Denis Leary Would Be So Proud …

Posted on by Justin Hauke

Since the Regional Economist is one of my favorite publications, I wanted to add my own two cents on Eric Dixon’s recent digression on Michael Pakko’s article on smoking bans.

Mr. Dixon focuses on the vague benefits of smoker vs. non-smoker “utility,” a value that Dr. Pakko’s article avoids entirely. Instead, Dr. Pakko focuses on the tangible negative costs of smoking bans, providing a counter-argument to recent papers.

So while I agree with Mr. Dixon’s opposition to smoking bans, I disagree with his focus on aggregate utility as a value judgment. As he argues:

“Markets, though still far from perfect, ultimately do a better job of maximizing aggregate utility because each individual market participant is able to estimate his or her own utility in a way that no legislator can, and then act accordingly”

That statement is misleading. I don’t oppose smoking bans (and support the market) because I believe that non-smokers derive less “happiness” from them than smokers do without them. I oppose smoking bans because they are a direct infringement upon personal liberty.

Maximizing aggregate utility is not necessarily a good thing. Abusing certain minority groups might “maximize aggregate utility” if the benefits to the aggregate abusers outweigh the negatives of the abused. That’s why utilitarianism is a dangerous value judgment, especially for governments.

The government’s objective should be to maximize personal freedom to the extent that those freedoms don’t infringe upon the rights of others. And before you say, “But what about the non-smokers? Aren’t their rights being violated?” remember that the non-smokers are in smoking environments voluntarily. Going to a bar is a choice. Attending jury duty is compulsory. I have no problem with a smoking ban in a courtroom.

Overturning Light Rail a Good Decision for Kansas City

Posted on by David Stokes

 

When citizens pass an initiative referendum, judges or elected officials should use the greatest of caution in exercising their authority to overturn that initiative. Nonetheless, the Kansas City Council’s decision to overturn the 2006 light-rail referendum is one of the rare examples where such an action was not only justified, but necessary for the residents of Kansas City. The tremendous financial problems the “Chastain” light-rail plan would have caused if it had gone forward necessitated the difficult decision to overturn the referendum, for the benefit of Kansas City.

Now the city must decide whether to proceed with a light-rail transit system at all. The choice is difficult, because while there is ample evidence that light rail would not be the best way for Kansas City to address its mass transit needs, the voters have expressed a desire for some type of light rail. Balancing the competing goals and interests involved will be a difficult job for elected officials as this issue continues to be debated.

In a study released by the Show-Me Institute on January 23, author Randal O’Toole, an international expert on planning and transportation issues, stated, “The factor that seems to have the greatest influence on transit commuting is not the mode of transit or the region’s population density, but the concentration of jobs in a central transit hub. … Kansas City has only about 50,000 jobs in its central business district, less than 7 percent of the jobs in the entire metropolitan area. This suggests that … it is a poor candidate for rail transit.”  O’Toole’s study discusses many other problems, financial and otherwise, with light rail in Kansas City. The entire document is available at showmeinstitute.org.

The dramatic weaknesses of the Chastain plan were obvious, even to many supporters of light rail. The estimated costs were too low, the assumed federal and state funding was unlikely, and the plan itself was far too grandiose. The worst part of the plan’s design, though, was its attempt to get light rail on the cheap by taking tax money from the bus system rather than by increasing taxes. There may be many legitimate criticisms of the MetroLink light-rail system in Saint Louis, but at least the voters there approved a tax increase to pay for it, rather than attempting to cannibalize the bus system that is so critical in meeting the needs of the very people who depend on mass transit the most.

With the Chastain light-rail plan overturned, Kansas City must now decide how to address its mass transit needs. Although less extravagant light-rail plans are being considered, O’Toole’s study suggests Kansas City should also give strong consideration to other alternatives, such as the expansion of KCATA’s successful bus–rapid transit lines. The Troost bus–rapid transit line, for instance, has maintained strong ridership at very reasonable costs. Several more such lines could improve transit in Kansas City at a much lower cost than light rail would require.

