“The plans differ; the planners are all alike…” - Frédéric Bastiat
In the video accompanying the post “But What If No One Wants To Come?” there are several political economy, public choice theory and general economic concepts worthy of mentioning.
Private-public partnership is a warm and fuzzy concept politicos love to trot on stage. The concept politicos want to sell the voter upon is that the private sector, the home of efficiency, is going to partner with the public sector, the home of inefficiency and then a magical moment occurs where an efficient outcome results. Nay, nay! As pointed out by Ludwig von Mises in his 1921 book Socialism, An Economic and Sociological Analysis, private-public partnerships produce sub-optimal outcomes with the only worse outcome being a totally public sector endeavor. How so?
Politicos through the mechanism of government use bureaucrats to deploy their dealings. Bureaucrats are by design cautious characters that take no risk. Meanwhile private sector entrepreneurs are risk takers. The mixture of the risk adverse and the risk taker inevitably produce a sub-optimal outcome. Enterprise is a risk taking venture with the bureaucrat being a fish-out-of-water wanting to take little or no risk. Meanwhile the risk taking entrepreneur is stymied by the bureaucrat’s need to be risk adverse, with the result in the main and upon normal occasion, being a sub-optimal outcome. (1)
Incumbent politicos like to show potential voters that they are “doing something”. The “something” proposed can easily be highly uninformed policy. Notional proposition based policy rather than evidence based “something(s)” are routinely proposed by politicos. How can they propose such non-evidence based propositions? The politico knows that contrary to popular belief, voters are uninformed. Voters are rationally-uninformed as the price to become informed is outweighed by the cost (deploying their time and resources elsewhere i.e. the alternative). Hence uninformed policy matches an uninformed electorate.
The “something” proposed in many cases comes in the form of a “monument building exercise”. Politicos love to build monuments to themselves. Monuments depicting the “something(s)”. Moreover, the monument to themselves is generally advertised as anything but a monument to themselves. The monument building exercise is cloaked as doing so for the greater good (whatever that is), for the voter, for you, for the public and generally enhanced as a “legacy for future generations”.
Then comes the complications of central planning of turning the “doing something” into the “monument”. The base uninformed policy, a central plan, inevitably runs into reality. The notional proposition begins to unravel as rather than being spontaneous/emergent order based with free market forces influencing demand and supply, an artificial demand and supply have been created. Hence the central planner has to tweak their “something” in an attempt to fix the many shortcomings associated with notional propositions (non-market, non-evidence based central plans).
And about the legacy and future generations: The incumbent politico’s event horizon is the next election. Therefore the cascading unintended consequences inherent with the deployment of a notional proposition, occurring years into the future, a price borne by future generations of un-born voters, are of no matter to the politico as they will either be dead or out-of-office. Therefore the event horizon of the politico dictates near-term “something(s)” with the “legacy” being no more than the price of failure of near-term something(s) superimposed upon future generations years into the future.
“The inefficiency of political control of an economy has been demonstrated more often, in more places, and under more varied conditions, than almost anything outside the realm of pure science.” - pg. 166, Thomas Sowell, 1999, The Quest for Cosmic Justice
Notes:
(1) Socialism, An Economic and Sociological Analysis, 1921, Ludwig von Mises, pg. 256 - 257.
Gasoline prices have fallen. Technological innovation has brought more oil supply and therefore more gasoline to the market place. A welcomed price break for consumers. Yet the same welcomed price break for consumers presents a political incentive to increase gasoline taxes. The argument comes with plenty of notional propositions including the need for additional tax due to slack demand of gasoline. That demand, in part, is slack due to vehicles achieving better gas mileage. (1)
Problem is, demand for gasoline is increasing, merely not increasing at the pace of supply available, therefore price falls. Demand is increasing and the tax per gallon of gasoline is generally fixed, meaning twenty gallons of gasoline at $3.69 yields the same tax revenue as twenty gallons at $2.14 (the tax per gallon is fixed whereas the total price per gallon is variable). Therefore, tax revenue is increasing, not decreasing, despite fuel economy of the aggregate fleet. Besides, the fuel economy of the aggregate fleet is a result of politicos and their legislation not a result of individual choice. (2)
Maybe the subject of gasoline tax revenue requires a visit to public choice theory.
The public choice theory argument is: Politicos champion the building of infrastructure and concentrate focus on the price to build and the wonderful things the “building” will bring. Yes, the benefit exceeds the price in their “economic development” calculation (or non-calculation as the case may be). Yet the same politico ilk fails to price long term maintenance price into their “building“, meaning taxpayers, decades later, are forced to pay the under funded or unfunded maintenance feature of the past “building“.
