I highly recommend Bryan Burwell’s column in today’s Post regarding the ludicrous lawsuit filed by the Hancock family over the death of their son.
50 Ways to Get Around the Earnings Tax…
The Post has a great article today in the business section on recent successes in luring businesses to locate in downtown St. Louis. Although I type this from Clayton, I love downtown and hope it thrives. I lived there for three years in a loft at 11th and Pine in the late ’90s. Then the whole place started to get trendy and I had to flee, ’cause that’s just how I roll. But anyway, there are two main parts to the article on why businesses are moving downtown. The first is that the convergence of highways, architecturally significant buildings, and being part of a larger business community all give downtown a lift over your suburban office-park. To this I say, hell yes! The buildings are gorgeous, it is easy to get there from anywhere, parking is affordable (except for the meter maids), and downtown is great fun — now moreso than ever (or at least the last forty years). Clayton has many of the same qualities, except the architecture, but you don’t find any of those qualities, other than parking, in your standard office park.
The second major thrust of the story states:
"However, low-interest loans, tax abatements and tax credit programs are helping owners mitigate the impact of the income tax."
I felt like Homer Simpson screaming at the TV while reading this, but instead of yelling "It means he gets results you stupid chief!" I was yelling about just getting rid of the damned earnings tax, and you don’t need all the other things to mitigate it! SMI has done a great study on a way to do just that. This is the insanity of modern government. We keep taxes high and then implement hundreds of programs, credits, deductions, earmarks, etc., to allow people and projects to get around the taxes. How can it not be economically more successful to keep tax rates broad and wide, but as low as possible for everyone?
Students Would Benefit From Diverse Virtual Schools
What kind of student enrolls in a course online? It could be someone who needs to do remedial work, or a student who wants to study more challenging material at a higher grade level. Students who are home schooled, whose high schools don’t offer advanced placement courses, who want to take an additional foreign language, or who just want to work at their own pace might all benefit from virtual school. These students are each looking for different things when they sign up for online courses. But under Missouri’s current Virtual Instruction Program, they have to settle for one-size-fits-all online instruction.
Other states allow students to choose between competing virtual public schools. Some virtual schools have developed their own curricula, while others use online instructional programs sold by private companies. If Missouri followed the lead of other states and offered more virtual school options, Missouri’s virtual school could give students the individualized education they want.
Washington is a good example of a state with a variety of online public schools. Washington students can choose from 26 different virtual public schools. Students don’t have to enroll in one program set up by the state; instead, they can enroll in online academies that public school districts have set up in addition to their brick-and-mortar buildings. Families can borrow the required computers and other materials from the districts. The equivalent of this in Missouri would be if students in Saint Louis City could enroll in, say, a Ladue Virtual Academy and receive the same education as students in the suburbs—without having to spend hours on a bus every day.
A state doesn’t need dozens of virtual schools to create competition. When even a few virtual schools compete, they’re responsive to parents’ requests. Missouri parents were upset when they found out Missouri’s new virtual school doesn’t yet include courses at the middle school level. (Meanwhile, it offers some courses, like technology for kindergarteners, for which there is relatively little demand.) In Florida, middle school students can enroll in the Florida Virtual School, the Florida Connections Academy, or the Florida Virtual Academy. Besides the standard middle school courses, they can study electives like Spanish, French, home economics, the arts, and world cultures. If a virtual school in Florida didn’t offer enough middle school courses, students would switch to one of the other two.
Missouri’s Virtual Instruction Program didn’t have enough resources to build middle school courses from scratch in time for its first year of operations. Had it faced competition, the Department of Elementary and Secondary Education might have realized it couldn’t reinvent the wheel. Some states partner with private organizations that have already produced courses at all grade levels. For example, many states allow virtual school students to take courses from William Bennett’s k12, which sells courses to home schooling families. Students in twenty states can choose this option.
Besides giving states a way to meet demand for new courses, partnering with private organizations and offering competing online programs could prevent public virtual schools from replicating the mediocrity found in so many brick-and-mortar public schools. If the state creates a monopoly virtual school on its own, it will suffer from the same problems that plague local school districts. But if virtual schools compete with each other and take advantage of successful curricula from the private sector, they’re more likely to come up with models that improve upon the traditional public schools.
