This post continues from my last comment under my previous post about democracy (which nobody talked about!) and public transit. It provides an opportunity for me to make a point I’ve been wanting to make for a while.
Jeff:
“I guess the idea that I want to get across here is that I don’t think we should be providing everything they WANT but should rather be ensuring that they receive what they NEED.”
I would like to propose that need is not a basis for action, either in private affairs or in public policy. When I say “I need food,” what do I mean? Of course, I need food to survive, but it does not follow necessarily that I am going to get food. I will get food only if I want to. And my wanting food is contingent on my wanting to stay alive (or perhaps on my wanting to taste something or wanting to socialize with others over a meal). I don’t really “need” food. I want food, for various reasons.
So the idea I want to get across is that, when we decide to pursue lower inequality, we need to think carefully about what kind of inequality we’re trying to reduce. What we are concerned with redistributing is not transportation, food, access to healthcare, or any number of other seemingly important “needs” — it is the happiness people derive from these things that we are interested in. This is why I would prefer cash handouts instead of specific subsidies for things like food, housing, medicine, childcare, education, or transportation. If your goal is to give somebody who is less wealthy a higher standard of living, the most cost effective way to do it is to just give them cash. Then they will spend it (or save it and spend it later) in the way that makes them happiest. If someone would prefer ten pairs of shoes to some quantity of food, who are you to say that they don’t know what makes them happy? To look at it differently, why give someone the food and make them a little happier when you could give the shoes, at the same cost to you, and make them a lot happier?
One objection you would probably bring up is that, in your view, people cannot be trusted to make the best decisions about their own welfare. You say:
“One of the valuable roles that a government can play is to force people to do something that is against their short-term interests (e.g. raising taxes), in order to provide a long-term benefit (e.g. extensive free public transit).”
Wow, Jeff. Do you really want to live by your words? Perhaps people are impatient, spending too much now and not saving enough to spend in the future. How do we differentiate between the impatient person who is somehow falling victim to themselves and someone who really just values having less things now instead of more things later? And beyond that, even if people have some kind of bias such that they don’t think enough about the future, why do you think the government will do a better job? One could argue that government actually causes society to be more near-sighted, since the benefits people receive from government programs are immediate and tangible and the costs are abstract (and debt can be put off into the indefinite future).
And I don’t quite understand why it requires incredible strength of character, beyond that of the average lowly consumer, to be willing to pay for bus service. It’s really pretty simple. An entrepreneur judges what the demand is like in an area for particular runs at particular times, and then runs buses on the routes at the times when he or she can expect to turn a profit. No great foresight on the part of consumers is needed. They just have to be willing to pay to ride a bus.
“The people who can afford to make this kind of system [light rail] worthwhile aren’t the people who are going to need it and push for it.”
In the case of a line heading from the suburbs into downtown (like the MAX in Portland), what about commuters?
“if a private company runs into snags getting the system up then there is a good chance that the venture capital will run out, the program will crumble and then in the future, private companies will be much less willing to even try to get a system set up.”
What kinds of snags do you have in mind? If a project fails, it might be bad luck, but on the average it is because the project can’t produce enough value to justify the cost. Where you fear private ventures crumbling, I fear government-run systems persisting even while they lose money and produce too little value for society.
“in Denmark they have an expansive public transit system that is so good that most people don’t see any reason to have cars, you can just grab a bus and get wherever you are going almost as fast. The best part? It’s all free, you just get on and go wherever you need to.”
No, it is not free. Someone is paying for it. And why do you care whether people have fewer or more cars? If you are concerned about externalities like pollution, you have a point. Perhaps we could take a stab at that with an increase in the gas tax. If you just think driving cars is bad, then you can make a personal choice to try to switch from a car to another form of transportation in the future. But we shouldn’t penalize others for liking things we dislike.
“‘But I wonder, if these people can’t afford transit and our far from possible employment, how did they end in this predicament in the first place?’ Well maybe they had a decent job and then either lost the job or had to take a pay cut like when the economy tanked post-9/11. Or how about this, a poor person is living in the middle of the city in a very dense area, but they can’t find a job within a reasonable distance for walking or riding a bike, consider Eli (remember him?) he can’t find a job in Washougal (apparently), but he can take the bus into Vancouver and expand his job search significantly (he doesn’t but that’s another topic).”
