomorrow. Perhaps it's still a must-see, but not as something new and vital.

Of the three theme parks we visited in California (Knott's Berry Farm, Universal Studios, Disneyland), Disneyland was by far the most disappointing experience.

It's crowded because it's not that expensive. Raise the price and see the crowds thin.

In our urban neighborhood there's a homeless guy that kicks the bejesus out of park fountains and benches, until they're unusable. You can fix it, but he kicks them again.

Tell the CIA that he's a Muslim terrorist. Problem solved.

Really?

Weren't the authorities repeatedly told about the Tsarnaevs, Maj. Hasan, Aaron Alexis and even the 9/11 attackers, who were seen casing an airport?

The idiot in Sydney was literally declaring jihad on the courthouse steps.

Government is intrusive, paranoid and coercive everywhere except where it might actually do some good.

You miss the point. Those chaps you mention really were Muslim terrorists whereas homeless guy isn't.

Of course, he'll say he is after a spot of torture.

How can you recommend Disneyland as a model for us to follow???

Disney has, in the words of budget balancing tea partiers, UNFUNDED LIABILITIES.

They have corporate debt. That is an unfunded liability. They need to balance their budget and not have any debt because debt is an unfunded liability.

Did they use this debt to build something that will yield a cash flow over time? Or did they use this debt to throw a massive party and get everyone drunk? Which is these is closer to what modern governments do?

But the borrow and party government fiscal policy has been increasingly the case since conservative Republicans have taken control of more and more government.

Brownback cut taxes in ways that favored the well off and that created huge deficits which he is paying for by diverting the gas tax funds from road maintenance to paying for those tax cuts.

Brownback promised the tax cuts would pay for themselves by boosting growth, but the State has lagged behind its neighbors.

But that is no different than Bush and the Republican Congress that cut taxes based on debt only increasing $1B in 2000 to give back to taxpayers the $200 billion too much in taxes, and that was done by sending out millions of checks with Bush telling everyone to be patriotic and party. Then the pork started being shoveled. The balanced budget in 2000 quickly became a $400B deficit.

Conveniently ignored is the money the government keeps in trust in government debt internally. Setting up the "lock box" was supposed to be conservative, but in 2001 Bush never talked about the need to hike taxes to pay off the massive public debt because of the growing internal debt in the trust funds. Nope, he was all about partying, and Greenspan liked the idea because Wall Street needed lots of safe US Treasuries to put cash in, so borrow and party was fine with Mr Libertarian.

If only native American Elizabeth Warren were running the show everything would be just fine. But actually, what's to complain? Isn't what we've got now the fruit of democracy?

Ricardo,

Every time I take a ride on the interstate highway system, I am riding on an unfunded liability at the time it was made, a debt given to me by a past generation, to pay off while I use the road. You and others have to get off the rhetorical bandwagon that stops you from thinking. Its not debt, but what debt is used for, like the over $1.1 trillion for an Iraq War to destroy Sadams weapons of mass destruction. I am indebted to past generations which helped me achieve what I have achieved.

Merry Christmas.

Maybe you should but the Indiana Toll Road authority in charge.

After all, only eight years after Indiana privatized the major east-west toll road the private company filed for bankruptcy.

I wonder why Marginal Revolution did not have much to say about this.

They certainly had a lot to say about it when it was first privatized.

"the private company filed for bankruptcy"

That's a good point. If it were a government entity it would have never filed for bankruptcy, regardless of it's expenses. Taxes would have been raised instead.

So it reverts back to Indiana? Sweet deal for them.

No, Indiana isn't getting the tollway back, but it does get to keep the $3.8 billion it got upfront. The stock and bond-holders of the private operators take the bath.

No, it does not revert to Indiana because it borrowed and paid fees to Indiana up front. And it has kept the toll road operating and has claims against the State of Indiana for breech of contract for not ensure traffic can't bypass the toll road.

What is happening is redistribution of wealth by a Federal technocrat through the process mandated in the US Constitution. Basically the middle class is going to redistribute wealth through the private corporation to the State of Indiana and the banks who got fees for making the deal, etc by having their savings get repaid at 60 cents on the dollar or something. After all, bonds for toll roads are generally rated as AA or higher and thus bought by pensions and other funds considered safe for worker retirement savings.

After all, bankruptcy simply eliminates or reduces a claim by one party on another and is thus a transfer of wealth. For those who decry redistribution of wealth, I see most immediately call for bankruptcy when that takes wealth from worker savings especially union workers and gives it to the wealthy who benefited in the past and now have weaseled out of paying.

