The Economics of Parks and Recreation - Swing Vote

[Heavily conceptually inspired by "The Economics of the Office"]

Parks and Recreation, a mockumentary style comedy in the vein of The Office, explores the lives of employees at the Parks and Recreation department in the fictional Indiana city of Pawnee. One of the main sources of conflict in the show is between the Director of Parks and Rec, the grizzled anti-government Ron Swanson, and the Deputy Director, the cheery (and pro-government) Leslie Knope. Eventually, Leslie is elected to City Council, and starts a crusade for more and more government involvement in the lives of the citizens of Pawnee. 

One such crusade, as seen in the episode "Swing Vote", is to stop the closing of the Pawnee Palms Public Putt-Putt, a government subsidized mini-golf course. Ron Swanson, ever the budget hawk, has moved to cut funding, citing his belief in "cutting useless government projects". Ron notes the course costs taxpayers $9000 a year to fund, and views it as little more than government waste.

The issue will be decided by a City Council vote the next day. A desperate Leslie tries to whip votes to "save" the course, citing how it's "good for families" and "a job creator".

Leslie's second argument, that the subsidized course is a "job creator", is one of the most persistently enduring economic fallacies. The city of Pawnee is not "creating" any jobs at all. All they are doing is transferring wealth from one group (the taxpayers) to another (those who are employed by the Public Putt-Putt). While jobs may exist as a result, these aren't "created" in the same sense that someone could create new jobs by opening a new restaurant and employing people there. Jobs of that sort wouldn't exist without providing real, economic value to the patrons of the restaurant, the employer, and so on. Government jobs, like at the Public Putt-Putt, don't face the same constraints. They shall continue to exist as long as they are funded by the government, which they often are.

One Councilman, Jeremy Jamm, holds the swing vote on the issue. Leslie, eager to get his vote, takes him golfing at the Public Putt-Putt, and plies him with copious amounts of snow cones to try to sway his favor. Leslie's actions show the way that many decisions are actually made in government, through trading favors and excessive lobbying. Ostensibly acting for the "public good", Jamm is actually making his vote based on what he personally can get out of it. Individuals still face incentives, even in government, as stated in public choice theory.

Ron Swanson, sensing that Leslie might try to influence Jamm, also arrives at the course. He consistently states the downsides of the course, namely, that "this ridiculous play palace costs the taxpayers thousands of dollars a year". Leslie responds by again noting that "everyone loves it". Some people may in fact enjoy the Public Putt-Putt (at the government subsidized pricing), but all taxpayers might not. Ron is defending those taxpayers (likely including himself) that do not enjoy Putt-Putt, and are yet forced to pay for it through their tax dollars.

Eventually, Jamm is swayed to Ron's side (after Ron beats Leslie in a game of mini-golf). An angry Leslie confronts Ron the next morning, who cites his principles as the reason for his opposition. Jamm later meets Leslie in her office, brazenly offering to switch his vote for the right offer. Leslie seems sickened by his political graft, but Jamm notes that this system of trading favors for political support "is just how people like us [politicians] operate".

Leslie, apparently drawing a line in the sand, refuses to make a deal, and Putt-Putt is defunded. However, she later notes a plan to authorize funding through a ballot proposal, which she believes will pass. Putt-Putt's passing is a classic example of concentrated benefits, dispersed costs. Those who stand to benefit (former employees of the Public Putt-Putt, former patrons) will eagerly vote for its authorization. The apathetic (or indifferent) taxpayers who don't support Putt-Putt will likely not find it worth their time to go vote to save a few cents on taxes per year.

This process is repeated over and over, for all kinds of government projects, and eventually those few cents add up. That is why there is consistent government growth. That is why so many boondoggles, like a publicly subsidized mini-golf course, exist. When economic decision-making is politicized, this is the end result.

The Multiplicity of Nations

Competition drives progress. Competition forces providers of goods and services to increase the quality of their products. For example, a car company might make a car with better fuel mileage to undercut a competing car company. In the process, cars get better, and consumers of cars benefit.

The same principle applies to nations. The roughly 200 sovereign states on Earth vary wildly in forms of government, legal institutions, and cultural traditions. There is a somewhat free flow of labor and citizens among these nations, though restrictions persist in much of the world.

