Provoking Thought: I Like the Way you Move

So Westy posts this over in Facebook/Twitter:

For those of you who are interested in his link to the Economist article, click here.

And of course, there are some replies:

Schultzie, channeling his inner conservative talk show host.

So naturally, I have some thoughts, too. And I tried to put them into Facebook, but I kept hitting "enter," hoping for a line break, but instead had my comment submitted. So, I punted on Facebook, because I can't be bothered to hit Shift+Enter.

With regard to taxes, what's wrong with paying your fair share for the society that you want to have? The voters indicate the society that they want. Then everyone has to pay to make that society happen. That's basically democracy in a nutshell. If you believe in democracy, you don't go off to duck votes (whether it's hiding in a neighboring state or filibustering). And you can voice your concern, but you don't do so in a way that interrupts the people around you (like the idiot protesters in Wisconsin). On the other side of the coin, you also need honorable officials that really represent the interest of the people. But what doesn't work is doing things piecemeal. If you have people pay for what they want to pay for, nothing great will ever happen, and even if you let the market decide, there's a very high likelihood that important elements are mis-priced or not priced at all. Of course, I've never been a fan of democracy, so that's neither here nor there.

The analogy isn't perfect, but it's like an amusement park. The crappy ones are the ones where you pay for each ride, and you have a bunch of gypsies trying to con you out of your money. The rides suck, and the side shows are worse, there's nowhere to sit, and the only bathrooms are port-o-lets. You walk around, and you don't have a good time. But at least you're only paying for the roller coaster that you (sort of) like, and you're not subsidizing that crappy spinning tea cup ride with your hard earned money.

Now, compare that to going to a real amusement park, where you pay $40 to go in for the day. Sure, you may be paying for the crappy It's a Small World ride, and that log flume that you hate. And you're never going in to watch the mini Snow White dance and music extravaganza. But you get to ride on the awesome pirate ship, and do a bunch of awesome roller coasters. And the lines may have the Cool Zone fans that blow water mist at you. And there are benches where you can sit down to eat a really good funnel cake and frozen lemonade. In a set-up like that, it takes the scale to develop any sort of efficiency. Sure, some of the rides may be "subsidized" more than the others, but the additional cost is often negligible, and you're actually creating more revenue because you're drawing in folks who may not have otherwise gone to the amusement park (those who get really nauseous on roller coasters, but love musical shows, interacting with cartoon characters, and other rides that are low-impact).

The question isn't whether the popular rides are subsidizing the less popular ones. But, is the entire system better off for having some of the less popular ones? The answer is generally yes, if (and I stress the "if") there is smart management in place. Now what happens when there's an economic downturn, and that $40 ticket isn't enough revenue to make everything run? You could raise the price. You could start to eliminate some rides or some of the services that don't generate money (the nurse's station, the bathrooms, not fix the roads between rides, not repair benches, remove the cool zone fans, get rid of the aspiring actors in the Goofy or Donald costumes running around). There's not a clear answer, without other information. However, it's very, very easy to see that people would never vote to pay for a lot of things that aren't high on their personal list of things that are important, and the things that people see as being important may be unsophisticated.

Think about the petition that Mikey passed along to some of us (click here to see the petition). Basically, Illinois is planning on cutting a lot of funding for mental health services. This is an easy target. The thought goes, "I'm not crazy, I don't get any benefit. I don't want to pay for it." The point of the petition is that there are other unintended consequences if you cut funding. It's a little more subtle to think about the costs that go with helping these folks (or keeping them off the streets, if you're less altruistic).

We've decided as a society that it's not OK to just euthanize these folks. So we have to do something with them. If they're run well, institutions are helpful in the recovery process (as well as the "keeping them away from me" process) and are more cost-efficient, since you're getting the economy of scale for keeping a bunch of crazies together in one place (fewer staff, better pricing on food/drugs/supplies, etc.). Think of it this way. How often do you need to use a cattle prod on a crazy person? Hopefully, about once or twice a month (any more, and you need something better, any less, and it's not as much fun). If you have a big institution, you can have one cattle prod for like 40 crazy people. But, if you were to get rid of the institution, then everyone has to buy their own cattle prod. The overall cost to society is much higher. A more serious concern is homelessness and crime. Are we sure that it's cheaper to get rid of the institution, and to have more homeless/crazy people on the streets who may be committing crimes (and at the least, sort of scary)? I'd argue that the thought process behind the folks who say that we need to cut programs is relatively unsophisticated, and doesn't think through the consequences (which is what Mikey was getting at, I think).

Now, we've stuck with two easily constructed options. Increase the price of the amusement park (raise taxes). Or, get rid of unprofitable parts of the amusement park (remove services). I suggest that other options exist. I say that two things are crucial: one is to make sure that the amusement park is being managed efficiently, and the second is to really understand the factors that are important to the amusement park visitor's experience, in terms of willingness to pay. All sorts of inefficiencies when you have federal and state level issues in play. The example cited in the Economist article of the NJ governor 86'ing renovations on the NY/NJ border is a fairly typical discussion. Why would NJ pay, when NY (and other states) get as much of the benefit? Even if NJ's benefit is worth the cost (which if I recall, the projections were that it was), there's an irrational aspect because of human nature (demanding equity/justice). This is where real-life breaks down from the game-theoretic models. There seem to be limits to efficiency when you have multiple players. Perhaps, control at the national level should be instituted at major transportation hubs that straddle states, so that issues of cooperation at the state level become moot? I have zero idea what sort of consequences this would result in, though, and it's just a whim. And the second point of better understanding what people really want and are willing to pay for is crucial. It's important to lay out realistic scenarios for people to make decisions on. Giving us choices that are as sophisticated as the options you give a 4-year old, does a disservice to us.

Getting back to the point that Westy had, I'm all for more public transportation. Basically, getting the poor people off the roads makes my life easier. So, I'm all for $8/gal gasoline, and congestion pricing, and all of that stuff. Get people out of my way. I'm willing to pay for it. (Actually, who am I kidding. I have a 12 minute commute, and I do most of my driving between 11am and 3pm, and from 9pm to 5am, when there's no one on the roads. I don't have a real job, so I really could care less. Really, I'm just for punishing dumb and poor people.)

Basically, there are ways to create incentives that get you to the results you want. And when people are actually using these services that make life more efficient (both for the world and for me, in particular), the costs become more justified. If you're running an efficient society, then I don't think that "like" has anything to do with it. People may like their cars, but when the privilege of driving is priced appropriately, and the laws that are in place are actually enforced, then behavior changes.

But for those of you think don't believe that infrastructure restricts other parts of the market, come down to New Orleans, and drive on the roads out here. Let's just say that I would have bought a new car down here, if I had any confidence in the roads and drivers at all. Instead, the roads are so bad, and there are a lot of uninsured idiots driving out here, that a new car is a very bad financial move. So, I'm still cruising around in my awesome 1999 Toyota Camry. If you fix the roads, and enforce insurance laws and car standards, at least one more new car would have been sold down here. But, instead, it will be El Paso and the great nation of Texas that will be getting my new car dollars later in 2011 or in 2012.

-Chairman