Online schools have the potential to give students across Missouri access to individualized education. The new Virtual Instruction Program is most likely to succeed if it offers students the choices they want.
Sarah Brodsky is a policy analyst at the Show-Me Institute.
I Love University City, But I Hate This Proposal…
I have weighed in on my absolute hatred of red light cameras before. Now my own hometown, University City, in which I am extremely proud to live, is considering installing them right by my house. University City, which was the only (I think) municipality in the area to pass one of those ‘don’t-cooperate-with-the-Feds’ anti-Patriot Act ordinances, is now getting into the very same act itself, or at least considering it. As I said previously, red-light cameras are not about safety, they are about new revenue collected under the guise of safety, and the last thing in the world that should be contracted out to private companies is law enforcement. And I say that as someone who thinks government should contract out lots of things to private industry.
I may have to take the radical-yet-strangely-whimsical act of speaking before my city council about this at the next meeting. By the way, the cameras at Big Bend don’t even make any sense to me as it is a T-intersection, not a 4-way, and my experience with it is that traffic goes very slowly around the intersection. I admit there can be a problem at Hanley, but U. City should have its police enforce the intersection more closely, not hire a company to snap photos of me as I walk my dog. I shall keep you all informed as this issue progresses…
You Don’t Count the Cost
David Stokes has been doing a fine job covering the potential legalization of ticket scalping. There’s no question legalization is a good idea here, both for sellers and consumers. There are also some other economic points to consider.
The price of an item isn’t just what you pay for it in cash. The true price, to you, of a bag of groceries includes things like driving to the store, time spent browsing the shelves, waiting in line, effort expended pushing the cart, etc. The more difficult it is to get the thing you’re buying, the higher the real cost — regardless of what it says on the price tag.
Ticket-scalping policies are usually adopted out of a desire to keep prices down. If scalpers buy all the tickets for an event at face value, then turn around and sell them at a high markup, consumers are worse-off, right?
Not quite.
The real price of a consumer good is just a measurement — an intersection of supply and demand. If a baseball team sets the price of its tickets much lower than the real price that the market will bear, it hasn’t made the extra cost vanish. The team has simply shifted the cost in some way, perhaps by giving people an incentive to camp out all night in the rain so they can be first in line. The time and effort spent waiting in line is all part of the price of the ticket.
There was an excellent example of this sort of cost (which I linked to earlier this month) when a county in Virginia tried to sell several iBooks at $300 below market price. The result? "Mothers clutched their children for protection, people screamed as they were knocked to the ground, a stroller was demolished, cars inched through the crowd…" Economist Alex Tabarrok noted:
You can get rid of the market but you can never get rid of competition. Goods not allocated by market prices have to be allocated somehow and so long as goods are scarce there will be competition to obtain them, if not by outbidding competing buyers with money then by outbidding them in time spent waiting in line, doing political favors or some other method.
What happened in Henrico county is the same type of thing that happens when there is a price control.
Controlled prices rise above the nominal price tag, despite all efforts to keep them low. Tabarrok goes on to point out:
It’s very important to notice that that the shop owner gets your money but does not get your time. Thus, money expenditures are a transfer but time expenditures are a waste.
The best way for our hypothetical baseball team to keep real prices low is to sell tickets for what they think the market will bear. And the best way for politicians to keep real prices low is to get out of the way — let people trade, sell, give away, or destroy the tickets they’ve legally purchased.
New Bridge Might Not Ease Rush Hour Congestion
Have you ever tried to get through downtown Saint Louis during rush hour? How about before or after a Cards game? If you have, you know it can take quite some time to get from one side of the Mississippi to the other. A stalled car or accident snarls traffic for miles. This type of experience may have you agreeing with proposals to spend hundreds of millions of taxpayer dollars on a new bridge connecting Missouri and Illinois. Before committing taxpayer funds, however, we should rethink the situation. Do we really need that new bridge?