In an ideal world, there ought to be as many possible legal jurisdictions and civil societies as there can be. Not only would this mean that individuals would be free to settle into whatever state that best fits their preferences, but also this would yield competition among states for labor, capital, and people.

Some competition between nationstates already exists. For example, the Export-Import Bank of the United States ostensibly exists to provide "financing tools" to companies exporting goods, with the intention of keeping the companies in the United States. Other countries, such as Singapore, instead rely on institutional incentives. They make it easier and less costly to operate a business in their country, whether that's through regulatory reform or other institutional processes. So, some competition indeed exists. But is it enough?

In any market, it is to the firm's advantage to raise barriers to entry, or drive their opponents out of business, if at all possible. This is why states tend to engage in empire building and conquest. The victor benefits from more customers (taxpayers), more market power, and less competition.

This also explains why most states stubbornly oppose secession. Secession creates a new competitor which automatically takes away a chunk of their business. Secession is to the detriment of the state, but not always to the individual. More states means a greater variety of laws and institutions to choose from. More states yields greater competition, which forces states to develop incentives for people to stay such as tax cuts.

States have a tendency to bitterly cling to every square inch of land they can. Secession movements, such as the recent Scottish Referendum, are becoming more frequent with limited success. Other alternatives include seasteading, the practice of creating micronations in international waters unclaimed by any nation.

The key to progress is allowing competition to fluorish. Dynamic markets are constantly in flux, which is necessary for growth and advancement to take place. Increasing competition through the mulitplicity of nations may not be the most stable solution, but it would ultimately result in more choices and more prosperity for the people of the world. 

Freedom of Contract and Self Interest

Freedom of contract is the principle that two parties can voluntarily enter into an economic agreement that they both deem mutually beneficial. In other words, people are free to make agreements regarding working conditions that all parties find acceptable.

Freedom of contract hardly exists today. For example, OSHA currently mandates such specific requirements like mandatory minimum lighting requirements. One of the most wide reaching set of regulations is the Fair Labor Standards Act, which mandates the now commonplace overtime pay requirements, child labor laws, and more.

These regulations were ostensibly enacted to ensure "fair" labor conditions (according to the arbitrary standard set by the bureaucrats, of course), and protect workers. There's nothing inherently wrong with the standards themselves. The real harm comes with the one-size-fits-all mandate.

Suppose there's a seventeen year old looking for work. He happens to be an expert in meat processing, and interviews for a job in the meat department at a grocery store. He is shocked when he's told that it's illegal for him to operate any meat processing machines at work, because it's unsafe. He leaves dejected and unemployed.

In this scenario, the grocery store loses a skilled and willing worker, and the young man loses a job. Neither party used force against the other. The beauty of freedom of contract is that it requires voluntary action from everyone involved before anything actually happens.

Labor regulations impose an arbitrary standard of fairness on millions of people with different wants, needs, and standards. What's fair to one worker may not be to another, and with the freedom of contract, that's okay. Every worker can seek a job where the standards and conditions fit with what they personally are looking for.

There's a common fear that if these standards were removed, some companies would take advantage of their newfound freedom and abuse workers with deplorable conditions, hours, and pay. This fear ignores the crucial motivator; self-interest. Henry Ford famously payed his employees the (at the time) exorbitant wage of $5 a day, far more than anyone else was offering. His reasoning was simple. The more he pays, the more likely he is to both attract and maintain the highest skilled workers for his factories.

Nobody forced Ford to pay a higher wage. He benefitted, and so did his workers. Self interest motivates businesses to keep working conditions at a place their employees want. If they start to fall, the workers will seek employment elsewhere. Even if they would rather cut corners on safety and wages, their own desire to stay in business and make a profit forces them to keep things at an acceptable level.

Adam Smith wrote in The Wealth of Nations that "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self interest." He demonstrates with this example that self interest is an incredibly powerful guiding force that ultimately tends to yield socially beneficial outcomes. This is why freedom of contract works. Regulations simply get in the way.

Bernie Sanders' Agenda for America: 12 Steps Backwards (Part 1)

Senator Bernie Sanders' policy proposal, the "Agenda for America", is billed as 12 Steps Forward. In it, he details his proposed economic reforms. The proposal covers the standard run of social democrat talking points: more government growth, more intrusion into markets, and more onerous regulations.

