Tuesday, January 23, 2007

Whom Should We Starve?

According to a Milwaukee Journal article, property tax bills in western Racine County are going through the roof, prompting State Rep Robin Vos to suggest a property tax freeze, which in turn elicited this response from State Senator John Lehman; "What do you want to do, starve government?

Um, yes.


Anonymous said...

From the jsonline.com:

As for Vos' contention that tax freezes will make a difference, Lehman said, "What do you want to do, starve government? What services do you want to eliminate?"

So what services do you suggest we eliminate Denis? And Vos can say there should be a freeze in property tax, but does he have a plan on how to accomplish this goal? I am not backing Lehman, because there is a lot of government waste, but just to say something doesn't help. - Dogman -

Denis Navratil said...

It wouldn't be easy of course, but we should get the public sectors health benefits and pensions in line with the private sector. Outsourcing education to the private sector, through vouchers and tax credits would save millions. Privatize trash pickup, eliminate most or all planning and economic development personel. Rid ourselves of racially discriminatory policies, if they exist, like affirmative action. This would be a good start.

Anonymous said...

How much of that would find opposition by the Unions? Did you ever try taking down a Union?
- Dogman -

eric said...

My experience has been every program you wish to eliminate is someone else's "pet rock". I agree with the general drift of the posts so far, your crusade to reduce government is worthwhile but temper your expectations.

Privatizing trash pick-up sounds like a no brainer.

Conceptually attractive school vouchers may be about to collide with also attractive neighborhood schools in Racine. Some on the school board have a compromise position.

Healthcare, a national entitlement expanded to those under age 62, or a personal responsibility handled through private programs?

Denis, you generally bring me along to favor free market solutions, but as a mutual fund investor I'm pretty sure the market isn't always efficient. One of the reasons we're not all in index funds encompassing all markets all the time is that for some markets human manager intervention sometimes improves our returns. So what I'm saying is that I agree with freemarket principles generally, but that sometimes they must be tempered. The questions are when, how, to what degree, and for how long?

Denis Navratil said...

Eric you frustrate me. Let me ask you a question. If you assume that there is a continuum between total freedom and totalitarianism, were should we be between those extremes? In general, should we have less government (taxes, regulations etc...) more government or do we have pretty much just the right amount right now?

eric said...

Denis, let me try answering by continuing another discussion we had, the smoking ban issue. You convinced me government should not intervene with a smoking ban, but with reflection I concluded that since establishments invite us in, they should be required to let us know in advance whether they permit smoking, and that requirement might need government to insure it's satisfied.

I think the contuium goes from totalitarianism to anarchy - those two are out (although in our house we often respond to teenage anarchy with totalitarianism). I think we have it near right in the US, our brand of democratic capitalism with a little socialism thrown in. I would want to error on the side of less government. But to insist freedom cures all woes and elevate free markets to an almost religious standing, short sells the world as it is I think. I would reference my original post, do you own mutual funds and are they all index funds, and if not, why not?

Denis Navratil said...

Eric, I don't know much about the stock market and indexed funds, but it seems that you are suggesting that free market believers should have indexed funds because the latter are not dependent on "human manager intervention", like the free market. If I understand your point correctly, I would have to disagree. Are you saying that free market capitalism does not use "human manager intervention?" Free market decisions require human discretion, judgement, intelligence, risk assessment etc... Also, indexed funds require human managers to create the index. For those two reasons, I don't think your analogy works.

I do think that the free market is the most efficient system. However, that does not make it perfect. There are people who will suffer in a total free market system. Babies and the elderly would die in a purely free market system. But is this an argument for government to take over the care of child rearing? Not in my view. Free and responsible people will do a better job helping babies, elderly etc...than will government programs. Of course there are exceptions to this rule. Some people should have their children taken away from them. But generally, we should move in the direction of protecting the rights of individuals (not groups) from the coercive power of government, until such time as they demonstrate that they are incapable of functioning in a free society. Then we have to spend money and separate them from society.

eric said...

Denis, the argument regarding index funds and the stock market, is that as long as you have transparency and widespread availability of info about the market, then it operates efficiently, but when those factors aren't there, human intervention in the form of fund managers improves returns. It's widely believed you have near max efficient conditions with the larger US stocks, but smaller and foreign stocks probably not. So an index works well for large caps, but small caps and a few others benefit more from fund managers.