This sort of thing seems to be somewhat common in retirement communities. See "The Villages" in Florida for example.

You give up a lot of control living in those sorts of places.

Retirement communities are nice because they compete for new residents. If you're retiring to Florida, you'll compare several retirement communities and pick whichever one seems best. These towns compete on just a handful of factors: fees, cleanliness, access to golf courses, and little else.

Other cities compete on far more factors: access to jobs, living costs, crime levels, good schools, etc. Cleanliness simply isn't that important (compared to other factors).

For working-age people, competition between cities is held back by poor labor mobility. Double-income families can't simply pack their bags and move to a nicer city, unless both parents manage to find jobs there. Relocation costs can add up too: scrapping all Real Estate Transfer Taxes would help.

Somebody above mentioned Switzerland. In that country, the majority of residents rent, so mobility is much higher than in other parts of the world. This forces cities to keep their cities clean and safe; otherwise they risk losing workers.

Maybe if the US had some tax revenue.

Too bad US central planning did not work in A-stan or Iraq:

$620m
Six ways to waste it

$500m in transport planes for Afghan forces, stored for three years, turned into $36,000 of scrap metal

$80m on north Afghan consulate, officials decide too vulnerable to attack

$34m on base with 64,000 sq ft operations centre in southwest Afghanistan, never used

$3m on eight patrol boats for Afghan police, still in Virginia storage after four years

$5.4m incinerators, installed incorrectly, never used

$3.6m on TV broadcast trucks for live sporting events, unused in Kabul storage

$892bn Future costs :

$56.4bn in 2015 budget war funding request includes 10,000 troops in Afghanistan for two years at cost of $7bn a year

$836bn in estimated care for veterans of wars in Iraq and Afghanistan in coming decades as soldiers reach 60s

http://www.ft.com/intl/cms/s/2/14be0e0c-8255-11e4-ace7-00144feabdc0.html#slide0

"Maybe if the US had some tax revenue."

Well clearly by your own examples, the US has significant tax revenues. It just isn't allocating them very well.

They should have called it a stimulus plan or something. But then Krugman would complain we didn't waste enough.

The solution is to let Disney run all future wars.

Gurgaon is an example of efficient investment.

Now, I thought I'd heard everything, but heh no.

Do you worry about 20 yard line fumbles? Or goal line fumbles? Or any fumble?

1. Disneyland works because it draws in repeat customers. A lot.

2. Open borders/internal migration means exit value is high. Move to Gurgaon or Singapore if you don't like American anymore.

3. If I am not going to be around in 10 or 15 years why should I pay to clean the sidewalk. Throw it away!

Alex starts to make a good point, but fumbles on the 20 yard line, to coin a phrase.

>The problem with America is that our public infrastructure has been turned over to...

Public sector unions, obviously. Unions who overcharge, are overpaid, and force their membership to contribute to the Democrat party in exchange for being overpaid. "Benefit to the public" never comes up. Few things exemplify clear-cut corruption more blatantly than this. The "solution" is always to pump more money to the unions. As an "investment" of course.

But, no, we can't go there. Alex blames a "fickle political process." Jesus. Thanks for mentioning the private sector as a better solution, which it is, but you can't advocate well when you don't understand the problem.

I've observed Disneyland with periodic visits over a period of fifty years. One thing that has been striking is that maintenance has been far from consistent and has, in general declined. There have been periods, particularly in the early 1980s and late 1990s, when the condition of the park was very rough. (The worst was an Enchanted Tiki Room in the late 90s, in two visits a couple of months apart in which a good percentage of the figures didn't work at all, the audio track included prominent drop offs and much decor had been destroyed.) Clearly savings on paint jobs and minor maintenance were being delayed and you can see considerable reduction in the visible cleaning staff during guest hours. In my most recent visits, the push to increase admissions has resulted in appreciable wear, with reduction in the space given to live entertainment and decorative detail reassigned to crowd traffic. All in all, it has become a much less happy place.

disneyland is such a one-off anamoly/resort. this is an insane argument.

Seems sort of silly, disneyland is nice because it's expensive. Not because it's private. If a city in america cost 80 dollars a day to visit you would bet it would be nice. Private property rights are a good way of solving certain problems, democratic processes are a good way of solving other problems. These institutions are just tools with various advantages and disadvantages, are the problems of having a nice city with good infrastructure better solved by privatizing it at the level of the city? The problems of collecting money for non-excludable and less-excludable are difficult. Efforts to exclude "free riders" can be costly and can be value destroying. At some point you're in danger of spending more on the wall around the garden than the garden you're keeping people out of.