Kansas City should also look at the examples of Las Vegas and Denver, which have contracted out many of their transit operations to private companies. Both cities have significantly expanded their bus systems and held costs down by allowing private contractors to bid on the rights to operate bus routes. Competitive contracting is one way for Kansas City to address its transit needs in a financially responsible manner.

All of these options should be analyzed and debated as Kansas City moves forward with its long-term transit planning. So far in this process, members of the Kansas City Council have made a tough but correct decision. They certainly have many more ahead.

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

 

KIPP Schools Are on the Way

Posted on by Sarah Brodsky

It’s official: Knowledge Is Power Program (KIPP) charter schools are coming to St. Louis:

The announcement today from the San Francisco-based Knowledge is Power Program makes Washington University the sponsor a cluster of five tuition-free, hard-work public schools, aimed at serving roughly 1,500 St. Louis students over the next 10 years. The first, a middle school, would open in the fall of 2009.

This is great news for children in the city, although they’ll have to wait until 2009 to attend. Here’s a map of KIPP schools already operating. These schools share a rigorous academic program and have been very successful. Now some students in St. Louis will have the opportunity to benefit from KIPP.

The Economic Impact of Smoking Bans

Posted on by Eric D. Dixon

One of our scholars, Michael Pakko, has a piece looking at the economic effects of smoking bans in this month’s issue of The Regional Economist, a quarterly journal published by the Federal Reserve Bank of St. Louis. He’s written a few other pieces about smoking bans during the past few years, and this new article (which has been spotlighted by the Kansas City Star, the Post-Dispatch, and KWMU) brings a considerable amount of fresh research to the table, much of which "suggests that at least some businesses do suffer costs." Pakko concludes that, "When they consider passing smoking bans, policymakers should study evidence both from public health professionals and from economists."

Pakko’s conclusion supports a crucial insight about smoking bans — they’re not just a matter of public health. Any general health benefits that may be gained from blanket anti-smoking laws have to be weighed against other measures of human welfare and happiness.

I’ve never smoked, but during the course of my life there have been many occasions that I’ve decided it’s worth the small health risks of some amount of exposure to secondhand smoke in order to, say, see live music (or, when I was much younger, earn money by working at fast food restaurants). In every one of those instances, I would have preferred a non-smoking environment, and I’m sure some other people shared my preference. But all the smokers, had they been forced by a blanket law to cease puffing away, would have enjoyed themselves less, to varying degrees.

Economists have a broadly-defined word for happiness, or satisfaction: utility. Although a mandated non-smoking environment increases my own utility, it simultaneously decreases utility for those who are barred from smoking. I can probably estimate my own utility in general terms, by using thought experiments: For instance, I would put up with a smoke-heavy environment to see King Crimson, but the smoke would probably edge out my desire to see Ben Harper, a performer I enjoy to a significantly lesser extent; so if I consider the amounts I’d be willing to pay for tickets to see each band under ordinary non-smoking conditions, I can roughly calculate the amount of utility I’d lose if a smoky environment made me miss out on music I’d otherwise enjoy.

But I can’t calculate the aggregate utility that all the smokers at an event would lose if a law prevented them from smoking, because they would each have a different marginal utility for the value of smoking at a given concert. Absent the actual observation of each smoker’s preferences over time, there’s no way to measure that aggregate utility — and, so, no way to measure the amount of happiness or satisfaction they lose after a smoking ban is passed, or weigh it against the increased happiness of non-smokers.

This is one reason economists tend to be suspicious of regulation — because centralized authorities have no mechanism to measure the aggregate utility of the people their laws will impact. The economic effect of a regulation on specific businesses is an important subsidiary measurement, but it’s only the tip of the full utility iceberg. Markets, though still far from perfect, ultimately do a better job of maximizing aggregate utility because each individual market participant is able to estimate his or her own utility in a way that no legislator can, and then act accordingly — either buying a product, attending a concert, patronizing a bar, or not.

