Rent-Seeking Snow Cone Stands Wage Fight to the Stain

Posted on by David Stokes

We have in O’Fallon, Ill., a rare example where the government gets it right — at least, so far. Two snow cone firms are engaged in a rather stupid fight over who has a permit to operate a stand at a bowling alley. The Belleville News-Democrat has the story here. The city seems to have made some minor mistake by generating two permits for a stand where the competitors think there should be just one. Instead of allowing the market and competition to work, the competitors want the city to outlaw the other stand. The city is taking the correct response to the dispute:

“The city doesn’t want to have to get between them,” Zoning and Planning Department head Ted Shekell said. “Let the best snow cone win.”

It is nice to see a planning and zoning official who understands that their role, if there is to be one, should be limited. But I do love the story and the dispute. I’ll let my friend “D,” who sent it to me, sum up all the great stuff included in one small story:

The story has it all. Misuse of needless licensing to stifle competition, a b.s. argument about protecting jobs, and sno-cones.

I can fairly claim to be more knowledgeable about the machinations of the snow cone oligopoly than most bloggers. I hope, for the sake of capitalist enterprise in the Metro East, that they experience a record heat wave this summer and both stands have a blow-out year — provided they only serve authentic Rio Syrup in their cones.

The snow cone market is highly variable and dependent on both season and weather. The obvious goal is to keep fixed costs extremely low and then the variable costs sort of take care of themselves. Sort of the exact opposite of the utility business model. If it is 102 degrees in July, trust me that people will pay just about any price for a snow cone. Unless, of course, some jerk in city government gives permission for someone else to also operate a stand nearby. Just who does O’Fallon think it is, that it refuses to prevent someone from operating a competing business? If governments at every level started acting like this, the next thing you know we’d be responsible for our own health care. …

P.S.: Here’s a link to the movie reference in the title of this blog entry.

SWAT Raids vs. Military Raids

Posted on by John Payne

A commenter on this Show-Me Daily post about SWAT raids wondered how much worse military raids in Afghanistan might be compared to SWAT raids in this country. An Army officer writing to Radley Balko suggests that it is actually easier to obtain permission for a SWAT raid in America than a military raid in a war zone like Afghanistan, and that SWAT teams here use more aggressive tactics:

I am a US Army officer, currently serving in Afghanistan. My first thought on reading this story is this: Most American police SWAT teams probably have fewer restrictions on conducting forced entry raids than do US forces in Afghanistan.

For our troops over here to conduct any kind of forced entry, day or night, they have to meet one of two conditions: have a bad guy (or guys) inside actively shooting at them; or obtain permission from a 2-star general, who must be convinced by available intelligence (evidence) that the person or persons they’re after is present at the location, and that it’s too dangerous to try less coercive methods. The general can be pretty tough to convince, too. (I’m a staff liason, and one of my jobs is to present these briefings to obtain the required permission.)

Generally, our troops, including the special ops guys, use what we call “cordon and knock”: they set up a perimeter around the target location to keep people from moving in or out,and then announce their presence and give the target an opportunity to surrender. In the majority of cases, even if the perimeter is established at night, the call out or knock on the gate doesn’t happen until after the sun comes up.

Oh, and all of the bad guys we’re going after are closely tied to killing and maiming people.

What might be amazing to American cops is that the vast majority of our targets surrender when called out.

I don’t have a clear picture of the resources available to most police departments, but even so, I don’t see any reason why they can’t use similar methods.

I can’t personally vouch for anything this officer claims about Army protocol, but if what he claims is true, it’s very disturbing.

Privatizing the Saint Louis City Water Division

Posted on by David Stokes

Yesterday, we released the lastest Show-Me Institute case study, about the potential for privatization of the St. Louis city water division. We officially unveiled it on The McGraw Show, on KTRS The Big 550 AM. I’d like to take this opportunity to thank Monsieur Milhaven for that invitation. I had a lot of fun on the program, and I appreciate all the people who phoned in with questions.

I have two goals with this case study. First, to get the city to consider the gains it could realize by privatizing the water division, which is the only one of the three traditional utilities served by a public agency in St. Louis city or county. All three — water, gas and electric — are provided by private companies in St. Louis County, while gas and electric are privately provided in the city. (Kirkwood and Eureka are exceptions in the county.)