I give this essay a C- see me after class.

I think Tabbarok's argument would be that we could make it less expensive if we had open borders.

Does Disneyland have open borders?

Yes.

No it doesn't. The poor and disruptive are not allowed in, and it reserves the right to evict you at any time.

Are there schools in Disneyland? Are there prisons? There are a lot of infrastructure Disneyland does not provide for its $80 a day.

David Cay Johnston takes a trip to Disneyland some 60 years after his first visit.

He says 25 years. Disneyland hadn't yet opened in 1954.

Some of us have been listening to the shizz about deteriorating infrastructure since John Anderson's campaign for President. William Shatner may insist that off screen he never ever talks like Every. Word. Is. It's. Own. Sentence. but Mr. Anderson could not credibly offer such assurances ("The. Leaky. Water. Mains").

Young people walk around swigging from Dasani bottles all the time. I'll wager quite a number of them have never taken a drink from a water fountain in their lives.

Alex is correct. Johnston says he last visited 25 years ago but he first visited in 1955.

So I think we can conclude that David Cay Johnston wishes that all of America were maintained by HOA-style maintenance and upkeep. That's already a thing. I know people who live in HOA/POA neighborhoods and in zero-lot-line communities, and of course similar dynamics apply to condos and even to apartments. That choice is already open for people to pick: pay extra to get a community that controls its presentation, security, garbage, maintenance, whatever. It also exists in commercial form, where developers and landlords own shopping plazas and malls, then maintain the facilities and internal roads and benches to whatever standard they choose.

Some people prefer to live in communities with lax rules and standards regarding appearance, maintenance, etc. and some businesses remain established in commercial property that is less than beautifully maintained. Maybe rather than assuming that all people and all businesses wish they lived or worked in areas with impeccably high standards for maintenance and construction, DCJ should acknowledge that not everybody shares that goal and even those who do share it may assign it a strikingly low priority. I see the value in an expansive outlet mall with crisp paving and evenly spaced trees, but sometimes I also like smaller urban stores in aging brick buildings. Not everything has to be the same.

We're about to move to a new apartment in a late 19th century brownstone, which we chose over comparably priced brand new high-rise apartments. I can't expect it to have huge closets or a 40th-floor glass balcony, even though I like both those things. We juggled the various trade-offs, looked intently at the price, and figured a brownstone would be the best choice for us. I know David Cay Johnston understands trade-offs. I'm just not sure why he thinks that everybody appreciates the idea of "infrastructure" as much as he does.

+1 Pretty good comment.

I'm constantly amazed by the assertion that Gurgaon is one of the best places to live and work in India. I guess its all relative! Try living there for a day or two and after you encounter the endless number of potholes and the traffic nightmare, you would probably put it as the last place you'd really want to live. In fact the paper itself states that the water, electricity, sewage, road traffic and crime conditions are quite bad in Gurgaon. I'm not sure how that paper can then also hint that someone somewhere calls Gurgaon a nice place to live!
Only for work it might be a good place because of the dense population of good companies to work for.
But please! lets not give Gurgaon as an example of how a city should be built.

The last time I visited Disneyland it didn't have "open borders". Just imagine how much nicer and more fun Disneyland could be if only they would have open borders.

If only we had some economist who could explain the magic of open borders to the Disney executives......

There are plenty of cities that work as well as Disney World.

Singapore is famously described as "Disney World with the death penalty"

Consider this graph:

http://www.randalolson.com/2014/06/25/average-iq-of-students-by-college-major-and-gender-ratio/

Ask yourself which end of the IQ distribution ends up running Singapore, Walt Disney World, and the US public service jobs, and the cause of the relative efficiency of each will be obvious.

Most ambitiously we need more cities as hotels, more proprietary cities.

So more Company Towns? We've been down that road in the US, and it's not something I'm eager to emulate. Saying it's alright in India isn't exactly impressive when you consider it's India - that's a very low bar for municipal governance.

How much would any of you pay to stay in the town or city you live in? If some corruptocrat took over your city and jacked up your taxes, while keeping all the money for himself, you'd complain about it, but you'd stay as long as the tax increase wasn't too high. You've got friends, family, and jobs in the place you live. The cost of staying in the city whether it was payed as taxes to a government or as rent to a private corporation would reach the monopoly price, because it's the only thing in town.

This is exactly what we need. Look no further than the island of Lanai that's been passed between private hands for 150 years and is, of course, a model of economic and aesthetic success that none of the other Hawaiian islands can match.