A basic idea in economics is that individuals respond to incentives. If the price of strawberries rises, people buy fewer of them. This same insight applies to commuters. Right now, some people avoid commuting in congested areas because of the time and hassle. If we reduce congestion by building a new bridge, that might just cause more people to take to the roadways.
Reducing the time it takes to commute in and out of Saint Louis could induce those currently using mass transit or ride-share programs to start driving again. Solving the current mess could have the unintended consequence of inducing more traffic entering and leaving St. Louis. And this might just further jam up the connecting roadways. Would building the bridge create a need to further widen I-55 and I-70?
It wouldn’t be the first time. Current traffic flows on the Poplar Street Bridge are significantly greater than engineers estimated when the bridge was constructed. We know that because if they had gotten it right, we wouldn’t need the new bridge. Do we know that their projections this time are any more accurate?
It might be worthwhile to turn the current bridge debate on its head: Instead of finding ways to increase capacity, what if we looked for ways to decrease congestion by reducing the number of cars on the road? Rising gasoline prices are significantly increasing commuting costs. Add to that the cost of sitting in a traffic jam and commuters might begin to alter their behavior. Just think: If rush hour commuters simply doubled the average number of passengers in a car—from one to two—the number of vehicles crossing the bridge would be sliced in half. Commuters create congestion for other drivers on the bridge because they do not bear the full costs of their commuting decisions. The bottom line is that rush hour drivers use up too much scarce bridge space because they don’t pay the real cost.
One way to bring supply in line with demand is to charge commuters for the valuable rush-hour capacity they use. Charging a user fee (a toll) on commuters who use the bridge during rush hour is one way to efficiently price the use of limited space on roads and bridges. And a toll system is fair: Heavy users pay the higher price. To those who argue that toll booths would create more traffic problems, available easy-pass systems can significantly reduce the hassles associated with paying tolls.
Increasing commuting costs by charging congestion fees might lead cost-conscious drivers to take other, less congested routes or travel at non-peak times. Think of it. Carpooling might become more popular.
Establishing a system of user fees is the best means available to efficiently price commuting. If a price system works for movie tickets, electricity, and seats at Busch Stadium, why not for space on the bridge during rush hour?
R.W. Hafer is the chairman of the Department of Economics and Finance at Southern Illinois University Edwardsville.
All Eminent Domain at the Post Today…
Today’s Post-Dispatch gives extensive coverage to various eminent domain issues in St. Charles, Jefferson and St. Louis Counties. The St. Charles’ story is a good example of what can happen when voters take this issue to heart. A proposed project using eminent domain has been stalled because voters voted out the city councilman who was supporting the project. That’s called democracy. People should trust it just a little bit more.
The Jefferson County case is a victory for the good Doctor Tourkakis. We have been following his case closely here at the Show-Me Institute and are delighted that his decidedly-not-blighted dental practice will still be serving the people of Arnold. Reading this story made me wonder if the elected judges in the far-suburban and rural areas of Missouri might be just a little more sensitive to the public’s anger over eminent domain abuse than the appointed (usually for life) judges in St. Louis and Kansas City? That is not to say that the ruling in favor of Dr. T was not entirely based on the law, but it is an interesting question.
The St. Louis County case is, of course, about the Centene Project dispute, which is being heard today by the State Supreme Court. With my luck, the court will announce its decision exactly one second after my editor reviews and posts this – making this post irrelevent, but so it goes. I wish I knew enough about the Supreme Court to offer a prediction, but I don’t. I know that I want the Centene Project to move forward – but I don’t want other businesses in a wonderful area such as Clayton to be closed (or at least forcibly moved) just so another company can expand. It is too bad it had to come to this point, perhaps more negotiating and less threats of eminent domain by Centene in the early stages of the project could have prevented this. Now it is a matter of principle for the opponents to stand and fight and all costs, which is their right. Hopefully they will win their case, prove their point, make solid case law for the rights of property owners throughout Missouri, Centene will up its offer, the opponents will accept the new offer, the project will move forward, and everyone can declare victory and go home.
