We frequently hear phrases like “the government should do something about that.” Do any of us really know what that phrase truly means?
Moreover, do any of us really think the government is capable of doing something constructive about the numerous challenges across a society? (If so, why do most government programs fail to meet their original policy objectives and rarely, if ever, stay within original budget projections?)
These latter questions beg a larger, philosophical question about whether the government should act in the first place, in spite of what is a common expectation among many that we should turn first to government for solutions. The larger question arises because many people do not have a clear understanding of how a “society” really works. A number of earlier postings – which address the misguided incentives that result from many government actions – are found at the bottom of this posting. But, while these postings often identify many failure points, we need to understand better what really drives positive outcomes in the world around us.
I recently discovered a wonderful new blog site, Cafe Hayek, run by two economics professors from George Mason University.
One of the site’s contributors, Professor Don Boudreaux has published an article entitled Triumph of the Individual at Tech Central Station in which he discusses Nobel Laureate Hayek’s contribution to our understanding about how it is individuals – not government or markets – that make things happen in any society:
…Hayek spent most of his career watching the worship of power supplant the love of liberty. Nazism and Stalinism were the two most grotesque forms of this power-worship, but as Hayek warned in his most famous book, The Road to Serfdom (1944), even milder forms are surprisingly dangerous.
…the source of Hayek’s fundamental contributions to our understanding of society comes from the method of doing social theory that he learned from these scholars.
This method is one of rigorous adherence to the tenets of “methodological individualism” — a fancy name for recognizing that the only units in society who think and act are individual persons. Society doesn’t think or act; the market doesn’t think or act; the United States government doesn’t think or act. Only individuals think and act…
Whatever the topic — war, economic growth, government regulation — the only way to achieve genuine understanding of what’s going on is to trace all actions back to the individuals who take them. The fact that individuals often act in concert — say, as voters — still requires those of us seeking to understand the outcomes of elections to understand the incentives and the constraints that confront the individuals who make up these groups.
Failure to be a consistent methodological individualist leads to misunderstanding. Consider, for example, that politicians and pundits frequently go on about how “we as a nation” did this, or how “we as a nation” must not do that.
“We” who make up the American nation number 300 million people, each with our own preferences, beliefs, and expectations. It’s only an illusion that “we” act — or can act — as one. It’s no less an illusion that “we” act when government acts in our name…
The Hayekian also understands that the individuals who make up government are spending other people’s money for yet other people’s benefit. So these officials lack both the incentives and the knowledge to spend this money wisely.
…The Hayekian isn’t misled by romantic talk of “we as a nation” rebuilding New Orleans (or doing any other task) because the Hayekian never forgets that only individuals choose and act — and that the market is the only means of harnessing individual knowledge and effort for the greater good.
Boudreaux, in the comments section of his posting, offers this Leonard Read classic, I, Pencil.
[Open full post]John Roskelly, a former Washington state politician, thinks that RI should steer clear of the Voter Initiative:
There are some Washington State initiatives I have personally promoted, such as I-901, which passed by 66 percent of the vote, and eliminated smoking in all public places, including restaurants and bars. But in general, the initiative process limits debate to those with money, runs government by emotion, and wreaks havoc on your local government’s ability to provide necessary services. Show me a state with the initiative process, and I’ll show you a state legislature that failed to do its job.
Too bad Mr. Roskelly doesn’t live in Rhode Island, because then he would have realized that all of those fine points he has proferred actually explain what is currently going on in this state!!! He continues:
During my time as a county commissioner (1995-2004), I dealt with the local budgetary fallout of statewide voter initiatives. For instance, I-747 limited property-tax revenue-collections to a growth factor of 1 percent per year. As a home owner, I was pleased it passed. As a commissioner, in charge of the county’s budget, I had to scramble to balance the budget, while providing the necessary services demanded by the same people who cut our purse strings.
Now, that’s too bad, isn’t it? What Mr. Roskelly can’t appreciate is that the “necessary services” provided in Rhode Island are some of the most expensive and inefficient in the nation. However, he does save himself a bit with his last suggestion:
So, before you let this feisty horse out of the barn in Rhode Island, I would encourage you to put legislators in office who will make the tough decisions they were elected to make, and to severely limit what can be legislated through the initiative process.
Good idea, but we’ve been trying that, haven’t we?