If a large enough number of other people enjoy smoking, and accept its long-term health risks, I have no place denying them the opportunity to do so. If a privately-owned "public" establishment decides it wants to cater to smokers, I can choose to patronize a different business — or put up with the smoke, if the other aspects of a given opportunity set outweigh my loss of utility from the smoke itself.

At the very least, if the public-health mavens are resolute in their insistence that a regulatory solution is necessary, there are options other than blanket prohibition that at least acknowledge the existence of varying individual preferences, such as proposals to provide incentives for businesses to go smoke-free, or allowing some establishments to opt out of a ban, if they and their customer base want it badly enough. Markets don’t provide results that are good for all people, all the time, but at least markets aim to please large segments of the population, most of the time, by catering to decentralized, individual needs and wants.

Update and Correction to SMI Case Study on Pharmacy Privatization

Posted on by David Stokes

Last year we released a case study on the privatization of the county’s pharmacy services. With the release of the 2008 county budget at the end of last year, we have been able to update and correct come of the information it contains. Here is the original study. Here is a statement explaining the updates and corrections in detail. Finally, here are some things to keep in mind about the update and corrections:

  • Nobody called us on this. Our own follow-up research led to the corrections, and we are making these changes in the interest of accuracy.

  • The error in the 2007 data was not our fault. We used a number provided to us by Saint Louis County. I am certain that nobody intentionally gave us a lower-than-accurate number. It was just an error. These things happen; you correct them and move on.

  • Most importantly, the essential point of the case study, and its conclusions, remain exactly the same: that privatization has been great for county government, patients, and taxpayers. The only change is that the new numbers show lower savings — but there are still savings. If you adjust for inflation, the new numbers still show substantial cost savings. The improvements to patient services brought about by privatization remain a primary argument for the benefits of privatization, and are not changed by these new numbers.

Bellefontaine Habilitation Center Is a Difficult and Emotional Issue

Posted on by David Stokes

The St. Louis Post-Dispatch has a very thoughtful editorial this morning (link via Combest) about the Bellefontaine Habilitation Center in north Saint Louis County. The problems there are heartbreaking and long documented. There have been cases of abuse, neglect, and patient death both at the center and among patients who have been moved to private facilities for care. Each case is awful. The Post states, "As it turns out, privatization is no magic bullet."

Indeed, privatization is not necessarily the best choice for circumstances such as this, which deal with the absolute neediest members of our society. If I may digress a bit, one of larger problems I have with the welfare state is how quickly and easily the definition of "needy" gets expanded to include a very large number of people. You expand Medicare to serve anyone who wants it, and then when the governor merely tightens the eligibility requirements, to try to focus more resources on those who truly deserve it, he gets ripped for destroying families — regardless of whether that actually happened. So, yes, I clearly favor substantial reductions in the welfare state at the state and federal levels.

But that is not really an issue here, because everyone can agree that the patients at Bellefontaine clearly deserve state care if their own families are unable to provide it. And I don’t mean financially unable — the level and difficulty of care required for many of these patients is beyond what most families can perform. The state has a role in providing for these citizens, and the question is whether the state or the private sector should actually perform the job.

As for these patients who require lower levels of care, I don’t see anything wrong with allowing qualified private facilities, with appropriate state oversight, to provide that care. And I certainly see nothing wrong with firing 125 employees who are no longer needed because the patients have been moved. However, for the remaining 160 or so patients who need the greatest level of attention, the state should continue to provide the highest level of care possible. Only after private facilities have proven they can handle the most demanding patients, which may never happen, should the state consider moving them out of Bellefontaine. Until then, resources must be directed to provide for those patients.

Now, I look foward to discussing the SCHIP program and wondering why the hell families at 300 percent of the poverty level deserve to have the taxpayers pay for their kids’ health care, so I can return to being a tightwad.

And the Slippery Slope Award of the Day Goes To …

Posted on by Nicholas Loyal

Missouri Sen. Scott Rupp, for his recently introduced bill that seeks to end cyberbullying in the wake of the tragic "MySpace suicide" of Megan Meier, the Dardenne Prairie girl who hanged herself after being the target of hateful messages on the popular social networking website.

