The case for accessibility legislation in a market economy."

 

 

Report of the CIB Expert Seminar on Building Non-Handicapping Environments, Budapest 1991

Contents

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The case for accessibility legislation in a market economy

Adolf D. Ratzka, CIB Secretariat, Royal Institute of Technology, Stockholm, Sweden


The political changes of the last few years in the countries of Eastern and Central Europe will have consequences for the social and economic life of their citizens far into the next century. One of the most pervasive changes in the lives and thinking of these nations will be in the division of responsibility between the collective on the one hand and the individual on the other. From a position that all areas of human life are the realm of politics and thus a legitimate arena for state intervention, the pendulum is about to move towards the other extreme that 'least government is best government', that the 'invisible hand of the market' will automatically put everything right and lead all sectors of society to a life of ease and affluence.

Given the mistrust against the efficiency of central planning and abuses of state power, will there be the tendency to look for easy answers by throwing out all central planning? In such a scenario what will happen to our field, the efforts to create better awareness of the needs of old and disabled persons in the built environment? Is there a place for standardization, for building codes and norms imposed on builders, planners and households from above?

In the present paper I attempt to provide a rationale for the existence of accessibility legislation in a market economy. Starting from the classical economic assumption about the perfect market I want to show that the market is not able to solve all problems, that there is a case for state intervention including accessibility legislation.

In textbooks on classical economics we can find the postulate that a society's total aggregate welfare will be maximized, if all individuals, consumers and producers, were to make decisions in their own best economic interest. In order for this postulate to hold, the classical economists needed to make the assumption of the 'perfect market'. The 'perfect market' is characterized by 'perfect competition'.

Among the assumptions of the 'perfect competition' are perfect information, smallness of each buyer or seller in relation to the size of the market, absence of artificial restraints and free entry into the market. Let us look at two of these assumptions in more detail.

Perfect information assumes that all economic agents have access to the same information at the same time. In the real world we know that access to information is very unevenly distributed. The country with the supposedly most capitalistic, free market economy - the United States - has probably the strictest government regulations concerning financial markets. Company employees are prohibited by law to make economic use of any "inside information" they might have.

Smallness of each actor in relationship of the market. While this is one of the most important assumptions of a "perfect market", in reality it is well documented that a market economy leads to increasing concentrations in production and marketing as an industry matures. An example for this is the automobile industry where the number of companies has been constantly decreasing over the years giving rise to larger and larger concerns. In order to keep up competition most 'capitalist' countries have had to establish anti-trust legislation including state agencies for prohibiting cartels.

This cursory discussion of some of the assumptions underlying market economies is intended to show that:

• a pure market economy does not exist anywhere,
• some state intervention is actually necessary in order to aid the market in moving closer to the ideal of 'perfect competition' in order to achieve higher efficiency.

So far we have only looked at the micro-economic level, that is the interplay of individual economic agents within an industry. As far as the macro-economic level is concerned, that is the aggregate functions of all households, producers and consumers, we can observe a similar tendency. Modern governments use their budgetary function, fiscal policy and control over the money supply in order to smooth out fluctuations in the level of aggregate economic activity with the aim of a more efficient employment of national resources over the long run. The more developed countries are characterized by an elaborate system of such central controls designed to stave off dramatic changes, such as runaway inflation and depression.

A comparison of various countries will show that the more highly developed countries - in the economic sense - have the largest array of policy instruments for state intervention. Recent theories of economic growth would go as far as claiming that the very reason the most "developed" countries have reached this position is precisely because of their long-standing history of state intervention and controls. For example, a well-functioning system of comprehensive legislation, courts and appeals, and police is one of the most fundamental requirements for flourishing economic activity. Such a system is needed to protect the rights of producers, consumers, sellers and buyers of goods and services, to allow them to make contracts and to guarantee ownership rights. This protection removes some of the uncertainties inherent in all investments and encourages individuals and companies to lend or borrow and to commit resources over a long time for productive purposes.

Similarly, in many countries it is the function of the state to issue norms, to issue and coordinate industrial standardization, and to license professionals. State agencies usually are best fitted for this purpose because of their neutral and central position. Also, public agencies subjected to the political process are more trusted with these functions than private interests.