Bureaucracy for the Uninsured
Rep. Jo Ann Emerson says she wants her plan for government-run health care to be "driven by the private sector":
"I don’t want a government health care system. What I want is a system to insure all Americans through the private sector. People can’t afford health care today, so we’ve got to make it affordable," said Emerson, a Cape Girardeau Republican.
From this very simple premise came Emerson’s fascination with a universal health care proposal by Sen. Ron Wyden, D-Ore., an unlikely ally for the typically conservative-minded Emerson.
The article continues with the gory details of Wyden’s plan–mandatory insurance, even more extensive regulation of insurance companies, taxes to subsidize insurance for large segments of the population.
There are two main problems with this idea. First, if you overwhelm an industry with regulations and rules, the private sector might just disappear. When I started writing a blog post about Amtrak a few weeks ago, I was under the impression that private companies were not allowed to compete with Amtrak. My coworkers set me straight: private passenger trains are permitted, but there are so many requirements about where they run and how they operate that no private company would want to be in the business. Emerson says she wants to involve the private sector and competition, but her plan would probably narrow the choices down to one easily derailed AmHealth.
Second, there’s no free lunch. Some people are expensive to insure because of preexisting medical conditions. A complicated system of taxes and subsidies won’t change that. But for those people, paying for health care directly might be a better idea than going through an insurance company. The purpose of insurance is to protect your property in case of unforseen expenses–not to cover expenses you already know about.
The Drawbacks of Country Living
The Southeast Missourian has an article today on broadband access in rural areas. The piece reports, "Since 2002, USDA Rural Development has administered a program that gives loans to broadband Internet service providers to install service in unserved or underserved rural areas," but that misuse of these funds in non-rural communities has led some in Congress to question the program.
Broadband Internet has become an indispensable part of life for me — essential to work, recreation, shopping, staying informed, paying bills, playing games, staying in touch with friends — so I can understand wanting to spread the technology to underserved areas. High-speed Internet access is simply useful, in a wide variety of ways. But it’s not a problem that requires a government solution.
The economist David D. Friedman briefly described the concept of "opportunity sets" in his book Price Theory: An Intermediate Text:
Your problem as a consumer is to choose among the various bundles of goods and services you could purchase or produce with your limited resources of time and money. There are two elements to the problem–your preferences and your opportunity set. Your preferences could be represented by a gigantic table showing all possible bundles–collections of goods and services that you could conceivably consume–and showing for every pair of bundles which one you prefer. We assume that your preferences are consistent; if you prefer A to B and B to C, you also prefer A to C. Your opportunity set can be thought of as a list containing every bundle that you have enough money to buy. Your problem as a consumer is to decide which of the bundles in your opportunity set you prefer.
When people decide where they’re going to live, they choose between a variety of opportunity sets, each of which contains some combination of positive and negative factors. A house’s low price may be seen as a positive factor, while its low quality of construction, or risky surrounding neighborhood, may be seen as a negative. A group of friendly neighbors may be mitigated by their unkempt yards or loud music at night. And the pastoral beauty, seclusion and relative safety of rural life might have other drawbacks — distance from the nearest hospital, perhaps, or a limited selection of stores and restaurants. It may also have fewer (or no) options for broadband Internet access.
It’s not clear that any of this is a problem for government to solve. I may have hundreds of great reasons to live in the country, but there are always going to be drawbacks. There’s no reason limited Internet access should be treated as more of a government concern than, say, the lack of good Thai food or multiplex movie theaters. Similarly, the fact that I choose to live in an urban area, with access to a wide range of things to do, doesn’t mean the government should try make my life a little better by tearing down a few buildings to install an artificial lake next to my apartment. Lack of immediate access to nature is one of the drawbacks of my otherwise favorable opportunity set, and it’s simply not government’s job to fix it.
I have a friend in rural Idaho who depends on broadband Internet access for his telecommuting job. None of his options were entirely reliable, so his solution was to pay multiple providers for different kinds of high-speed service — and he can always revert to dial-up in a pinch. It’s more expensive that way, but he’s taken responsibility for his choice of where to live, enjoying the many benefits of rural life and improving his technological opportunity set at his own expense.