So Eli can’t find a job in Washougal, isn’t willing to use the bus system to look for jobs farther away in Vancouver, and yet still eats and has shelter? Still has time for some DnD now and then? To think that migrant workers in China leave friends and family in the countryside and travel long distances to the big cities to find better jobs. People with far fewer resources than most unemployed Americans have been able to go to great lengths to find work. Eli may be a fringe case, being young and given his, uh, other circumstances, all of which probably put him far down the income distribution and make it especially hard to find a job.
Good Morning, Economics 
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April 27, 2007 at 12:33 pm
Jeff
I don’t care if the people are happy, making themselves happy is their problem not mine, what I care about is that the people have the opportunity to survive long enough to provide their own happiness. i don’t want to give money to people who are going to spend it on luxury items instead of essentials, if you want more shoes then get a damn job, but if you want some bread so that you can live long enough to get a job then I’m up for paying for it.
“One objection you would probably bring up is that, in your view, people cannot be trusted to make the best decisions about their own welfare. You say:”
I think it’s fairly obvious for an objective observer to see that, everyone is guilty to some degree or another (for instance I’m at work responding to you instead of working), but one of the things that I see is that many times the people who are in the situations that require welfare-style help are more guilty than the rest of us.
Regarding the value of government in long-term planning, most people I know are horrible when it comes to considering the future and an unfortunate amount of time the government is too, but I have more faith in the ability of the government to improve in this regard then the people.
“In the case of a line heading from the suburbs into downtown (like the MAX in Portland), what about commuters?”
If the light-rail hadn’t been there I wouldn’t have pushed for it, if the light-rail hadn’t been there and I’d been asked if I’d ride ride it my answer probably would have been “how much would it cost?” If the answer was $5 then I would’ve said no. The public nature of the system with the redistribution of wealth via taxes makes it worth my while to ride the MAX, if it was privately run the price would probably be higher and it wouldn’t by worth my money.
“What kinds of snags do you have in mind?”
What kind? All of them. There is an infinite number of ways in which a project can go bad. But I know that’s not the answer you want so how about these: major sponsor pulls out due to internal financial problems or a change of management, lawsuit is filed by someone in an attempt to preclude eminent domain and investors pull out, partway through the project one of the areas is deemed unsafe to continue in the project stalls and before a new path can be found the investors leave or the money starts to run low. I could come up with plenty more scenarios but I’m at work.
“Where you fear private ventures crumbling, I fear government-run systems persisting even while they lose money and produce too little value for society.”
I’ve seen numerous movie and game franchises fail not because they weren’t profitable but because they weren’t profitable ENOUGH, if the system was left up to private interests it is likely that many lines would be closed well before they were unprofitable due to the fact that the private companies are only concerned with maximizing profits not providing services.
“No, it is not free. Someone is paying for it.”
Right the tax system makes it so that everyone pays for it and the people who can afford to pay more do so.
“nd why do you care whether people have fewer or more cars?”
I don’t, my point was that their system is so good that the people don’t feel the need for cars. Even if I lived in the middle of Vancouver I probably wouldn’t give up my car because our public transit system isn’t good enough for my tastes (I’d probably use it occasionally still though).
And regarding Eli, you don’t need to preach to me about him being a lazy bastard but my point is that the bus system allows him the opportunity, whether he uses it or not, to cheaply look for employment farther away.
April 29, 2007 at 3:29 am
cdfox
“I don’t care if the people are happy, making themselves happy is their problem not mine”
Fair enough.
“what I care about is that the people have the opportunity to survive long enough to provide their own happiness.”
So you don’t care if people are happy, but you care if they survive so that they can provide for their own happiness? If you give someone who is just about to starve to death something to eat, then even if they become self-sufficient and provide for their own happiness afterwards, all that happiness is contingent on your act of charity. So it kind of sounds like you do care about people’s happiness — you’re just saying that food will ultimately bring more happiness to a starving person than luxury items, like 10 pairs of shoes. Which seems reasonable to me. Do you not think the starving person, if you gave them the option, would choose the food over the shoes?
