Showing posts with label
focused benefit and diffused costs.
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Showing posts with label
focused benefit and diffused costs.
Show all posts
“Community interest groups and businesses have donated more than $100,000 to a committee campaigning for a quarter-cent increase in the local sales tax rate.”
“The donations, as well as other endorsements, “signal that our business community knows how critically important public education is to economic development, how important it is to attracting jobs to Guilford County, and how important it is that we maintain a top-notch school system,” said Anita Bachmann, the committee’s campaign coordinator.” - Tax campaign draws $100,000, Greensboro News and Record, 10/29/2014
James and Jane Goodfellow, when interviewed about “government“, will on balance, tell the interviewer that government rips them off and politicians/bureaucrats are corrupt. One might say that the answer repeated over and over by James and Jane Goodfellow(s) is: The wisdom of crowds.
A problem arises, in that, the many and various James and Jane Goodfellow(s), the common sense observation that government rips them off and politicians/bureaucrats are corrupt, can’t quite articulate the “why”. Stated another way, common sense will get you through the day but common sense does not explain “why”.
One might want to consider a specific building block on the way to answering ”why”. One building block is that of special interest groups.
One can certainly paint special interest groups as “community interest groups” or “businesses” but the zebra is the zebra regardless of the color of the stripe. It is of no matter that a particular special interest group’s mantra is education, green energy, tax loop holes, infrastructure, tax abatements, economic incentives, etc. A special interest is a special interest and as such wants focused benefits.
Those focused benefits applied to the particular special interest comes at the price of the many. That would be you. The many (you), in fact fund the focused benefit for the use, enjoyment, deployment, etc. of the focused special interest.
Many times it is difficult to answer the “why” due to political slight of hand. How so? The special interest is merely collective self-interest. The mantra of the special interest is generally cloaked in some altruistic endeavor. That the altruistic endeavor will somehow and in some way benefit all. Problem is the special interest group is made up of self-interested people (a normal human condition). The special interest group would very much like one to think that a magical moment occurs where the characters making up the special interest step out of their private self-interested life and become altruistic when functioning within their role as a special interest. Nay, Nay. Self-interest remains and is not supplanted by the supposed altruism:
“[Peter] Stillman … points out that those who see “a strong central government or a strong ruler” as a solution implicitly assume that “the ruler will be a wise and ecologically aware altruist,” even though these same theorists presume that the users of CPRs [common-pool resources] will be myopic, self-interested, and ecologically unaware hedonists.” - Governing the Commons, Elinor Ostrom, page 218
Special interest groups, the very long list thereof, who indeed gain the funding of the many (you), have a surprise in store for their own rank and file. Once funding is procured, the supposed altruistic endeavor receives the least funding, the rank and file of the focused benefit receive the next least amount of funding, while the power purveyors of the special interest gain the most. Stated alternatively, the focused benefit once procured is further focused upon the power purveyors of the special interest.
[Paraphrasing] We would all like to see government spending go down as long as it is not the government spending that affects us. We would all like to see government deficits go down as long as increased taxes fall on someone else. Most people welcome more government spending on them, few welcome more taxes. - Money Mischief: Episodes in Monetary History - Milton Friedman
Within the realm of public choice theory (politics without the romance) is the proposition of: Focused benefit and diffused costs.
Focused benefit and diffused costs is an observation regarding special interests through politico enablers. The special interest, be it the education establishment or any other special interest, want to acquire a focused benefit upon themselves through a small incremental price extracted from a diffused group.
The insidious mechanics are as follows:
(1) the special interest desires additional funding for their particular constituents making up the aggregate special interest,
(2) the special interest knows that a small incremental price (tax) increase will not be rationally opposed by any one individual in a large diffused group,
(3) the special interest is highly organized and knows the unorganized/diffused group, that the price is to be extracted from, is not organized,
(4) the special interest then recruits politicos to champion the additional funding, with the implicit assumption that the constituents of the special interest will become constituents of the sponsoring politico,
(5) the politico sees an opportunity for a political constituency building exercise through other people’s money (the unorganized/diffused group),
(6) the special interest, with resources supplied by its constituents, mount a very focused campaign for the increased funding while the diffused group has zero resources and a diffused constituency that is highly unlikely to form a focused campaign against the increased funding.
The insidious stratagem of the special interest depends heavily upon: A small incremental price (tax) increase that will not be rationally opposed by any one individual in a large diffused group. An example might help. Jane Goodfellow, one of many price payers (taxpayers) is not going to expend one hundred hours of research to fully understand the issue, spend many evenings attending multiple meetings and become fully aware of the issue proposed by the special interest. Jane Goodfellow’s rational position is to forgo the research and meetings and merely pay the increased price (tax) as the increased price (tax) is a smaller price than the price of the research and meetings.
Moreover, the special interest knows the chances are remote that many Jane Goodfellow(s) will organize themselves together around a particular and small incremental price (tax) increase as the Goodfellow(s) are diffused with no organization.
Insidious to say the least.
An additional observation is the rational choice by individual constituents of the special interest. What rational choice? The individual constituent is in effect campaigning to raise his or her individual price (tax). That is, the individual constituent of the special interest faces the same price (tax) increase as the unorganized/diffused group. However, it is rational for the individual constituent of the special interest to support a price (tax) increase upon themselves if the benefits flowing to such individual constituent is greater than the price (tax) increase experienced by the individual constituent.
Therefore, in the particular case of ¼ cent sales tax increase, the aggregated ¼ cent sales tax increase, across millions of dollars of taxable purchases (conceivably billions of dollars of taxable purchases), becomes a very large number of aggregated additional tax collected. The large sum collected is then dispersed to the small focused benefit group of which the constituent is a part. As long as the benefit bestowed is perceived to be larger than the self imposed price (tax) increase experience by the individual constituent of the special interest, then it is totally rational to support a price (tax) increase upon oneself as the price (tax) is less than benefit bestowed.
The rational choice by the individual constituent of the special interest, to increase price (tax) upon themselves, explains a nagging question of why someone feverously supports a price (tax) increase that they themselves will experience. How so? In the main, the outward political position of the individual constituent of the special interest supporting a price (tax) increase, that they themselves will experience, is that such increased price (tax) will create/facilitate some altruistic endeavor. Meanwhile, the inward focused benefit being greater than the individual’s price (tax) is a motivating factor, if not an overriding factor.
Even more insidious, huh?
Welcome to public choice theory, politics without the romance.