The other goal, equally important in my mind, is to convince the city of St. Louis to install water meters. It is nothing short of insane that the city still charges via flat-rate billing for residences. The only good thing about not having moved to meters yet — decades after most other large cities did so — is that the city now has the opportunity to skip using regular meters and move directly to electronic meters that don’t involve meter readers. Maybe that was the secret plan all along. …

The work in this study could just as easily be applied to Kansas City, and especially Springfield.

Re: [Shawtalk] Historic Code

Posted on by Christine Harbin

I live in the Shaw neighborhood in Saint Louis, and I subscribe to the area’s email listserv. Last week, a subject of much debate was the Shaw Neighborhood Local Historic District’s long list of Use, Rehabilitation and New Construction Standards, which describes which architectural details, roof shapes, roof materials, etc., that residents are allowed to use.

When a person walks through a neighborhood like Shaw that features aesthetic continuity, he sees only part of the story; historic codes like those in the Shaw neighborhood entail many unseen costs and negative unintended consequences, which I will attempt to enumerate in this post. For these reasons, historic building codes discourage the practical use of existing structures — the very thing they are supposed to encourage.

  1. Historic codes violate private property rights.
     
    They restrict individuals from altering, adding to, or demolishing the buildings that they own. By purchasing an older property, an individual assumes the risk that it could lose value in the future. Property owners have an incentive to maintain their investment, because otherwise the value of the property will decline.

  2. Mandating aesthetics should not be the role of government.
     
    Ensuring that a building is structurally sound is one thing, as David Stokes has written previously, but mandating how a building looks aesthetically is another. In my opinion, individuals should be free to enter into voluntary agreements of this nature, but only as a private matter (e.g., neighborhood covenants). I disagree that it should be the role of the government to ensure that the block “works visually,” as one person writes on Shawtalk:

    There is something to be said for architectural cognizance-for having the entire block look so different that it no longer works visually. Sort of like wearing a plaid shirt with flowered pants and a striped jacket-one can do it but it looks silly.

    Furthermore, mandating and regulating this conformity is largely redundant, because the majority will not choose to make egregious violations of social convention, such as paint their houses hot pink. As an analogous example, there is no law against cutting in line, but people choose to wait their turn out of social convention. People choose to wear jeans because many other people also wear them. Businessmen and politicians wear dark suits because their peers and colleagues do.

  3. Historic codes increase the cost of the materials required to rehabilitate a house.
     
    A homeowner has to search for windows, doors, and millwork that fit the conditions of the code. There can also be additional costs for compliance, such as, say, the need to build a different fence because the one you have is an inch too short. As a negative consequence of this increase in cost, homeowners have less of a marginal incentive to repair their property.

    Tangentially, supporters of historic credits argue that the regulations benefit the local economy, because the code-appropriate items are often made regionally or locally. This argument fails because it ignores the unseen. The resources that are devoted to making code-approved materials could be put toward other uses. It’s possible that local manufacturers do not possess a comparative advantage in manufacturing windows and doors, and that they could manufacture other products more efficiently.

  4. Historic codes discourages people from making technological improvements to their home, such as upgrading the energy efficiency.
     
    How new can something be and still be considered historic? Is modern plumbing historic? Is central air historic? Is an Internet hookup historic?

  5. Housing codes are passed under the guise of protecting quality, but homeowners have other avenues of redress.
     
    Another commenter observes:

    It also plays into safety issues as some people would do very flimsy and faulty work in an effort to sell the house without regard for how well the job was done.

    This is one reason that the judicial system exists. If a carpenter does flimsy and faulty work, the homeowner can take him to court. Furthermore, if a carpenter does flimsy and faulty work, the homeowner would discourage his friends and neighbors from hiring him. The carpenter would lose business as a consequence.

  6. Historic codes like Shaw’s favor home ownership over renting; cementing such preferences through policy also should not be the role of government.
     
    The Shaw Neighborhood Historic District Rehabilitation and New Construction Standards explicitly state the following:

    it is the intent of this ordinance to decrease the density of housing units within the neighborhood without demolishing buildings. Whenever feasible, buildings should remain with the same amount or less living units as the building was originally designed.

    […] Buildings should not be converted from single-family to multi-family. Two-family structures should not be converted to more than two units. Four family buildings should not be converted to more than six units with no units having less than six hundred net rentable square feet.

    First, this code prohibits a person from subdividing her property. This means that she cannot lease out her property and receive rental income. Second, this policy restricts renters and people of lower income from moving into the neighborhood.

