http://channel-surfing.blogspot.com/2010/03/ill-gladly-pay-you-tuesday-for.html

Monday, March 08, 2010

‘I’ll gladly pay you Tuesday for a hamburger today’

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I am not the only New Jersey columnist who believes the state needs to rethink how its local governments are organized. Alfred Doblin, editorial page editor for The Record, takes on the sacred cow of home rule in his column today (http://www.northjersey.com/news/opinions/doblin_030810.html):

“What is more important: Quality education or a local school district? Is the firefighter less competent because he or she answers to a regional supervisor instead of a local chief? Does it matter if the municipality, county or an independent contractor removes snow as long as the snow is removed?”

He likens the state’s fiscal crisis to the Chicago fire that destroyed that city in the late 19th Century, saying New Jersey has “burned down” and adding that “We should not build it like it was.” As he says of the sacred cow of “Home rule” — a “very big cow”: “it’s time it either produced a beverage or became an entrée.”

“The fiscal reality is bleak. But there are ways of providing many of the services we expect while still spending less. We don’t have too many teachers. We don’t have too many parks. We don’t have too many roads. We have too many districts. We have too many municipalities. We have too many departments that essentially duplicate other departments.”

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“We don’t have too many …”

How can any one possibly say that?

One of the problems that Austrian Economics points out is that socialism has no way of making these economic calculations.

In a free economy, the price mechanism determines how many of anything we have. (Evil) (business) people risk their own capital to “test” if something is needed. Then the economy efficiently allocates capital to the things that people want. And they “vote” for the things they want by spending their scarce dollars. Profit is the message that the invisible hand of the economy uses to attract more capital to a needed area. That’s if we had a “free” economy.

Now we have a semi-free economy. The gooferment at many levels intrude and distort the market signals. For example, the FED by distorting the core interest rate for capital encourages “malinvestment”. The Austrians fault malinvestments for the boom and bust we see in the economy. That one distortion alone has catastrophic implication on what risks people take. Bubbles would not be as big or as hurtful without the “money” distortion. Commodity money, or at least the repeal of “legal tender” laws, would allow the free market to adjust the interest rate. And, limit the ability of the gooferment to spend.

Now, when we have NO profit or price mechanism, the gooferment can’t do anything. Because EVERY decision becomes a “political” decision. Only at the very grossest level can we opine on government spending. Suppose that a park was a for profit operation, like Disney World, and it had to carry its costs. This is the specific argument that I have with the South Brunswick “Public Library”. They take money from property taxes and “fund raising” that they do. People in and around South Brunswick didn’t support a movie theater; it went out of business. How can the “Public Library” go out of business? It can’t. The State Gooferment “legislates” that there be one for every Municipal Gooferment. It’s politics; not economics.

You have to laugh at the Census advertisement saying that everyone should fill it out so that “the Gooferment can figure out how many schools we need”. That is the economic calculation problem. We never hear anything about how many McDonalds we need. Because some uncompensated person has risked their capital to fulfill what they perceive as a need. See if we left education to parents, as we do food, clothing, and a myriad of other things, then we would know EXACTLY how many “schools are needed”. Of course, the Gooferment with its “zoning regulations” still interferes. That’s why we have a McDonalds on Sand Hill and Route 1 where a jug handle should be.

In closing, I know that I’ll get the usual carping about “libertarian looniness”. But it is a real political and economic problem. It’s wasteful to have politicians and bureaucrats making what should be economic decisions.

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