The free market is unrivaled at producing the goods and services people want at the lowest possible price. It is the most democratic of institutions. Everyone’s dollar has the same value, and the voting of those dollars evidences demand and determines what will be produced.

When the market is coerced to respond to something other than aggregate demand, it operates less efficiently, shifting resources to produce things people want less.

This problem occurs when government interferes.

For example, intellectuals may lobby government to provide radio broadcasts of opera or chamber music which means fewer resources are available to blast heavy metal and rap which, unfortunately, are more in demand. Or, governmental officials may assume their election invests them with the expertise to decide what people really want or, if not want, should have; to the extent they are able, they may force businesses to produce it.

The “it,” insofar as Galveston City Council is concerned, is restaurants and hot tubs. A majority of the city council recently decided that there is a shortage of hot tubs and restaurants in town, particularly on the west end of the seawall. (I know many restaurateurs who would be astounded to learn this.) To remedy the deficiency, the city council has caused an ordinance to be drafted requiring hotels built on the seawall to include these amenities.

Before building a chain restaurant or hotel, investors do a sophisticated market analysis that is massaged with complex algorithms to accurately project demand. When there is sufficient demand for a restaurant, it will be built. If a hot tub or swimming pool is justified, it will be constructed.

Forcing hotels to stray from the market profile increases the chance they will not do well, will defer maintenance and become an eyesore. The idea that the city council knows better than the market or well-informed hoteliers is not credible.

Further, forcing hotels to tack on amenities will increase room rates and make it more difficult for less-affluent families to visit our city. The city needs and the market have provided a mix of hotels. Only a few hotels here are destinations that provide entertainment and amenities on site. The others are used mainly as a base from which guests leave early and return late to enjoy the city’s numerous attractions and eat in its numerous and varied restaurants. There is a restaurant within approximately 5 minutes of any hotel on the seawall.

The city council’s job is to make sure basic city services are well and efficiently provided — of which, only a few: that police and fire departments do their job; that the port and park board are well-run; the streets, drivable; the water, potable; the sewer, operable; the garbage, removed; the parks, verdant and clean. This partial list is a full-time job. If done well there should be no extra time to spend interfering with other people’s businesses. Once begun, there is no logical limit to these shenanigans; and council will feel justified in attempting to remedy any imagined deficiency.

Kenneth Shelton lives in Galveston.


(8) comments

Susan Fennewald

I always worry when people start citing a free market as the solution to everything. They generally mean that they support a free market as long as they agree with the results. If the free market ruled - then abortion would be readily available and street corner drug dealing and prostitution would be legal.
Just because the "free market" supports something - doesn't mean we want it. (or don't want it)

Bill Cochrane

I agree. This is government intrusion at it’s best. It’s not city council’s job to mandate how a business operates. Yes, there are city codes to insure safety, ample parking etc. But for the city council to dictate what amenities a hotel must have is wrong. But Mr. Shelton, you did miss one thing. The reason city council wants these things. In other stories, they admit they want a “better class of visitors.” I wonder what would happen if the federal government decided that Galveston Texas needed set aside 10% of the rooms in these new hotels with the “proper” amenities for families making minimum wages? They would be screaming government overreach loud and clear.

Bill Cochrane

Susan, I always worry when people comment on a subject using extreme, over the top babble. The subject is government intrusion, hotels, restaurants and free markets. Not drugs. Not abortion. Not prostitution. Question. Do you think that the Galveston City Council has the right to dictate weather a hotel has a hot tub or not? Wait. Since you started it, let’s get extreme. Question #2 - Do you think City Council has the right to require new hotels to furnish prostitutes?

Susan Fennewald

I figure that when you cite the "free market" for your excuse for something - you're just inviting over-the-top response. If he had cited something else - like economic reality - I wouldn't have responded. Idon't know whether City Council has the "right" to dictate such things. I don't think that they should, but I wouldn't cite the holiness of the free market to defend that position.

Susan Fennewald

Is this all about the seawall property near 12th st - where the developer wants to build higher than the rules dictate, and he figures that getting the rules changed to give him extra height in exchange for amenities will allow that?
I do think that the city has the right to control aspects of the property, such as height, that affect the surrounding community. Whether the hotel has a hot tub or not, doesn't affect the surrounding community, so I don't care what the hotel has. It could be argued that the type of clientele the hotel has does have an effect on the surrounding neighborhood, but I don't really think that the difference between the San Luis and the Holiday Inn is going to affect the neighbors.

Chuck DiFalco

"forcing hotels to tack on amenities will increase room rates and make it more difficult for less-affluent families to visit our city" Of course it will. That's entirely the point! And that's a good thing, according to Galveston City Council. Chasing the affluent dollar is what I've seen cities focus on. Ultimately, the voters of Galveston need to influence, and hopefully decide, what kind of city they want to become.

Chuck DiFalco

"Forcing hotels to stray from the market profile increases the chance they will not do well, will defer maintenance and become an eyesore" Um, no. The potentially struggling hotels won't get build in the first place. That's the flip side of the point of Galveston City Council's vote.

Cary Semar

I would agree that a market solution should be the first choice unless there is a good reason not to go that way. There are good reasons for government entities to modify the operation of the free market and there are bad ones. A good reason would be one that promotes the general welfare and a bad one would be one that benefits a special interest to the detriment of the general welfare.

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