A Quick Explanation for Pat

I haven’t had a chance to work through my Sunday paper, yet, so I’ll offer no comment on the bulk of that to which Pat is responding in this post, but he does construct a question in such a way as to merit correction. Arguing for increasing taxes and government-induced costs of doing business in Rhode Island, he writes:

Let me ask the business folks reading: is it a successful business model to lower your prices year after year even if your production costs rise each year? I mean, you want to run government like a business, right?

The flaws in these questions are multilayered, but the core error probably comes with Pat’s failure to account for the fact that much of what Rhode Island “produces” — and therefore much of its expenses — is separate from the activities that bring in revenue. Businesses will not relocate to Rhode Island based on its social safety net, for example. As for items of direct utility to businesses and productive residents — such as transportation infrastructure — the insidious tendency of modern government is to treat them as additional to general expenses, with annual bonds and supplemental fees and taxes.
The next most significant error centers on the related implication that the government’s “goods” are limited and distributed in a “one per customer” fashion. If the government is to be seen as a business, most of its products are actually services, and the incremental cost of accommodating an additional customer is minimal. Adding a few cars to a highway’s burden doesn’t affect the cost of maintenance tasks and barely affects the frequency, yet the increased revenue of several new residents working for a productive company is likely to be significant.
In this regard, the state-as-business is more like a movie theater. The costs associated with acquiring the films, maintaining the building, and offering concessions may be going up, but if the owner finds that fewer customers are taking in the flicks, and that those who do come buy less popcorn and soda, every year, increasing the price of tickets is not a very farsighted strategy. Rather, the owner should pare down expenses not related to revenue, streamline excessive costs (e.g., if there are more ticket-rippers than attendance justifies), and redirect resources toward changes that might attract more viewers — whether that means upgrading the seating or offering discounted Jujubes.
In reality, what government entities such as Rhode Island seem to tend toward is a shifting of their “business model” toward a focus on the expenses column as their core purpose. It becomes less their business, in other words, to foster a wealthy, secure, and productive society, and more their business to mandate charitable services for the unproductive and to protect and advance the wealth and security of public-sector employees. The state undertakes to increase “production costs” (to use Pat’s phrase) as its raison d’etre.

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Frank
Frank
12 years ago

I am a small business owner. If I had 49 competitors and forty four of them offered what I offer for less cost, then yes, I would most definately lower my prices despite the rising cost of doing business. I may not want to lower my costs to stay competitive, but after watching tens of thousands of “my customers” leave for the greener pastures of my competitors I really wouldn’t have much choice would I?

Tom W
Tom W
12 years ago

The old gambit of public sector myopia.
Divert the discussion to who should pay (e.g., “the rich should pay their fair share”) and no discussion concerning if we should be paying for the government we have.
In other words, government should get whatever it wants, including its perpetual above-CPI increases, and the only discussion will be who pays how much.
So in Crowely-land Rhode Island’s no minimum retirement age pensions, bloated payroll (e.g., inflated teacher – educrat to student ratios) and welfare magnet status are not to be questioned.
Meanwhile in Realworld-land employers have been voting with their feet, avoiding entering Rhode Island if not already here; adding facilities outside of Rhode Island instead of inside Rhode Island if already here; and in many cases just packing up and moving out entirely.
Why shouldn’t they? All Rhode Island offers is crumbling infrastructure; lousy public schools run as cash cows for the teachers unions rather than as educational institutions; the unskilled workforce produced by those schools; corrupt union-dominated politics and punitive taxation.

Monique
Editor
12 years ago

Wow. An argument or analogy with so many holes, it really doesn’t qualify as either.
Continuing what will be a very long list, most companies do not collude with their labor union to completely write quality control out of production. As this has successfully taken place in the Rhode Island education system, it is grotesque to contemplate an ever increasing price for an ever more inadequate product.

Tom W
Tom W
12 years ago

Monique,
Monopoly 101.
Coupled with coerced revenue via taxation.
In a way, it’s surprising that public education quality isn’t even worse than it is.
Probably due to the fact that there are some teachers who truly are dedicated, are only in the union because they’re forced to, and resist the culture of mediocrity pushed by the union and many of their mediocre (or worse) peers (who not coincidentally tend to be the most vocal union supporters).

George Elbow
George Elbow
12 years ago

Trying to find a shred of logic in any of Pat Crowley’s views is a fruitless pursuit, period.
That being said, the question I’d like answered is why Pat Crowley & Co. are so dependent upon “collective bargaining”?
Why not support and embrace “Right to Work”?
Teachers start each day in the public schools with a Pledge of Allegience to the Flag. The flag they pledge a allegience to is a symbol of freedom.
Where is the “freedom” when you don’t have a “Right to Work” statute?
Our disgruntled, coddled and misguided teachers in locations like East Providence are “free” to make choices in response to the City’s undeniable inability to pay what they demand.
They can Quit, Retire, Go find a Job in another District to which they love to Compare their Compensation to or, best of all, they can go take a job in the Private Sector. Lastly, they can keep the job at the price at which the Taxpayer’s representatives (SC) are willing to pay.
Those are 5 very reasonable and fair choices that they are Free to chose from. Yet, they instead insist upon chicken crap “collective bargaining”, “work-to-rule” and other disruptive Union tactics.
Where is their pride and self dignity? How is it possible to go thru life being so non-self-reliant, so dependent upon mob rule?
When someone can provide me a reasonable answer to this basic question, perhaps they can then provide me a reasonable answer as to why our Public Employees (Teachers, Police, Fire, etc.) should NOT pay at least 25% of the cost of their Healthcare.

John
John
12 years ago

It is absolutely telling that Crowley neglects to mention the words “customers”, “competitors” and “technology” in his question.
Anyone who has run a business in a competitive environment, and particularly one that faces intense global competition knows that their organization faces a constantly changing balancing act. At the highest level, they pursue three goals: survival, shareholder value creation, and the achievement of some non-monetary purpose, which is often described as delivering superior value to their target customers. If you get the latter right, the other two tend to take care of themselves.
Yet superior customer value is a moving target, because it depends not only on what you offer, but on what your competitors offer, and what changing technology is making it possible to offer in the future, and different ways you could deliver your current offering (value proposition) at a lower cost.
Moreover, the relevant competitive set isn’t just the firms you compete against, it is also potential substitutes and experiences your customers have in different industries that raise their expectations for your offering (e.g., anybody who has shopped at Amazon or Nordstrums will have a forever different expectation of what constitutes “good” service from the RI Registry of Motor Vehicles).
In this context, business models are a dynamic concept that successful businesses constantly adjust to maximize the value they deliver to both customers and shareholders.
Clearly, Pat Crowley’s wildly simplistic question: gee, if your costs rise, you raise prices, right? — clearly shows he hasn’t a clue about the challenges facing private sector taxpayers.
And that is why RI is in such a mess.

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