The Lakers Win, And So Does Adam Smith

Free market lovers have had little to celebrate over the past year or two, but an interesting outcome of the Los Angeles Lakers' recent NBA championship win might make them feel a little better. No, Kobe Bryant has not come up with an explanation of how to solve market failures without regulation. Presumably he'll leave that to the Washington Wwizards. Instead, the Lakers' victory parade today will be an event that would make Adam Smith smile.

The Los Angeles Times reports that Mayor Villaraigosa was receiving a great deal of heat for the parade, since it would impose a cost to the city at a time when California has some pretty bad money problems. The Times explains the solution:

Mayor Antonio Villaraigosa said Monday that private donors have pledged to pay the estimated $900,000 cost of providing police and fire protection and city street services for the celebration, ensuring that no tax dollars will be necessary.

I talked to a spokesperson from the mayor's office who explained that the production services are always paid by sponsors or other private individuals. This year that bill is around $1 million. But the city services, as described in the above block quote, are usually paid by the city. And that additional cost of $900,000 is significant, especially when the city is already laying people off.

Now libertarians out there would probably find it appalling that a city would even consider incurring a cost of $900,000 to pay for a parade to celebrate a sports team. Professional sports teams are privately owned, so they would argue that taxpayers shouldn't foot the bill.

But there's strong public utility in a parade. So those who are okay with the government spending in order to enhance the collective good of the public might be okay with a city paying for a parade. After all, many citizens will enjoy the celebration. They might also argue that, without the city footing the bill, the parade would not happen. After all, who would foot the bill for a parade if the city won't?

"The invisible hand!" cry the libertarians. They'd prefer to let the market worry about that. But their opponents don't believe it would work. They prefer the certainty of Uncle Sam's hand.

But suddenly, in Los Angeles, the invisible hand becomes a little more visible. No, it doesn't belong to Kobe Bryant; it belongs to business leaders who have the money to make it happen. Presumably, either they have an additional advertising incentive for contributing, or they just love the Lakers and have extra money lying around.

What's even more striking is that this did not occur at a time when business is flourishing -- it occurred at a time when businesses are experiencing historically unprecedented economic hardship. Imagine how easy it would have been for businesses to contribute if times were good!

It makes you wonder if government should ever fund events like parades. This experience seems to indicate that the government's funding for such events is not as necessary as many thought. It kind of makes me wonder where else private business or individuals would have picked up the tab if Uncle Sam didn't already do so.