    Through this policy, the government favors home ownership over renting. Owning a home is a significant investment that isn’t suitable for all individuals; by renting, many people who can’t afford the investment commitment and risk of a home can live within their means.

Let a Thousand Schools Bloom

Posted on by John Payne

The New York Times ran an excellent article on Friday critiquing the idea that all students should attend college. A college education can certainly lead to a better career and higher pay for those who prosper in that academic environment, but for millions of others, it is ultimately a very expensive distraction:

The idea that four years of higher education will translate into a better job, higher earnings and a happier life — a refrain sure to be repeated this month at graduation ceremonies across the country — has been pounded into the heads of schoolchildren, parents and educators. But there’s an underside to that conventional wisdom. Perhaps no more than half of those who began a four-year bachelor’s degree program in the fall of 2006 will get that degree within six years, according to the latest projections from the Department of Education. (The figures don’t include transfer students, who aren’t tracked.)

For college students who ranked among the bottom quarter of their high school classes, the numbers are even more stark: 80 percent will probably never get a bachelor’s degree or even a two-year associate’s degree…

College degrees are simply not necessary for many jobs. Of the 30 jobs projected to grow at the fastest rate over the next decade in the United States, only seven typically require a bachelor’s degree, according to the Bureau of Labor Statistics.

Among the top 10 growing job categories, two require college degrees: accounting (a bachelor’s) and postsecondary teachers (a doctorate). But this growth is expected to be dwarfed by the need for registered nurses, home health aides, customer service representatives and store clerks. None of those jobs require a bachelor’s degree.

Despite the steady drumbeat from politicians and educators over the last 50 years, college is not the one true way in education. Training in a skilled trade and on-the-job experience are just as valid educational paths as college, and can be just as lucrative — often, more so. Government policy, both at the federal level and in Missouri, encourages people to attend college instead of pursuing other routes. We could both save money and achieve better outcomes if the government were to cut back on spending for colleges and shift some of that funding to need-based scholarships for trade schools.

The near single-minded focus on college as the best educational path is just another example of government’s tendency to impose a monolithic solution for a host of varied and complicated problems. Such problems can best be solved by a greater role for the market, which offers numerous alternative strategies for achieving similar goals.

Even Justified SWAT Raids Can Be Deadly

Posted on by John Payne

Many readers have probably already read about the tragic death of Aiyana Jones, who was killed when a member of the Detroit SWAT team accidentally shot her while conducting a raid on her home. The police in this case were looking for a murder suspect whom they found in the apartment, which seems like an appropriate use of a SWAT team to me. There is good reason to think that a murderer might try to resist police with violent tactics, after all. Still, the case underlines the reason that SWAT teams should only be used when absolutely necessary. Accidents do happen and people can get killed, so unless there is good reason to think that the suspect will react with potentially lethal violence, we should avoid that risk.

The City of Saint Louis Should Implement Water Meters

Posted on by David Stokes

I pose this question to the residents of the city of Saint Louis: Did you know that when your neighbors fill up the outside children’s swimming pool, wash their fleet of cars, or water their lawn until the grass is greener than the gardens of Shangri-La, you are paying just as much for their water as they are? Unlike many other large cities, suburbs, small towns, and hamlets, the city of Saint Louis has never adopted water meters as part of its water distribution system. Other cities are already moving from meters read manually by workers to meters read electronically, but Saint Louis still bills for its water through a flat-rate system that encourages overuse and inefficiency.

Saint Louis may have an abundance of water, but that is no reason to facilitate its overuse. Pricing is the most accurate way to limit resource usage to necessary levels. If city leaders wish the residents of Saint Louis to think of themselves as the zealots at Masada — wallowing in water while the Roman legions below suffered in the desert — then, by all means, flat-rate billing would accomplish that goal. If, on the other hand, city leaders want to facilitate conservation, choice, and a basic sense of paying for what you use, they should implement the very simple solution of water meters.

Numerous studies document the decrease in water usage that follows a conversion to meters. Denver saw a 28-percent decline in water usage after it switched to meters in 1995. A 1994 comparison in New York City between apartment buildings with metered billing and those without saw 36 percent less water usage in buildings with meters. Finally, a 1984 study for the Department of Housing and Urban Development compared multiple water conservation methods. It observed that meters were the most effective, and generally resulted in a 20-percent decline in water use.