Have people who write such nonsense...ever been to America?

http://data.worldbank.org/indicator/LP.LPI.INFR.XQ?order=wbapi_data_value_2014+wbapi_data_value+wbapi_data_value-last&sort=asc

US infrastructure is ranked #5 in the world. 3 other countries slightly ahead of it are city states (Singapore) or tiny states (Norway and Netherlands). Only Germany, as a sizable state with a sizable population, is ahead.

Crumbling infrastructure? What planet do these people live on.

Norway is BIG. It does not have big population, but the country is not small. Upkeep of highways and electricity lines in thinly populated subpolar territory must be more challenging, not less.

Less.

You need far fewer infrastructure, if you have far fewer people to reach and if its used far less often.

As mentioned above, it's extremely silly to use Disney as a model for a private city-state unless it's an extraordinarily wealthy one with lots of children. Only the top 1% could possibly afford to live there.

It is interesting that Disney's theme park margins are considerably lower than many other amusement parks such as Six Flags and Cedar Fair. If they're a model for anything, it's a company that is willing to sacrifice short and medium term profits for long term value. If you were forced to own one stock for 50 years (and had to reinvest all the dividends), you probably couldn't find a better one.

Adjusted for the age of individual pieces of infrastructure, America is becoming more like Disneyland. This change is being driven by women, who much more than men want things to be clean, tidy, pretty, etc. The power of women in a particular society is a good indicator of its level of Walticity.

The most Waltish city I have so far visited is Singapore.

On reflection, I believe the mandarins of George Mason University should grant Mr. Tabarrok a two year sabbatical to live & work in Gurgaon.

I am confident he will find the standard of infrastructure there to his liking:

"Most of the city lacks proper urban infrastructure with broken roads and streets that often leads to traffic jams" http://en.wikipedia.org/wiki/Gurgaon#Infrastructure

A word to the wise: avoid the street food.

Ok Ok, but what about all of the privately owned fairgrounds whose infrastructure sucks?

And I thought waiting 15-20 minutes at the DMV was bad, at least it's air conditioned.

http://touringplans.com/magic-kingdom/crowd-levels

Columnist who wrote the piece under discussion here....

Professor Tabarrok's post is a breathtakingly dishonest comment on my column. And I say dishonest because I took the time to show the professor, point by point, how he missed the entire theme of my column and got facts wrong.

Instead of correcting or even reconsidering, he dashed off a dismissive reply. That is not the kind of response we should expect from people whose professional obligation is relentless pursuit of facts and truth and their dissemination. When I err I correct, forthrightly and promptly because that is what honest people do. Expecting the same of any critic, but especially a professor, is reasonable.

My Disneyland column used the theme park as metaphor to examine economic and public finance issues in ways that can be understood by people who have no idea of input-output tables or marginal utility.

My column was about risks, rewards, investing in the future of America and a change in culture from the boundless optimism of the 1950s to the widespread belief of many people today that their situation is hopeless, that they cannot do anything to change our economic conditions. Experience has shown me that belief is widespread from the bottom of the income ladder to the upper reaches of the one percent, including many wealthy business owners. My column also discussed basic research, education and how disinvestment damages us competitively in the global marketplace, but Tabarrok failed to inform readers about that, perhaps because it would vitiate his baseless assertions.

Tabarrok dismisses my column as not serious, telling his readers my argument is this simplistic and silly assertion: "what makes Disneyland different is….happy thoughts." Utter nonsense.

At best the professor gets it backward. It is not happy thoughts that will produce investments in infrastructure. Rather, investing in the future of America will produce a happier nation.

Tabarrok ignores that I quote Walt Disney verbatim on this very point in his dedication of Disneyland and I show the risks he took against the advice of his brother and investment bankers. Disney mortgaged his home, a pretty serious assumption of risk. He hosted a Sunday night show for ABC to raise the money to complete Disneyland. That bet on the future paid off so handsomely that today the Disney Company owns ABC.

One would think that at a website heralding marginal utility a professor with an endowed chair would tell his readers that my commentary is about risk taking, investing and the benefits that flow to both private enterprises like the Disney company and to the commonwealth. But of course that would not justify his dismissive tone and false writing.

Tabarrok could have engaged my implicit Smithian moral arguments, Benthamite utilitarianism and touch of Keynesianism. He could have noted my lack of any mention of privatizing infrastructure, which he favors. Instead, Tabarrok took the low road – caricature, fabrication and ignoring verifiable facts.