One might conjecture that the situation is akin to the classic case of cascading unintended consequence regarding “monument building”. Monument building is a public choice theory proposition of politicos building things with other people’s money as a monument to their “doing something”. Matter-of-fact, politicos are so vain as to name the monuments after themselves or their favorite past politico of the same ilk. Meanwhile, the-last-man-standing pays the price of cascading unintended consequence regarding “monument building”. The ongoing maintenance, which the monument required but was not properly priced in by politicos, requires a future set of taxpayers (you) to be saddled with the price to maintain something that has not been properly maintained.
The building phase is a period ripe for political constituency building with other people’s money. Surely politicos would enjoy the maintenance phase, and direction thereof, regarding other people’s money. Yes, during the “repairing” stage of their own making due to a under-funded or unfunded phase, politicos would like to spend your money again.
Stated alternatively, the-last-man-standing pays the price of cascading unintended consequence regarding “monument building” of under funding and/or unfunded maintenance. The politico frames the under funding and/or unfunded maintenance phase, and call for more tax revenue, as unrelated to, or exogenous to, their own political dupery and nitwitery of under funding the “monument building” phase in the first place. Hence a new tax revenue stream for a new period of “repair” is called for, and not so incidentally, ripe for political constituency building with other people’s money. Wash, rinse, dry… begin process again. Sweet!
Politicos many times rely on special interests to make their case for tax increases. Special interests that will directly benefit from the tax revenue being spent, focused up them as it were, always champion a tax increase. Enter the U.S. Chamber of Commerce business group and AFL-CIO union federation: special interests extraordinaire! You guessed it! The U.S. Chamber of Commerce business group and AFL-CIO union federation back a tax hike on gasoline. If anyone can solve their own problems with the use of other people’s money, it certainly is this coalition (or more succinctly under the theory of ‘syndicate’). (3) (4)
Returning to the monument building episode, politicos frame the building phase as economic development but rarely if ever price in the long-term maintenance of the monument they propose to build. If the maintenance price is factored in their “economic impact guess”, their wild guess, will look much less rosy. If the taxpayer knew they and those coming after them would be required to pay ongoing maintenance, many times far in excess of the original monument price, taxpayers might reject politicos building things with other people’s money as a monument to their “doing something”.
If one ponders the debate point of infrastructure crumbling, then one might want to find “why” infrastructure crumbles. Is the crumbling due to lack of tax or lack of foresight? Is the crumbling due to monument building with ongoing maintenance not factored in when politicos want to spend other people’s money as a monument to their “doing something”?
Also, the debate point of infrastructure crumbling is sophistry. Road, bridges and general social overhead capital is in better shape today than anytime in the last twenty years. Oops! (5) (6)
One might also consider the political class as the quintessential shirking partner. Yes, the partner that wants part of the gain without putting forth any effort. That’s right, anytime one gains, be it through irksome toil such as work or technological innovation reducing price, any gain one enjoys, becomes fertile ground for the shirking partner, the political class. (7)
Finally, the gasoline tax is a regressive tax hitting lower income individuals hardest. Should the working poor or those climbing the economic ladder from below pay more now that they have increased their meager disposable income due to technological innovation?
Notes:
(1) In Low Gasoline Prices, an Opening Emerges for Higher Taxes, WSJ, 01/08/2015
http://www.wsj.com/articles/in-low-gasoline-prices-an-opening-emerges-for-higher-taxes-1420747684?mod=WSJ_hpp_MIDDLENexttoWhatsNewsForth
(2) Ibid
(3) Ibid
(4) A Theory of Syndicate, Pichler and Wilhelm.
http://gates.comm.virginia.edu/wjw9a/Papers/syndicate1.pdf
(5) New report shows state highways in good shape, USAToday, 09/01/2010
http://usatoday30.usatoday.com/news/nation/2010-09-02-roads02_ST_N.htm
(6) 19th Annual Highway Report, Reason Magazine, 09/02/2010
http://reason.org/news/show/19th-annual-highway-report
(7) From Economic Man to Economic System, Harold Demsetz
http://www.amazon.com/Economic-Man-System-Institutions-Capitalism/dp/1107640857/ref=sr_1_1?s=books&ie=UTF8&qid=1420921465&sr=1-1&keywords=From+economic+man+to+economic+system