Not surprisingly, many of the usage differences cited above are greatest during the summer months. With flat-rate billing, the cost of sprinkling your yard is shared by everyone. The one homeowner on the block that sprinkles for five hours every day still pays the same flat, quarterly fee for water as everyone else. I love a nice lawn, but I fail to see why the owner of the lawn should not pay for the water that maintains it. Meters are a simple and effective way to realize that goal. Furthermore, technology has reduced the annual costs of monitoring meters, giving the city even less reason to maintain flat-rate billing.

Water in Saint Louis — or, more exactly, the infrastructure to treat it and transport it directly to your house — is inexpensive by any measure. Even though the switch to metering would entail new costs, the long-term savings for many customers from reduced usage and conservation would offset those costs. Poor families in Saint Louis would still be able to afford their water bills if the city were to switch to meters, and could even save money by choosing to limit water usage. The low price means that lawns would still be green and pools would still be full, but a switch to meters would mean that you are no longer required to pay for the wasteful habits of your neighbors, and they would not pay for yours.

David Stokes is a policy analyst at the Show-Me Institute, a Missouri-based think tank.

Related Links

Privatization of the Saint Louis Water Utility (Case Study)

 

Taxes in Philly and My Talk With a City Official on the Earnings Tax

Posted on by David Stokes

Earlier this week, I went to an after-work charity event where I was engaged by a city official — who I won’t name — on the earnings tax debate. It was a pleasant 10-minute talk. One of the first things he asked me was whether I knew of any cities that had gotten rid of the earnings tax once it had been imposed. I said I didn’t, but I knew of cities that had lowered their taxes, like Philadelphia. He told me that although Philly had indeed lowered it, the city is raising it again to cover a budget deficit.

Apparently, though, Philadelphia is raising property taxes instead, and keeping intact the reduction in its (still very high) local income tax rate.

His real point, however, was deeper — and one with which I strongly disagree. He implied that if cities with an earnings tax are not getting rid of them, that is an indication that the tax is good or efficient. I only wish that governments acted rationally enough for that to be a plausible viewpoint. I could believe that cities keep such taxes in place out of efficiency considerations if I had even one ounce of faith in government, at any level, to get rid of a tax that was doing more harm than good, or whose original purpose had expired. You may recall that we just got rid of a telephone tax that had been instituted to fund the Spanish-American War.

I do remember that, by the mid-1990s, the federal government got rid of a luxury-item tax it had imposed in the early 1990s because it was clearly harming manufacturers of high-end goods. So, I guess there is one recent example. In the mid-’80s in Missouri, there were several examples of changes in corporate taxes, so that instead of being based on inventory or licensing rules, they became based on assessments and income taxes. (This is when the city instituted its half-percent payroll tax. I won’t say that the payroll tax is unconstitutional, but I will say that the state Constitution clearly states that every local tax has to be authorized by state law, and there is no state law authorizing a payroll tax. Draw your own conclusions.)

Those examples, however, were revenue-neutral changes that resulted in higher revenue collections over time, so I don’t think they count. Let me know whether you can think of any other examples where the government realized a tax was not working and got rid of it. In particular, let me know whether you can find one in the city of St. Louis. I will gladly revise my opinion here if I get good counter-examples.

The official then brought up the tried-and-true line that county residents who work in the city would be free-riding on city taxpayers if they didn’t have to pay an earnings tax. I have also heard Professor Jack Strauss from SLU say the same thing. Usually, a free-rider argument would carry a lot of weight with someone like me, but in this case it is absurd for two reasons. First, what the heck is the point of paying a city business license if it does not allow you to hire employees to come work on your property? City business license fees can be substantial. Companies also pay commercial property tax rates, which are higher than residential rates. The official responded to me about commercial property taxes by saying that the city had abated so many business taxes that it could not depend on property taxes. I find this a prime example of being in a hole and continuing to dig, but also a great argument in favor of land taxation, for which abatements don’t apply in Missouri.

The second problem with the county free-rider argument is that I am absolutely certain that not one city official would apply it to city residents who work in the county. Unless I hear city officials arguing to raise taxes on city residents who work outside the city (where they must be free-riding, if we are to believe the arguments of earnings tax supporters), I won’t give that view any credit. For the record, I don’t think city residents who work in the county are free-riding at all, for the reasons mentioned above.

Support Us

The work of the Show-Me Institute would not be possible without the generous support of people who are inspired by the vision of liberty and free enterprise. We hope you will join our efforts and become a Show-Me Institute sponsor.

Donate
Man on Horse Charging