First, the details of this case are harrowing, and should provide an excellent cautionary tale to parents in the age of Web 2.0. Now, more than ever, it is essential that attention be paid to what children do and have access to online (the Washington Post has an excellent discussion about this topic).

The problem I have with Sen. Rupp’s bill, though, is that it sets a dangerous precedent for online regulation. The Internet is an entity that has grown and changed lives largely because of anonymity. This anonymity brings freedom in cyberspace, allows a shield of privacy to protect users from having their lives put on display for the entire world, and protects online residents from the actions of others. After all, a law that punishes a "cyberbully" could be applied to the wrong user of a guilty account, because it’s difficult — if not impossible, in many cases — to prove whether a given users was the one at the keyboard, or whether it was a bystander unaware of the harm being done.

Sen. Rupp’s bill has the good intention of attempting to right a new and unfamiliar wrong, but I cannot agree with his remedy. The Internet may be the greatest common good that the modern economy has ever seen, and any attempt to manage it with a political agenda will bring far more harm than benefit.

There’s No Free Lunch – Even in Banking

Posted on by Sarah Brodsky

In the latest proof that foolishness knows no party, Bill Clinton and Arnold Schwarzenegger have teamed up to write about payday loans in the Wall Street Journal:

Imagine the economic and social benefits of putting more than $8 billion in the hands of low- and middle-income Americans. That is the amount millions of people now spend each year at check-cashing outlets, payday lenders and pawnshops on basic financial services that most Americans receive for free — or very little cost — at their local bank or credit union.

The high interest rates charged on payday loans reflect how much riskier those loans are than the typical transactions higher-income people handle at full-service banks. When a mainstream bank lends money, the borrower is typically someone who has deposited money there and who has a relationship with the bank. Payday lenders don’t have that security.

Payday lenders’ high charges and fees reflect a cost, and that cost won’t go away just because people switch to full-service banks. Someone has to pay for risky loans, and if the lenders don’t, someone else — probably taxpayers — will have to. Or, as a result of usury laws, poor people won’t be able to borrow money at all.

Clinton and Schwarzenegger suggest that their plan won’t be costly because it will just encourage people to use cheap services that are already there. But switching risky loans from one kind of bank to another won’t make the cost go away.

Poor people can escape payday loans if they earn more than they spend, save enough to deposit money in an account, gain financial literacy and form relationships with mainstream banks. That’s a worthwhile goal, but we can’t achieve it with a quick fix.

Star Headline Whets Appetite

Posted on by David Stokes

The Kansas City Star has a preview of tonight’s State of the Union speech, which I will tune in to only by default, because nothing else is on — if I watch at all. That bit of honestly aside, some parts of it have my tongue wagging, although I have no faith whatsoever that these things will pass Congress — and I have to ask why the President didn’t attempt to do these things earlier in his administration:

Offering modest new plans, Bush proposed a $300 million "Pell Grants
for Kids" program to help poor children in struggling public schools
pay for the cost of attending a private school or a better public
school outside their district.

I love this idea, although as I think about it I don’t know how much I like it as a Federal program…

Bush also was to urge elimination of 150 federal programs that [White House counselor Ed] Gillespie called "wasteful or bloated."

Dare to dream for this to actually happen. Again, why wasn’t this proposed earlier in this administration?

The president will issue an executive order Tuesday ordering federal
agencies to ignore "earmarks" that aren’t explicitly enacted into law,
erasing a common practice in which lawmakers’ projects are outlined in
nonbinding documents that accompany legislation. The move is aimed at
making doubly sure that lawmakers have the opportunity to strike
earmarks during floor debates.

However, Bush’s plan leaves untouched the more than 11,700 earmarks totaling $16.9 billion that Congress approved last year.

If the earmarks from last year are not legally required to be spent, then why on earth is the money going to be spent? Who cares when they were passed? I guess it’s better late than never, but this is awfully damned late.

This is the type of thing one can get very excited about — but this is just a speech, not a piece of legislation. When the latter succeeds in doing these things, then I will get REALLY excited.

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