[Open full post]In today’s Projo, Katherine Gregg reports on figures provided by Rhode Island’s casino supporters describing how taxes on gambling revenues might be used to provide property-tax relief to Rhode Island cities and towns. Unfortunately, a figure discussed by state budget analyst Peder Schaefer (who is very skeptical of the casino advocates’ analysis) is presented in a manner that may confuse the issue…
Legislative backers of the proposed West Warwick casino are dangling the promise of $119 million to $144 million in “property-tax relief” for their cities and towns back home.Mr. Schaefer is discussing how one portion of state aid is distributed, not the total amount of state given to cities and towns, but the comparision of the $119,000,000-$144,000,000 in estimated casino aid to the $51,000,000 in existing “municipal” aid may create the impression that casino revenue will double — maybe almost triple — the amount of aid available to cities and towns.
The promise was contained in one of the handouts the casino’s legislative backers provided at the news conference earlier this week to trumpet their campaign to change the state Constitution to specifically allow the Harrah’s-backed casino.
The handout shows communities getting anywhere from $1.6 million in new money on Block Island to $22.9 million in Providence under the rosiest scenario…
But none of the legislative backers could explain exactly how they arrived at the numbers.
The state’s chief budget analyst, Peder Schaefer, said the suggested allocation bears little resemblance to the “revenue-sharing” formula the state used to allot $51 million in municipal aid last year.
“We don’t understand what they have done,” said Schaefer yesterday. “Whether the $144-million figure is any good or not, I don’t know. . . . But it ends up, they are giving all the rich communities a much bigger share of the money.”
This is not the case. $51,000,000 is only a small portion of the the total state aid given to cities and towns. At the very least, it does not include the approximately $650,000,000 that the state provided to cities and towns in the form of education aid (included on a separate line item in the state budget) last year.
Since casino revenue is supposedly “replacing” property tax revenue, the best way to make an initial estimate of the impact of casino revenue on property taxes is to compare the amount of casino aid slated for a city or town to the amount of property tax collected by that city or town and not to the amount of state aid it received.
Providence is a useful example for this, because it has a very high property tax rate (making it a prime candidate for property tax relief), and because a casino revenue figure for Providence is provided in Ms. Gregg’s article. According to the city budget, Providence expects to collect about $237,000,000 in property taxes this year. This means, assuming that the $22,900,000 in projected casino-based aid all goes towards replacing property tax revenue, the result is a less-than-10% reduction in property taxes. And that is the result using the casino advocates’ best case numbers.
Is that the scale of relief that casino supporters have in mind when they envision the benefits that a casino brings? [Open full post]
According to Rhode Island Senate Press Secretary Greg Pare, Tuesday’s Judiciary Committee vote tallies in favor of holding the three tax-lien reform and four eminent domain reform bills for further study were all unanimous.
Since the sponsors of three of the bills are on the Juidicary Committee; Senators Harold Metts (D-Providence), Rhoda Perry (D-Providence), and Leo Blais (R-Coventry/Foster/Scituate), the unanimous votes may be an indication that “further study” is, in this case, part of the process of picking a single bill or combining features from the various options that have been introduced.
In Slate magazine, Michael Kinsley responds to a Paul Krugman/Robin Wells article in the New York Review of Books that argues that complete government control of healthcare — where the government is the only insurance company, and maybe even all doctors work directly for the government — is the only system of healthcare delivery that can work. (h/t Mickey Kaus).
Kinsley points out flaws in a number of Krugman’s and Wells’ assumptions. First, the argument for forcing everyone into a single government-run insurance pool is no more compelling for health insurance than it is for any other insurance sector…
Krugman and Wells note repeatedly that 20 percent of the population is responsible for 80 percent of health-care costs. But that doesn’t explain why health insurance should be different from other kinds. The small fraction of people involved in auto accidents in any year is responsible for almost all the cost of auto insurance. You insure against the risk of being in that group.Second, Kinsley argues that advocates of government controlled healthcare too uncritically assert that centralizing bureaucracy is automatically a good thing…
Even the most competitive industry can seem wasteful and inefficient when described on paper. Dozens of computer companies making hundreds of different, incompatible models, millions spent on advertising: Wouldn’t a single, government-run computer agency producing a few standard models be more efficient? No, it wouldn’t.Third, Kinsley questions the argument that high-risk individuals will be left uncovered in any system not tightly controlled by the government. As he points out, this is based upon the assumption that there can be only one cost for health insurance…
Krugman and Wells say that private insurance is flawed by “adverse selection”: Insurance companies will avoid riskier customers. Only a single payer (that is, an insurance monopoly) can insure everybody and spread the risk. But anyone is insurable at some price — a price that reflects the cost they are likely to impose on the insurer. Adverse selection is only a problem to the extent that insurance is not really insurance, but rather a subsidy.
