More About Signs

Posted on by Sarah Brodsky

This op-ed in the Post-Dispatch praises billboards and decries billboard bans. While I’m not sure I agree that billboards “are a part of Missouri’s heritage,” at least not on the level of Daniel Boone or Lewis and Clark, billboards do perform a valuable service: They give drivers information. I can see how billboards, even ones that carry ads rather than safety announcements, might reduce traffic accidents. Glancing at a billboard for a second or two is less distracting than trying to locate a tourist attraction through a phone call.

A previous op-ed complained about billboards, in part because it’s annoying to drive through a scenic area and see lots of signs advertising services that can’t be discussed on a family blog. And it is annoying — but would you prefer that people looking for those kinds of places instead wander lost throughout Missouri, searching in every town and asking the rest of us for directions? Better just to give them the information on a billboard.

Paul Krugman on Education Spending

Posted on by Sarah Brodsky

Paul Krugman writes that public-school layoffs bode ill for America’s economy:

According to the Bureau of Labor Statistics, the United States economy lost 273,000 jobs last month. Of those lost jobs, 29,000 were in state and local education, bringing the total losses in that category over the past five months to 143,000. That may not sound like much, but education is one of those areas that should, and normally does, keep growing even during a recession.

Krugman doesn’t mention the steady growth in per-pupil spending that has taken place over the last several decades. I refer interested readers to Andrew Coulson’s analysis of public schooling’s productivity.

Sinking resources into an inefficient sector will not propel the economy forward. But Krugman is right that people should increase investment in human-capital formation during a recession. So, why would the government back away from funding schools just when people need education the most? Is it a newfound interest in efficiency? Not if the calls for a stimulus are any indication!

It turns out that the government isn’t very good at timing expenditures. Russ Roberts explains why:

Government is actually staffed by human beings. It is not something called G that economists or even politicians can move up and down at will. Bureaucrats are cautious. They’re uncertain about what is going to happen to their budgets in the future. They’re uncertain about what the best thing is to do with the money they’re given. They’re worried about being accountable for their actions. So what do they do? They hoard.

Education means different things to individual people and to states. A person who can’t find a good job during a recession will think ahead, realize that he will earn more later if he goes to school now, and pay tuition in order to reap the future benefits. But, to government officials, education spending is just spending — it isn’t an investment that they will personally benefit from later. Sure, they may talk about it as an investment, and they probably know that education can lead to higher tax revenues in years to come. However, there’s no direct link between what officials spend on schools now and their prosperity in a few years’ time, the way the market rewards people who pay for their own education. So the government spends less on education during a recession.

Recessions are a rare opportunity for inefficient public systems to be pared back, which is good. The flip side is that when the government pays for education, spending increases don’t come at the optimal times. If Krugman cares about the timing of human capital investments as much as he cares about the overall level of education spending, he should reconsider whether the government ought to pay for as large a share of schooling as it does.

Tough Call on Real Estate Transfer Taxes

Posted on by David Stokes

Yesterday’s St. Louis Post-Dispatch had a story about the effort by Realtors to pass an amendment to Missouri’s Constitution that would ban real estate transfer taxes, which are essentially sales taxes you pay when you sell your house. Now, we don’t currently have this tax anywhere in Missouri, and Realtors want to keep it that way.

All of our neighboring states have this tax, and it is generally pretty small, but just because it might be small does not mean it is good tax policy. I agree with the Realtors that in a state that makes heavy use of property taxes to fund local government, a transfer tax amounts to double taxation. I oppose their implementation in Missouri at the city and county levels, and at the state level as well — with one potential exception, which I will get to shortly.

A few interesting things jumped out at me in the article:

In other mountain resort towns in Colorado, such as Aspen, Vail and Telluride, the taxes are used to help preserve open space or provide low-income housing.

Regular readers might recall that I love to ski, and I do so each year near Vail. From the perspective of Vail residents, it is a no-brainer to institute a transfer tax. Of course they want to tax the out-of-towners who own property in Vail; it is no different from the high real estate taxes on second homes for Missourians with property along the lake in Western Michigan or in Door County, Wis. The Great Lakes or Rocky Mountains are not easy to replace. If you keep such a tax within reason, it is a way to make people from outside your community pay more so that the full-time residents will pay less. I am not saying I like it, just that it is easy to see why they do it.

I don’t really think, thankfully, that this is something we can repeat in Missouri. Tourists visit Branson, but they don’t really own homes there. As for the Lake of the Ozarks, where people DO own the homes, I have to guess that most of them are Missourians from other parts of the state, so implementing such a tax would just end up screwing ourselves.

The other thing that jumped out at me was this:

While the taxes aren’t high, the revenue adds up when applied to every sale or transfer of property in a state. In Tennessee, the tax produced more than $174 million in revenue in 2004, according to a study of the Federation of Tax Administrators.

What do we have that Tennessee does not have? You guessed it: an income tax. Speaking generally, I would support the passage of some type of state transfer tax in exchange for getting rid of the state income tax. So, while I certainly support the Realtors’ position and oppose not only all local transfer taxes, but also any state transfer tax (short of possibly using it to replace the state’s income tax), I guess I wouldn’t want to enshrine it in the state’s Constitution if that would make it even harder to replace the income tax in Missouri.

Commuter Rail Plan for Jackson County

Posted on by David Stokes

I guess because we are always going somewhere, transit issues never seem to go away. Just today, we have the details of a proposed new commuter rail system for Jackson County. The plan details can be found here in the Kansas City Star. For more info, KC Light Rail has some thoughts about it here.

