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The Chicken-and-the-Egg Problem

Steven Titch
January 29, 2009, 1:43pm

Reason's Sam Staley pointed me to a question poised by the Cato Institute's Randal O'Toole at his Anti-Planner blog, namely is central planning required to advance certain technologies that require substantial investment from both users and suppliers? Randal raises the chicken-and-the-egg problem with driverless cars. Although the technology has been around for ten years, he sees something of a standoff--consumers won't install the technology in their cars until the government upgrades the roads and the government won't install the technology on the roads until consumers upgrade their cars. Must the government then step in to arbitrate the transition? My argument, of course, is that market mechanisms work. The downside is that they may take a little longer than government intervention to hash themselves out. The upside is that, in the end, the technology solution is sustainable, profitable and more economical for consumers and suppliers. The business process is always more prosaic, damanding extensive research and persuasive business cases. That's why when there's any uber-cool technology on the table, there is an unfortunate temptation to use the political process to subvert the business process, usually out of a belief that if someone doesn't take action now, all will be lost for good. This impatience, for one, led to the municipal broadband disasters of the last few years, and stands to be a problem as various parties vie for a piece of the broadband stimulus. I waded in because Randal chose HDTV as another chicken-and-egg example. Although there was some central planning involved, in my opinion it was not necessary. I elaborate on that in a reply on Randal's site.


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