Unfortunately, Kinsley doesn’t tell us exactly what a health coverage system based on his adjusted assumptions would look like (except to say it would be something more incremental than a complete government takeover of healthcare). So, after minutes of thinking about this particular article, I’ll propose a system…
- Either government or mandatory catastrophic insurance for everyone from the moment they’re born.
- Health-savings accounts (even with tax-breaks!) for preventative and routine measures.
- A robust, competitive private insurance market for stuff in-between.
The Senate Judiciary Committee voted last night to hold all 4 eminent domain reform bills (the Governor’s bill, the Lieutenant Governor’s bill, the Attorney General’s bill, and the Cote/Badeau/Breene bill) before the committee “for further study”, meaning that the Senate is not required to take any further action on them this session.
Whether this means that the legislature plans no action on eminent domain reform this year, or plans to pass one of the 4 bills still before the Rhode Island House (the Davey bill, the McHugh bill, the Lima bill, or the House version of the Attorney General’s bill) remains to be seen.
Details on all of the bills are available here, here, here, and here.
Since Anchor Rising is primarily a blog about Rhode Island, we don’t talk about the War in Iraq much. But I’m curious as to how Rhode Island conservatives view the situation three years out. So whether you’re a neocon, a paleocon, a realist or a “to-hell-with-them-hawk,” please comment on whether or not your outlook on the Iraq project has changed and in what ways. (If you’re not a conservative, you can chime in too…but let’s stay away from “war for oil” and all that, ok?)
[Open full post]In an op-ed published in Monday’s Projo, Cranston Mayor Steve Laffey makes his case for using school choice to increase the educational opportunities available to Rhode Island students. Here is the Mayor’s description of the first step, a voluntary pilot school choice program for Providence students…
This program will let students in Providence’s failing schools enroll in better schools in Cranston or other neighboring communities that choose to participate. At the same time, Cranston (or other accepting districts) will be reimbursed by the failing school district. The program lets parents choose the school that best fits their children’s needs and injects competition into the system, inducing failing schools to make real and tangible improvements.Providence Mayor David Cicilline has expressed a different view of how to best improve the education of Providence students. In his recent State of the City address, Mayor Cicilline expressed dissatisfaction with the growth-rate of state aid given to the city of Providence…
Republican policies at the Federal level have amounted to a political sleight-of-hand that has transformed politically expedient federal tax cut programs into destructive property tax increases in nearly every city and town in America.Note that Mayor Cicilline decries the “share” of aid given to Providence, not the absolute amount. State education aid to Providence has either gone up or stayed the same every year for at least the last four years. In 2006, Providence was budgeted to receive about $20,000,000 more than it did in 2002. All through that period, and continuing to the present, Providence has received a disproportionate of state aid on a per-student basis. According to the Rhode Island’s fiscal year 2006 budget (see page 442 of the Program Supplement), Providence received about $185,000,000 in aid for about 28,000 students (about $6,600 per student), while Cranston received about $34,000,000 for a little over 11,000 students (about $3,000 per student). Despite this, Mayor Cicilline’s position is that the Providence school system needs more.
And at the state level the Governor offers the same approach. Every year — a decreasing share of school funding from the state. Every year — a little more weight the property tax payer must bear.
Getting more education resources to Providence students can only take a few forms. The first would be to have Providence provide more for Providence students…
- Raise property taxes in Providence.
If additional resources cannot come from Providence, then they have to be taken from somewhere else. That leads to two possibilities…
- Raise taxes in other Rhode Island communities to subsidize Providence schools.
- Cut services in other Rhode Island communities to subsidize Providence schools.
Now, there is now a third option on the table, the school choice option…
- Distribute existing resources directly to the schools that Providence parents and students have chosen as best meeting their needs.
At his official campaign kick-off on Friday, Rhode Island Attorney General candidate William Harsch explained that a key component of his campaign will be increasing awareness about what the office of the Attorney General should be doing, but is not doing under the tenure of the current office-holder.
According to Mr. Harsch, the mission of the Attorney General is twofold. The AG must act both defensively and proactively, fighting crime and corruption after something goes wrong, as well as advocating for the public in areas like utility rates and health costs before problems begin. Mr. Harsch laments that in Rhode Island, because “the pro-active piece has been totally missing for so long”, people have forgotten that it is an important part of the job.
With regard to corruption, Mr. Harsch promised to…
- Join with Governor Carcieri to eliminate existing corruption and prevent future abuses and work to replace Rhode Island’s culture of corruption with a culture of integrity.
- Hold individuals who have betrayed the public trust, including members of non-profit boards and members of the General Assembly, accountable for their actions.