If you really do just care that the person has the opportunity to provide for their own happiness, well, hey, everyone has the opportunity to be Bill Gates. Of course, most of us will not, but there are no legal barriers (or at least not many in this country) to accumulating that kind of wealth. More down to Earth, isn’t it fair to say everyone has the opportunity to provide a decent level of happiness to themselves, in the US, Europe, Japan, etc.?
“I think it’s fairly obvious for an objective observer to see that, everyone is guilty [of not making the best choices in order to maximize their welfare] to some degree or another (for instance I’m at work responding to you instead of working)”
When you chose to respond to me, you apparently felt that a small diversion wouldn’t pose much of a risk to your continued employment (in fact I’m guessing it won’t impact your pay at all), and you found it more interesting than working. That sounds like an improvement in your welfare to me.
“most people I know are horrible when it comes to considering the future and an unfortunate amount of time the government is too”
I could argue with you about whether people or government consider the future, but there’s a third group besides individuals and government that you haven’t mentioned, business. Do you think business does not plan well for the future?
“If the answer was $5 then I would’ve said no.”
All depends on how expensive parking is in downtown, how bad the traffic congestion is, and what alternatives you have to doing whatever it was you were going to do in downtown. If the parking was expensive, the traffic jams unrelenting, and you really wanted to go to downtown and not somewhere else instead (say, if there was no other good substitute to Heald elsewhere), then you might have been more than willing to pay $5.
“private companies are only concerned with maximizing profits not providing services.”
And that, my friend, is one of the greatest things mankind has going for it.
“numerous movie and game franchises fail not because they weren’t profitable but because they weren’t profitable ENOUGH”
And WHAT does it mean if they aren’t profitable enough? If a given investment is profitable, why would a business not pursue the investment? It must mean that there are other investments that are more profitable. More generally, if a entrepreneur cannot raise the capital for a new business, even if it would likely be profitable, it must mean that investors believe they can get a higher rate of return (or perhaps the same rate of return with less risk involved) by putting their money into a different venture.
“I don’t [hate cars], my point was that their system is so good that the people don’t feel the need for cars.”
Ok. So what? They pore money into transit, and people own fewer cars and drive less. Similarly, if we subsidized ham, people would have fewer roast beef sandwiches. Why is it a good thing that Denmark has a nice transit system? Because of the mobility it provides for the poor, disabled, and elderly?
Let me offer what I have in mind as an alternative. First of all, I think we agree that markets are great when they work. So let’s start out by trying to get as much as we can out of market mechanisms. We can do this by removing the obstacles that are currently in place. Many cities (most, I think) regulate the taxi industry by limiting entry, controlling prices, and dictating how taxi companies operate. Other services, like minibuses, shuttles, and full-size buses are suppressed as well. It is my understanding, although I need to double check this, that it is illegal for any private company to compete with Seattle’s Metro bus service (I’m thinking it may the same with most public transit systems around the country).
After removing the barriers, I envision many people driving less and using these services more. Poor working people, for whom car loan payments and insurance are a heavy burden, seniors, and the disabled would have the option of using some kind of multiple passenger taxi that would offer more timely and flexible service than buses can. For a higher price, a more personalized service would be available. Buses would run on routes where there is enough demand, mainly higher density areas. A multitude of transportation services offered by private companies would cater to the differing needs of every group, and competitive pressures would lead to innovation.
Some people might be unable to pay. These same people are probably struggling with a variety of other expenses. For the reasons I’ve already mentioned, I think it would be beter to give these individuals a cash handout rather than specific subsidies for specific expenses. Although I also wonder about whether it would better to provide no help at all. But that kind of goes beyond the scope of this discussion. I’ll leave it to another post.
April 30, 2007 at 11:17 am
Jeff
“So it kind of sounds like you do care about people’s happiness”
No not really, you are closer to what I really think when you mention opportunity. I think that everyone should have the opportunity to succeed, some people make mistakes and end up down on their luck, that shouldn’t prevent them from having the opportunity to succeed. Now if they consistently make mistakes then yeah cut them off, but if they have simply made a couple mistakes and want to put their lives back together they should have the opportunity.
“everyone has the opportunity to be Bill Gates.”
Incorrect (sort of) and a common mistake when talking about the capitalist system. I assume that you are saying that everyone, if they work hard enough, can become filthy rich, this isn’t true. Wealth requires luck, working hard will reduce the amount of luck that is needed but in the end wealth is dependent on luck. There are an enormous number of small things that could have delayed, decreased or eliminated the wealth that Bill Gates has all of which are out of his control, but he was lucky enough that all those things went right for him, skill and hard work can minimize the amount of effect that luck has but cannot eliminate it.
