A Ban I Actually Support

That would be a ban on red light cameras, which was recently proposed in the Missouri Senate. Although I am not a fan of most rules, I have no problem with the fair enforcement of effective traffic laws. The problem is that red light cameras are not effective in preventing accidents — quite the opposite — and only serve as revenue streams for the cities that install them.

A 2008 study published in the Florida Public Health Review surveyed the literature on red light cameras and found that they actually increased the number of accidents at red light intersections. Here are some of the study’s key findings:

• Comprehensive studies from North Carolina, Virginia, and Ontario have all reported cameras are significantly associated with increases in crashes, as well as crashes involving injuries. The study by the Virginia Transportation Research Council also found that cameras were linked to increased crash costs.

• Some studies that conclude cameras reduced crashes or injuries contained major “research design flaws,” such as incomplete data or inadequate analyses, and were conducted by researchers with links to the Insurance Institute for Highway Safety. The IIHS, funded by automobile insurance companies, is the leading advocate for red-light cameras. Insurers can profit from red-light cameras, since their revenues will increase when higher premiums are charged due to the crash and citation increase, the researchers say.

Langland-Orban said the findings have been known for some time. She cites a 2001 paper by the Office of the Majority Leader, U.S. House of Representatives, reporting that red-light cameras are “a hidden tax levied on motorists.” The report concluded cameras are associated with increased crashes, the timings at yellow lights are often set too short to increase tickets for red-light running, and most research concluding cameras are effective was conducted by one researcher from the IIHS. Since then, studies independent of the automobile insurance industry continue to find cameras are associated with large increases in crashes.

In the two years since the study was published, there have been numerous reports of cities shortening the length of yellow lights at intersections, which leads to even more accidents, purely in the name of generating more revenue from tickets. If the evidence showed that red light cameras made the roads safer, I would not complain, but they simply encourage cash-strapped city governments to deliberately make them less safe, so they can rake in some much-needed revenue. That’s an unacceptable set of incentives, and Missouri should put a stop to it.

Full disclosure: I did just get a ticket from the city of Saint Louis for running a red light equipped with a camera. I didn’t actually run the light, but a rolling right turn is apparently also illegal.

Isn’t It Ironic? (Don’t You Think?)

As Caitlin pointed out last night here on Show-Me Daily, the Saint Louis blogosphere has been criticizing the Show-Me Institute for moving from Clayton to the Central West End, claiming that it is ironic that we moved to the land of the earnings tax, when the institute’s publications have argued that the earnings tax drives people and businesses away from St. Louis city. This assertion reminds me of that old Alanis Morissette song, “Ironic,” which described situations of mere coincidence, not irony. (Indeed, the only thing ironic about the song was that it contained no irony.)

Apparently, these authors understand neither the marginal nature of economic incentives, nor the fallacy of insufficient sampling.

Moving to a new area has advantages and disadvantages, and an individual or firm considers both in their decision process. The earnings tax is a cost that is associated with living and working in the city — not unlike higher crime rates and street parking — and it serves as an incentive to businesses and residents to locate in an area not subject to the tax. Individuals and firms weigh the sum of these costs against the benefits of living and working in Saint Louis City, such as proximity to other businesses, shorter commutes, and nightlife.

In its cost-benefit analysis, the Show-Me Institute determined that the benefits of being located within the city outweighed the costs. An increasing number of other firms, in their cost-benefit analyses, have concluded the opposite, and they go elsewhere. This is demonstrated by the overall exodus of businesses and individuals, and restricted economic growth for the city.

It should also be noted that the majority of people who work at the Show-Me Institute already live in Saint Louis city, and therefore were paying the earnings tax even when our office was located in Clayton. This group includes me.

Furthermore, these authors are using a sampling size of one to make a hasty generalization about how the earnings tax affects the movements of individuals and businesses. In no way does this move contradict the scholarly work that the Show-Me Institute has done on the earnings tax.

Parental Choice in Education: How Missouri Compares With Florida

Watching this video about the Florida School Choice Parent Resource Center, I marveled at the many options available to Florida families:

Some of the educational choices that exist in Florida are notably absent in Missouri. For example, Florida students with disabilities may choose between different public schools or receive scholarships to attend private schools. Tax credits drive a separate scholarship program for students from low-income families; these students also have the option to receive tutoring, which is provided by private companies through contracts with school districts. Florida’s public school system boasts multiple virtual schools. And Florida does not constrain its charter schools to a few cities, as Missouri does; they’re spread out across dozens of counties.

Even more remarkable is the view expressed in the video that parents should research different schools and decide which would be best for their children. Missouri doesn’t need to import all of Florida’s parental choice programs and establish all of the same scholarships. It would be enough to adopt the perspective that choice in education is every parent’s right. Choice shouldn’t be seen as a last-ditch response to failure.

The Earnings Tax, Marginal Utility, and Our Move

A few articles and blogs have recently criticized the Show-Me Institute for moving to our lovely new location in the Central West End. (One article erroneously cites another blog as having broken the news, when it was actually David Stokes here at Show-Me Daily who reported it first. We’ve also been planning the move for the better part of a year, and it wasn’t a secret.)

Collectively, these pieces suggest that there is some irony in the fact that the Show-Me Institute has long pointed out that the earnings tax creates marginal disincentives for economic growth and location within city boundaries, and yet we moved into the city anyway.