- “Participate aggressively in every utility rate and facility filing before the Public Utilities Commission”. Mr. Harsch noted that, by law, the Attorney General is a party to board meetings and that his absence is noted if he fails to attend.
- Go to Washington to address the fuel cost formula that determines utility rates in RI, because at least 70% of costs are determined by a formula that artificially ties all energy costs — even energy generated from alternative sources — to snapshots of oil and natural gas prices. According to Mr. Harsch, this odd system exists because nobody from the Attorney General’s office was present to represent Rhode Island when the current formula was created.
- Look very hard and very aggressively at future proposals for rate increases, at proposals for coverage decreases, and at costs that have been wrapped up in the past for “bonuses, gifts, and perks of every kind”.
- Investigate monies being lost to special reserve accounts and because of legislative add-ons.
Mr. Harsch said he has been and will continue to be effective in serving the public because he is willing to step on some toes, even well-connected toes, when that is what is necessary to protect the public interest. In concluding, he said that he does not view the rewards of public service in terms of access to special deals or fancy jobs. Instead…
My reward is being able to stand here today and say to you that I am ready give Rhode Islanders what they deserve for a change. Let the message be very clear. This state does not exist to make a few powerful families rich…Rhode Island needs an Attorney General who will be the people’s lawyer, an Attorney General who will do the people’s business, and not the business of a political machine or a political party, or some other special interest. I humbly submit to you that I am that candidate.[Open full post]
Legend has it that St. Patrick drove the snakes out of Ireland in the fifth century AD. On St. Patrick’s Day of this year, William Harsch drew upon that image to kick off his campaign for the office of Rhode Island Attorney General.
In his announcement, Mr. Harsch told a crowd numbering in the hundreds — including Governor Donald Carcieri, Senator Lincoln Chafee, and former Attorney General Arlene Violet — that he is running for Attorney General to serve the “hard-working, honorable, proud people of Rhode Island” who are shut out of a system where political insiders expect the people to “pay taxes, keep quiet and stay out of the public process”. He believes that Rhode Island needs an Attorney General who will prevent corruption and big-business monopolies from taking advantage of Rhode Island citizens “as they go about their daily tasks of providing for their families, paying taxes, making a living and making their communities better”.
Mr. Harsch called out the snakes he seeks to drive from Rhode Island — snakes that have the form of entrenched, self-serving interests — by name. First, he discussed the institutional snakes.
- Utilities — Mr. Harsch explained how Rhode Island’s small size makes certain portions of its economy vulnerable to large entities that seek to eliminate competition. Specifically, certain utility companies have become “effectively unchallenged and effectively unregulated monopolies” that have had “their abuses rewarded”. Mr. Harsch criticized the gas company for getting a 30% rate increase at the start of the heating season, then setting a record for shutting people off. He also warned that their profits have made them such “a fat and attractive takeover target” that Rhode Island is well on its way to being served by only a single, foreign-owned gas and electric utility.
- Beacon Mutual — Mr. Harsch explained that Beacon Mutual was intended to be the worker’s compensation insurer of last resort and intended to encourage insurance competition, but “with the help of the General Assembly, they turned themselves into an effective monopoly”. He decried Beacon Mutual’s “egregious” profits, taken from “the profits and the pockets of every single business in the state, including small business” and questioned their practice of fighting against taxpayer interests using taxpayer money. Mr. Harsch also noted that the current Attorney General is “nowhere to be seen in that particular fight”.
- Blue Cross — According to Mr. Harsch, Blue Cross has been allowed to exert “a stranglehold on the healthcare market in this state”. He believes that health maintenance organizations (HMOs) need to be returned to their basic mission and become something different from what they have now become — monopolies “loaded with political friends who are doing good things for other political friends and being protected and encouraged by our General Assembly”– and that Rhode Island legislators have corrupted “something that was a very good idea” by using anti-competitive standards and requirements that discourage other insurers from entering Rhode Island’s healthcare market. As an example of this, Mr. Harsch cited laws requiring all insurers to cover — and all insurees to pay for — fertility treatments of any kind, something he believes should “be the election of an individual” and not “imposed on the public by action of the General Assembly”.
- The departed and discredited former president of Blue Cross who received a $600,000 “divorce present” from the company.
- The Roger Williams Hospital board member hospital who received a $500,000 payment while overseeing a hospital President caught abusing expense accounts.
- Former Senators John Celona and William Irons.
- “What about the fire officials in West Warwick?”
Coming later today: How Bill Harsch plans to drive the snakes away… [Open full post]