In our smoking ban discussion, owners continually express a fear they'll loose business if smoking is banned, and yet the data trickling in indicates otherwise, and in fact some data indicates the opposite, business increases. So while we wait for the market to adjust, the majority of customers must either endure smoke or forgo an otherwise enjoyable experience, and owners may be operating at less than optimal profit - this doesn't seem an efficient situation. As I said before, you convinced me that the owners have the right to dictate the conditions in their business (even if it potentially harms the customers as long as the customers consent and it's within the bounds of the law), and as I think I said way back blogs ago, the market will eventually change owner behavior, but there's going to be a lag. That just illustrates the market isn't always efficient.

I'm not arguing against markets in general, but sometimes they need tweaked.

Denis Navratil said...

The info "trickling in" about the economics of smoking bans is suspect I think. People on either side of this debate have agendas so we have to be very careful not to blindly accept the data. Clearly some businesses will be better off as non-smoking establishments and some will be better off financially if they permit smoking. And certainly some business owners will make the wrong choice, fail to meet the needs/wants of their customers, and they will fail. Likewise, some will make the right decision (from a financial perspective) and their business will thrive. Thus the market, though ruthless, is very efficient in this case. And it maximizes the freedom of both owner and patron.

Now if I understand your point correctly, you believe that the market is not always efficient and that a nudge from government may be neccessary, and this would improve the efficiency of the market. No, it would not improve the efficiency of the market but it might produce some positive effects in other areas, such as health. But it can also produce undesireable, unintended, and unanticipated effects as well.

I am wondering if you think an efficient market, with respect to the smoking issue, will either allow smoking in every restaraunt or ban it in all restaurants. When you collectivize this decision, whichever way you do so, you will cause inefficiency in the market. For example, if you mandate that all restaurants permit smoking, you fail to serve the non-smoker market. Likewise, if you ban smoking, you fail to serve the smoker market. Any government mandate here will therefor increase innefficiency, while the free market will maximize it because, as I demonstrated in paragraph one, the free market will punish the restaurant that makes the wrong (inefficient) decision and reward the restaurant that makes the wrong one. Yes, individuals will make wrong decisions, but the system as a whole will be more efficient than if a third party (government) makes decisions for them. This is not to say that government is always wrong, but that government is removed from the information needed to make the most important decisions, while a business owner is marinating on a daily basis in the information needed to make the best decisions. For this reason, individuals are best equipped to make the wisest, most efficient decisions, while government simply can not possibly access or process the info needed to make the best decisions. Yikes, I just wrote a brief book report on one of the best books I ever read, Thomas Sowell's Knowledge and Decisions.

The Fishmonger said...

Congrats on being quoted on the Journal Sentinel editorial page!

Wind Lake Jase said...

Eric -

As a new poster to this blog, I would argue that your comments regarding gov't intervention on a smoking ban are flawed and agree with Denis that Free Market efficiency is ultimately the MOST efficient manner by which to let individual owners come to the "right decision." In your comments below you state . . .

"In our smoking ban discussion, owners continually express a fear they'll loose business if smoking is banned, and yet the data trickling in indicates otherwise, and in fact some data indicates the opposite, business increases. So while we wait for the market to adjust, the majority of customers must either endure smoke or forgo an otherwise enjoyable experience, and owners may be operating at less than optimal profit - this doesn't seem an efficient situation."

Owner's operating at a less than optimal profit (or a loss) is a prime example of market efficiency. No better way for a business making the wrong individual decisions than to be eliminated fast by large, less-than-optimal profits (or losses)! I see no inefficiency in your agruement whatsoever. That is the market at work - some will make it, some won't. It gives me great pleasure to see businesses that make bad business decisions get eliminated fast. All they do is confuse the situation for consumers and prolong the agony for the owner. And those non-smokers that patronize businesses that allow smoking only slow down the process of their elimination - shame on them!
- Wind Lake Jase

Wind Lake Jase said...

As a Western Racine County resident that owns three properties, I could not agree with you more. And starting with pensions and benefits should be job one! Chew that fat out of the system and then let's see how many of these unchallenged elected officials seek a new term???

Wind Lake Jase

Denis Navratil said...

Thanks for your comments Wind Lake Jase. Keep them coming.