There is a useful economics concept at work here: marginalism. A 1-percent earnings tax is not enough enough of a disincentive to determine the location of all businesses or residents, but all disincentives are marginal to varying degrees. Some number of people at the margin, who would otherwise be near an equilibrium point between the positive and negative aspects of living in the city, will find that the earnings tax tips the balance so that the negatives outweigh the positives, and they move away — or never move to the city at all, despite having considered it as a possibility. For others, the positives will continue to outweigh the negatives. This is something we’ve discussed before here at Show-Me Daily. Work published by the Show-Me Institute has always been careful to note that the earnings tax is only one factor among many in the locational decisions of St. Louis–area individuals and businesses. It serves as a disincentive for nearly everybody, but becomes an actual deterrent only for some.

Taxes on income and production are counterproductive. They diminish the incentive to work (even if only slightly) and encourage business owners to find alternatives for their labor costs, like increasing mechanization. The earnings tax, like an income tax, establishes a marginal incentive for businesses and individuals to find ways around this higher cost for labor and wages in the city, whether that entails moving to a suburb, investing in new machinery, cutting corners in production or service, etc. This all distorts the market to varying degrees. Specific types of taxes on property, on the other hand, are much less distortionary. They encourage development of land and maximization of the property value, bringing (again, marginal) new economic growth to the city.

The earnings tax does not keep everyone out of the city, but it does keep away some. Why this is true is one of the most important insights of the marginal revolution. At any rate, incentives are constantly in flux, and equilibrium points between them change frequently. Right now, it makes sense for the Show-Me Institute to work out of the city. But if the earnings tax hadn’t been in place, who knows? The Show-Me Institute might have moved here five years ago.

Lack of Economic Basis For Payday Loan Limitations

Today’s Springfield News-Leader has an op-ed (link via Combest) written by a state rep who is seeking to promote the growth of the mafia and loan sharks pass legislation limiting payday loans in Missouri. I never cease to be astounded at politicians, of either party, who consistently attempt to protect people from themselves and casually limit people’s freedoms as they do so.

Read the entire piece. Note the constant begging-the-question, asserting that there is a problem with payday loans without ever attempting to prove it. Enjoy the absolute lack of economic analysis in the piece. Consider the obvious unintended consequences of this, which are not even remotely acknowledged. Discuss the assumption throughout the piece that the state must have a role in limiting private, legal business transactions between free adults. Then come back here in two weeks or so, after we do some economic video performance art, chronicling my plan to take out a payday loan a week from Monday and use the money to go gambling.

“Rightsizing State Government”

I stole the title for this blog entry from Gov. Jay Nixon’s speech the other day. I haven’t discussed it sooner, because I wanted to give it the full think tank treatment, not like the usual ephemera I post on this blog. So, I warn you, this will be a long post.

I strongly recommend everyone watch the video. Speaking as someone who would normally rather take a dart to my eardrum than watch an online video of a political speech, you can trust me that this one is worth it. After you watch it, read the Post-Dispatch’s take on it and try and decide where you stand. Needless to say, I support the governor here. I think that cuts to the size and scope of government in our state, along with consolidations for greater efficiency, are long overdue, and I give great credit to any elected official of either party who is willing to make the tough choices and hard decisions, as the governor is doing here.

I have not fiskedPost editorial or column in a while — probably not since Eric Mink left. But I think that both this topic and article deserve a point-by-point analysis: Continue reading ““Rightsizing State Government””

Chester E. Finn Jr. on the Common Core Standards

Chester E. Finn Jr. is trying to convince conservatives to support the Common Core Standards. Although I don’t know whether he intended to include free-market bloggers in his audience, I’d like to go over his points and consider whether anyone — conservative or not — should be swayed by them. Here are quotes from his five arguments, with my responses:

First, they’re good, solid — indeed very ambitious — academic standards for primary and secondary schooling, at least in the two essential subjects of English and math. Students who attained them would be better off — readier for college, readier to get good jobs, readier to compete in the global economy — than most are today.

Students might be better prepared if they attained these standards, but it’s not clear that adopting the standards would achieve that result. Adopting standards on paper doesn’t, by itself, bring students up to a high academic level. In fact, the more ambitious the standards are, the less likely it is that U.S. students could meet them unless more significant changes were made to the public school system.

Second, they respect basic skills, mathematical computation, the conventions of the English language, good literature, and America’s founding documents.

This is faint praise. It would be pretty pathetic if the standards made fun of America’s founding documents. Nor is this a reason for states to agree to the standards. Anyone can have respect for basic skills and literature without uniform standards.

Third, they emerged not from the federal government but from a voluntary coming together of (most) states, and the states’ decision whether or not to adopt them will remain voluntary. Each state will determine whether the new standards represent an improvement over what it’s now using.

If states fail to adopt the standards, they lose their chance to receive some kinds of federal funding. The federal government approves of these standards and is using its power to get states to agree to them. That’s enough evidence that the federal government is imposing the standards on states. Where the standards originally “emerged” from is irrelevant.

Fourth, they do not represent a national curriculum — though to gain traction they’ll need to be joined by solid curricula, effective instruction, and quality testing.

In other words, if states adopt the standards, a national curriculum is sure to follow. For what would be the point of standards that don’t “gain traction”?

Fifth, one little-noted benefit of properly implemented common standards is a better-functioning education marketplace, in which parents will be able to make choices about schools on the basis of more accurate information about how school A’s performance compares with that of school B — not just within communities and states but also when considering a move from state to state. Entrepreneurial school operators (such as KIPP and Edison) will also be better able to gauge and manage school performance in locations across the land.

Give me a break. It’s the old “standards will help the charter schools” argument. I don’t know how standards alone could give people more information about their limited educational choices — unless states also agreed to tests that match the standards, and then published the scores. Sounds like No Child Left Behind all over again.

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