In going through each item individually, it's clear to see that the agenda is truly 12 steps backwards. Away from a free market, and away from the institutional foundation that is key to prosperity in America.

1. Rebuilding Our Crumbling Infrastructure

In Sanders' first proposal, his goal is twofold. First, to artificially create 13 million "decent paying" jobs, to be accomplished by the second goal of $1 trillion "investment" in infrastructure. To start out with, that is a staggering amount of taxpayer money to be spending on anything. Moreover, his use of the catch-all term "infrastucture" is dubious, as it includes not only roads and bridges, but also schools and waste water plants.

While infrastructure repair may be necessary for the future, Sanders' proposed spending levels are outrageous. Moreover, part of the justification for this massive sum is to "create jobs". One of the most enduring economic fallacies in America today is that the government can, in fact, create jobs. The workers in this proposed infrastructure plan would be paid by the federal government, which in turn can only get funds through taxation or borrowing.

Either way, that money has to be diverted from other uses in order to be used by the government. While it is true that these 13 million people would have jobs (however temporarily), it's also true that those trillion dollars could have been used to potentially create more or better jobs, groundbreaking technological advancements, or a whole host of other things. None of that will come to fruition, however, because the money was taxed away to be spent on something else.

2. Reversing Climate Change

Next, Sanders proposes sweeping subsides to "sustainable energies" among other environmental pet projects. The entire project reeks of cronyism (which Sanders purports to be against) by picking winners and losers in the energy market.

Alternative energies are famously expensive and comparatively inefficient. Diverting more tax dollars in the form of subsidies would indeed "create good paying jobs", as Sanders claims, but only for those in the alternative energy space. What about the lost jobs in coal and oil? What about the more expensive power and heat for Americans across the country? Sanders is silent on this, but these concerns are likely beneath his lofty goal of an American-led climate change reversal.

3. Creating Worker Co-ops

This marks the first appearance of Sanders' economic nationalism, where he proposes "new economic models", such as a co-operative, in order to counter corporations who "send jobs to China". I actually agree with part of his outrage (over the massive targeted tax breaks given to said corporations), but  Sanders doesn't seem to oppose cronyism in general, just for the stuff he doesn't like.

His solution is to "provide assistance" from the government in order to restructure business as worker owned co-operatives, wherein workers invest in and own the business, and collectively make democratic business decisions. Can you imagine the chaos of just a mid-sized company making every decision democratically? There would be an immense time cost in just the administration of such an affair, and it would result in more time bogged down in democratic meetings and less time actually working. Far from increasing job creation and productivity, the plan would easily flounder in a loss of productivity.

There are indeed situations where worker owned co-ops may make economic sense, but pushing for it at a national level would be a failure.

4. Growing the Trade Union Movement

Currently, union membership in the United States is at 11.1%, a .2% fall from the year prior. Sanders believes that it is only through collective bargaining and union membership that workers will be able to get higher wages and benefits. While it is true that union members, on average, have higher wage increases than non-union workers, there's more to the story. To begin, the more expensive it is to employ a worker, the less workers will be employed. In other words, unions can often lead to less jobs, not more.

Unions are in general a benefit to workers in them, but not necessarily always. In many workplaces (particularly, in states without a Right to Work law), workers are compelled to pay union dues (even if they deny association with the union). A portion of these dues are channeled into the political arm of these unions, who in turn funnel to the money to politicians like...Bernie Sanders.

Indeed, in many states, union membership is a condition of employment, regardless of what the individual worker wants. Though Sanders does not target Right to Work laws (at least, not here), it's clear that he remains on the side of Big Labor.

5. Raising the Minimum Wage

In one of his more widely accepted proposals, Sanders calls for an increased minimum wage. Though not cited here, he supports a $15 per hour national minimum wage. Approximately 3.3 million Americans (roughly 1% of the nation) currently earn at or below the minimum wage. And roughly 42% of American workers earn under his proposed minimum of $15 per hour. Isn't this a good thing? Shouldn't we want people to make mroe money?

The push for a higher minimum wage (for the benefit of workers) is largely counterproductive. The recent strikes specifically from fast-food workers to earn $15 per hour have led to increased automation in fast-food restaurants, again resulting in less employment, not more. It's economic lunacy to assume that you can double the cost of labor with no negative consequences on employment. Businesses don't have a massive store of money with which they can fund such huge increases in labor costs. The best solution, then, is to eliminate the need for labor as much as possible with greater capital investment.