You might think that because we have released two studies by Randal O’Toole, one criticizing light rail and one criticising high-speed rail, that we might automatically be opposed to a commuter rail plan. That supposition would be premature, though, primarily because I haven’t had time to get to know the details, but also because there are things about commuter rail in general — and this plan in particular — that might make it a more cost-effective way for Kansas City to go.

Below, I have bolded some of the plan’s good ideas, as reported in the Star article:

Sanders said the commuter rail system could be built for as little as $7 million per mile, using existing rail corridors throughout the area. In some areas, double tracks would need to be laid to avoid conflicts between freight and commuter lines.

Sanders said the rail plan could be operational in two years after money becomes available. It would use diesel-powered commuter railcars that could travel faster and more cheaply than light rail, which can cost $70 million per mile.

The best idea, though, is this one at the end:

One option: A private company might operate the system.

So, I will be responsible and reserve judgment for now, but I will have much more to say when, and if, this plan moves forward.

Permits for Temporary Signs

Posted on by Sarah Brodsky

A Post-Dispatch article about a “Help Wanted” sign provides anecdotal evidence that supports my opinion of permits: Permit requirements are a tax (and a pain in the neck for people who have to deal with them).

The article reports on a sign that a business in Maryland Heights put up in order to let commuters know it was hiring. A code enforcement officer spotted the sign. Apparently, the sign blocked the view of some drivers, which would be a good reason to reposition it. But the officer wasn’t only interested in moving the sign in the name of safety and welfare; there was also the issue of permits. Maryland Heights businesses must pay a fee to erect a sign, and then the sign has to come down after two weeks. Businesses can repeat the process three times in a year. If they want to hire four times in a year, or post signs more than three times for any other reason, they’re out of luck.

Forbidding signs that obstruct visibility or hinder traffic is reasonable. Charging $25 for the privilege of erecting a harmless, temporary sign is not. It penalizes business that want to communicate with the world around them. In this case, the business wanted to let people know it was hiring — a message that everyone should welcome during this economy. The manager quoted in the article was right to be annoyed by Maryland Heights’ regulations.

Real-Life Economics in the Kansas City Star

Posted on by David Stokes

Today’s KC Star has a terrific article about how the economic downturn has impacted people’s day-to-day lives in one very big way: People are having fewer children. This is not surprising at all, but it is fascinating to see the numbers and consider the real-world results of that. From the article:

For example, Missouri’s birth rate — the number of births per 1,000 women of child-bearing age — in the first five months of this year dropped 6 percent, a decrease that state demographers called substantial.

My wife and I had our second child during that exact period. These numbers could well influence his entire life. There will be less competition for high school and college admissions. Perhaps there will be less competition for graduate school and right-out-of-college employment. With less demand, costs to us for some of these items might decrease, as well.  

Now, obviously, he would see these benefits if this is a one- or two-year decline in the birth rate. You won’t see many universities close because they are short on admissions for just one year. But if this becomes a longer-term decline in the birth rate, the supply curve of education options would decline as well. More importantly, if the decline in the birth rate is a sign of long-term economic contraction, all of our children are going to be impacted by the resulting reduced opportunities.

It is a very interesting article, and another example of how macroeconomic issues impact microeconomic choices.

Two Americans Win Nobel Prize in Economics

Posted on by Christine Harbin

This morning, two U.S. economists, Elinor Ostrom and Oliver Williamson, were awarded the Nobel Prize in economics. Both study economic governance and individual decision-making. Additionally, Ostrom is the first woman to win the prize for economics.

In an editorial in Forbes, John V.C. Nye, professor of economics at George Mason University, explains how Ostrom and Williamson have contributed to the subject:

Both can be seen as pioneers in understanding how markets work in the real world where transactions costs are high, establishing smoothly functioning markets is costly, information is incomplete, and hiring and production options are limited. They show how firms, communities and organizations come to solve these problems absent government regulation and how the choices they make can be disrupted or worsened by bad state policy or sustained by good rules that promote stable property rights and reliable contracts.

Ostrom’s and Williamson’s works relate to the Show-Me Institute’s tenets of limited government, property rights, and informed state policy. Congratulations to them both.

What Will Future Health Care Look Like?

Posted on by Christine Harbin

Today, Rik Hafer, chair of the Department of Economics and Finance at Southern Illinois University–Edwardsville and research fellow with the Show Me Institute, and Susan Feigenbaum, an economics professor at the University of Missouri–Saint Louis, published an op-ed in the St. Louis Business Journal, “Will future health care look like Canada’s or Britain’s?”

Will our future health care look more like Canada’s or Britain’s system? The answer depends on whether the system adopted simply expands the Medicare approach. […]

Hafer and Feigenbaum explain that, although each country has a health system that is government-run, many differences exist between them. For example, the Canadians and Britons have responded differently to problems relating to patient access and financing. Whereas Canada has discouraged the expansion of private medical insurance, Britain has encouraged it.

For more information about the negative consequences of government involvement in health care, check out the Show-Me Institute’s study by Arduin, Laffer & Moore Econometrics, “The Prognosis for National Health Insurance: A Missouri Perspective.”

Another Proposal Turned Down in Oregon’s Anti-Charter Environment

Posted on by Sarah Brodsky

Last night, a school board in Oregon turned down a charter school application because the proposed charter would compete with the district:

Board members said the 6-12th grade school, sponsored by Corbett School District superintendent Bob Dunton, was an innovative program but would compete with course offerings at the high school and represented a budget risk for the financially-strapped school district. […]

Though no board members specifically cited one of the state mandated reasons for denying a charter applications, after the meeting board members said the school represented an “identifiable adverse impact” on the school district because the district might lose students to the charter and therefore a portion of state funding.

When school boards can stop charters simply because they want to keep their monopoly, no charter is safe.

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