So far the purpose of my argumentation has been to show that some state intervention is very well compatible with a market economy and even beneficial for it. In the following I would like to take this reasoning a step further and discuss areas of economic activity where state intervention is not only a beneficial but an outright necessary ingredient in a market economy.

At the beginning of this paper we briefly discussed some of the assumptions of a perfect market. You may also remember that economists need these assumptions in order to show that a perfect market will lead to maximum aggregate welfare. Some of the most interesting economic literature has been devoted to identifying situations where it can be shown that the market will not be able to arrive at an optimum solution. This is the case in so-called market imperfections.

Most often market imperfections are due to externalities. Externalities arise when the action of one economic agent causes benefits or costs elsewhere for which no fee can be charged or compensation be collected. For example, the market itself does not have mechanisms which would allow an individual to claim compensation from the many cars which foul up the air which he or she has to breathe in this beautiful city. As a consequence, an increasing amount of people contract lung cancer which imposes suffering on the individual and high economic costs on society. Since there is no mechanism by which each individual car owner is made to pay for the costs his car causes, car owners continue to pollute. Installing catalyst systems in car engines that would reduce noxious emissions is a cost which car owners can avoid. The cost of these devices would be much smaller than the damage caused by pollution. Thus, from a total societal cost-benefit calculus allowing car owners to pollute the air is not an optimum solution. A market economy left to its own devices will not be able to improve the situation. Obviously, what is needed are regulations which force car owners to install these devices.

But is state intervention really necessary in this case? Why not appeal to car owners' common sense and they might install emission controls voluntarily! For each car owner it will pay to wait for other car owners to install the device. In this way he can enjoy the clean air without having to pay for the catalyst. This is often referred to as the 'free rider' problem.

Other examples for the free rider problem are police and fire protection, national defence or city planning. It is difficult to exclude somebody who is not paying for such public goods. Public goods in the economist's language are goods whose consumption by one person will not diminish the amount of the good available to another person. Consider a radio program. Anybody with a radio receiver will be able to listen to it. Whether a hundred or a million people listen, will not affect the quality of the reception nor its cost to the individual listener.

A similar public good is fire safety. In the middle ages whole cities were destroyed by a fire which started in a single house. Today, most countries have building and zoning codes that specify distances between houses and fire safety measures in construction. In addition, most communities have fire departments for active protection. All citizens will benefit from fire protection whether they pay for the costs of keeping a fire brigade and comply to the construction codes or not - as long as everybody else pays and complies. Thus, the only way to bring about fire protection is to make the codes compulsory and to levy taxes to finance the fire department. The market, if left to its own devices, would not be able to produce fire protection.

Accessibility is a related public good. Accessibility measures in a building will benefit all users. Old persons will have less accidents in staircases, if they are provided with the alternative of using elevators. Similarly, accessibility features will make a structure usable by disabled persons or reduce risks for them. Since buildings typically represent long term investments, accessibility and its benefits will accrue to several generations of users. But who should pay for accessible construction? There is no market mechanism by which those who enjoy the features can be made to pay. Thus the only way to enforce accessible construction is through state imposed norms as in the case of fire protection.

Similar to fire protection, investments in accessibility measures are highly profitable for society. The costs of accessible construction are low in relation to the expected returns. In Sweden, we have had building norms stipulating accessibility in newly constructed public buildings and workplaces since the 1960's and in new multi-family housing since 1977. The additional costs due to these measures have been estimated to be less than 1 per cent of the total cost. The returns, on the other hand, accrue among other things in the form of fewer accidents, hospital days, and institutional care as more old and disabled persons can live at home instead of having to move to old age homes or similar institutions. Also, in accessible communities persons with disabilities will contribute to the diversity of society and put their resources and talents to productive use like anybody else.

In this paper I used language and arguments that are standard in Western economic textbooks in order to show that there is a place for accessibility legislation in a market economy. There are other, non-economic arguments that point in the same direction. Handicapping environments constitute obstacles to integration and perpetuate the systematic discrimination of a segment of society. Today, pluralism and market economy are often equated with democracy. If this is true, then in a truly democratic society it will be impossible in the long run to exclude whole segments of the population. Apartheid cannot be maintained.

 

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