I routinely and publicly invite critics to examine my work -- and have for decades. Serious critics have taught me a lot, sometimes changed my views with new facts and helped hone my work. My home address, email addresses and phone numbers are published in many places so people can easily reach me. Routinely I engage critics, as anyone can see at my Al Jazeera America, National Memo and other reported opinion columns, especially my work exposing bad journalism (including commentary) going back 41 years. I promote dialogue to improve public understanding, not Tabarrokian straw man rants.

Tabarrok demonstrated neither fidelity to what I wrote nor respect for Marginal Revolution readers. The honest response when errors in concept and fact are pointed out is contemplation, recognition of error and a corrective post, not Tabarrok’s haughty dismissal. As F. Scott Fitzgerald taught, action is character.

Mr. Johnston,

I am genuinely perplexed as to why you are so upset. Your comment is difficult to understand since aside from anger and invective you don't offer any sustained argument about what you found "false", "fabricated" or "dishonest" about my post.

As best as I can tell you think that I am denying the premise of your argument. Namely that Disney is great because it has invested in infrastructure and America would be better if it invested in more infrastructure. On the contrary, I quoted you extensively on this point because I agree with it. I too would like to see more investments in American infrastructure and I have said so publicly (see my book Launching the Innovation Renaissance).

My post is about a deeper question. *Why* does Disney invest while America does not? My mild critique of your article is that you don't answer this question and instead talk about vision, imagination and optimism (i.e. happy thoughts).

My answer to this question is that the incentive structures facing Disney and the American government are very different. In the first case we have cost and benefit analysis, market tests, and experimentation and in the second case we have a political system based, as all political systems are, on the pursuit of power that only rarely leads to the achievement of the social interest.

Thus, I take your argument more seriously than you did. I argue that if we want America to invest like Disneyland we ought to build more Disneylands, i.e. more competitive, private cities.

Now you may disagree with my conclusion but I hardly think you can say that it is dishonest nor, seeing as I start by accepting your premise, that it is dismissive.

Sincerely,

Alex Tabarrok

Professor Tabarrok,

This is not about your vision of how to create better incentives. You're entitled to that and its a fair point to raise. This is about your utter disregard for my argument as I framed it and the facts I used to buttress it. You proferred ridiculous characterizations.

Having twice taken the time to show you in detail your conceptual and factual errors, and explaining the reasons your characterizations are false, your self-described inability to appreciate your mistakes and falsehoods suggests a character deficiency. Sadly for your students and those who read your rants, your own words reveal that you suffer from that most curable of self-induced social diseases -- willful blindness.

The The Villages in Florida is private development that people joking refer to as Disney world for old people.

I think that even poor people might be better off with more and better police and better cleaner streets but with less welfare and less education spending but that is the question most of our taxes go toward transfer and defense. Democrats will not stand for transfer cuts and republicans will not stand for cuts to transfers to the elderly of defense cots. BTW One reason that you need more police is because some young men are very destructive.

I won't attempt to wade into the economic arguments, but there are a few things here that raise questions to me.
One, as others have alluded to, is whether it makes sense to compare a theme park to a city. There program criteria for what they want to accomplish are vastly different. A city has to accommodate all entrants regardless of ability to pay; it has to resolve its own struggles over power and representation.
A city has shareholders instead of customers. In a private city, do the citizens, like Disney guests, have as their sole remedy, voting with their feet? Alternatively, if the Disney guests could vote for new changes (Revamp Matterhorn or increase the maintenance budget?) how would it run?

Alex dismisses politics as something inferior to the smooth efficient workings of private entities. This seems like a mirage, the imagining that there is some way to simultaneously satisfy the emotional/ religious/ cultural longings of millions of wildly disparate people, while fulfilling rigorous demands of performance (like defense, police, infrastructure and the like), which isn't somehow every bit as messy and complex and contradictory as the people themselves.

Just read David Johnston's essay; I understand his vehemence now.
For crying out loud, his point is ridiculously clear; the editor even bolded the nut passage halfway down.
"We pay a huge price for our lack of investment and faith in the future of America.”"
It takes a determined effort to misread a short essay so poorly.

Johnston's point is clear from Tabarrok's excerpt. Tabarrok agrees with the point. Why is this hard?

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Proprietary cities seems the very opposite of open border style immigration and also equality. A proprietary city can set strict (or draconian as Caplan would say) limits of what type of people can live there, in other words who can immigrate. Proprietary cities can also be far nicer, or unequal, with other cities.

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