Even if it weren't for that, businesses simply can't afford to continue employing the same amount of people at a doubled wage. There would be lay-offs and even greater unemployment as a result.

Sanders focuses on the fact that most can't survive on a minimum wage job alone. Jobs that pay the minimum wage are primarily for unskilled workers, who are happy to have a job at all. Raising the minimum wage essentially builds a massive barrier to entry for these unskilled workers into the labor market, where it simply isn't worth it to hire them.

While Sanders pushes this plan so that nobody who works full time "should live in poverty", it will simply make even more people live in poverty with greater unemployment.

6. Pay Equity for Women Workers

Continuing his pandering to his base, Sanders next proposes complete pay equity, that is, "equal pay for equal work". He's addressing the alleged wage gap that exists between perfectly equal men and women working the same job, and cites that women only earn 78% of what men earn.

At face value, this assertion already shouldn't hold much water. To begin, businesses could save a tremendous amount of money by solely employing women (which doesn't happen). The wage gap exists for many reasons, but blind discrimination isn't one of them.

First off, there's the problem of aggregation. To compile this statistic, the Census Bureau just compares male annual earnings to female, again, in aggregate. This ignores the fact that men and women tend to make different choices in the field of work they go into. In general, more men than women go into high-earning jobs, and vice versa. This is not an issue of mass societal discrimination, it's simply a matter of choice.

Another key cause of the gap is that women, moreso than men, tend to leave the workforce to raise children or after marriage. Men also tend to work in more higher-risk jobs (like fishing and logging), which again means more pay.

Apparently for Sanders, none of that matters, and he feels free to continue propogating the myth of the discrimination wage gap.

(You can find Part 2 here)

The Economic Illiteracy of Bernie Sanders

Bernie Sanders, the feisty Independent Senator from Vermont, is challenging Hillary Clinton for the Democratic Presidential nomination. Originally seen as little more than a token resistance, Sanders has continually drawn crowds numbering in the thousands, and his fair share of media attention. 

A Monmouth University Poll (August 5) shows that he is still well behind the frontrunner, Clinton, but comfortably ahead of the rest of the meager Democratic field.

Sanders is tapping into the anti-establishment sentiment sweeping across the nation, blaming "establishment politics" for the woes of the country. This outsider spirit, youth appeal, and distrust towards the status quo have caused some to dub him "the Ron Paul of the left". Indeed, many young left-libertarians are applauding his stances on money in politics and crony capitalism, and deservedly so. However, this only captures a small part of his campaign platform.

From the beginning, Bernie Sanders' campaign has been about economic issues. He favors economic reforms such as a $15 per hour national minimum wage, an end to all free trade agreements, and economic redistribution (calling our current system "rigged"). For every one thing he gets right (such as his opposition to the Export-Import Bank), he gets five things dead wrong.

Sanders describes himself as a democratic socialist, and his campaign rhetoric revolves around not only the political establishment, but what he calls the oligarchy. The oligarchy is the power structure of big business and government that allegedly colludes to conspire against the average American. To an extent, he's right about the disease. Crony capitalism, government-private partnerships, or whatever other intrusions of the state into economic affairs there may be are indeed one of the biggest problems facing America today.

However, his cure is worse than the ailment. Sanders consistently advocates for MORE government intrusion into the market, not less. He wants more regulation, less freedom of trade, and less freedom of labor. While some of his proposed reforms may indeed weaken big business, he completely misses the point.

Commerical interests have a tendency to use the coercive apparatus of the government to restrict competition, increase their own market share, and lobby for regulations that benefit their own specific niche in the economy, rather than the market as a whole. Sanders sees this and decries big business. He glosses over the fact that the only reason business interests are able to do this is through the coercive apparatus of the government! The centralized, bureaurcratic, constantly growing government is the source of the problem.

In his quest to purge the country of inequality, Sanders also chooses the most ridiculous topics to attack. He has claimed that we have too many choices of deodorant and sneakers while children go hungry. He advocates for a minimum wage of $15 per hour while simultaneously pushing for full employment, and pays his interns less than his lofty minimum wage.

Bernie Sanders has consistently displayed a massive economic illiteracy. Even with the few things he gets right, his abysmal economic policy prescriptions make him the absolute wrong choice for President.