“More down to Earth, isn’t it fair to say everyone has the opportunity to provide a decent level of happiness to themselves, in the US, Europe, Japan, etc.?”
Yes, but people aren’t perfect, we make mistakes and screw up our lives. Some people make long strings of mistakes and then when they hit close to the bottom they decide they want to turn their lives around, these people should be supported (at least as long as they make progress).
“When you chose to respond to me, you apparently felt that a small diversion wouldn’t pose much of a risk to your continued employment (in fact I’m guessing it won’t impact your pay at all), and you found it more interesting than working. That sounds like an improvement in your welfare to me.”
But if I worked instead of spending time posting to you I would probably be able to get a raise sooner, getting more money and moving me towards the point where I don’t have to work anymore. The short-term very slight benefit outweighs the long-term very large benefit.
“Do you think business does not plan well for the future?”
For the financial future? usually but not always. For every other aspect of the future? not usually.
“All depends on how expensive parking is in downtown, how bad…”
All true, I was assuming that things were like they are now.
“And that, my friend, is one of the greatest things mankind has going for it.”
So the willingness to mercilessly screw over others for the sake of maximizing profit is one of the greatest things we have going for us? How very Gordon Gekko of you. To a certain extent greed IS good, but beyond that extent greed is destructive to the many to the benefit of the few.
“And WHAT does it mean if they aren’t profitable enough? If a given investment is profitable, why would a business not pursue the investment? It must mean that there are other investments that are more profitable.”
Right, but the thing I’m pointing out is this, sometimes the most profitable path is not the one that is best, sometimes it’s just the most profitable. It is more profitable to make a “reality” TV show, but few if any of those shows add anything to out culture, in the future nearly all if not all of the “reality” shows will be completely forgotten (I hope) the only benefit will have been that the execs at the bigs networks saw their stock go up a half point. For a more damning example, which is more profitable, keeping someone sick and receiving treatments for their entire life, or curing them in one go? Having established which is more profitable, which should the hospitals do?
“Why is it a good thing that Denmark has a nice transit system?”
I still don’t think you’ve quite understood what I’m saying here. All I’m trying to point out is that it is possible for a cheap public transit system (made that way through the wealth redistributing ability of a progressive tax system) to almost completely remove the need for private transportation. I’m not trying to say that it is good or bad, merely that it is completely possible.
“Let me offer what I have in mind as an alternative…”
I think this would be interesting experiment and I’d support a test to see if it works, but I would be mildly surprised if it ended up better than a good public transit system.
April 30, 2007 at 11:21 am
Jeff
“Do you think business does not plan well for the future?”
For the financial future? usually but not always. For every other aspect of the future? not usually.
EDIT: I was answering as if you had said “do you think business plans well for the future”, my bad.
May 1, 2007 at 4:21 pm
cdfox
“I assume that you are saying that everyone, if they work hard enough, can become filthy rich, this isn’t true. ”
That’s just the thing, though, isn’t it? Opportunity can be defined in different ways. I meant just that no one (and no law or institution, by and large) is preventing from being as rich as Bill Gates. As to which kind of opportunity should be available to everyone equally, that’s a whole debate.
“So the willingness to mercilessly screw over others for the sake of maximizing profit is one of the greatest things we have going for us?”
You’re putting the cart before the horse. Business is driven by profit — it is indifferent to whether it screws people over or enriches their lives in the process. Fortunately for us, business tends to do much more of the latter.
“It is more profitable to make a “reality” TV show, but few if any of those shows add anything to out culture, in the future nearly all if not all of the “reality” shows will be completely forgotten (I hope) the only benefit will have been that the execs at the bigs networks saw their stock go up a half point.”
Oh, Jeff. Why don’t we just put you in charge, since you know best? Come on, let other people have their own preferences.
May 1, 2007 at 9:20 pm
Anonymous
“I meant just that no one (and no law or institution, by and large) is preventing from being as rich as Bill Gates.”
True enough. The problem I have with sweeping statements like “Anyone can be as rich as Bill Gates” is that they imply that all it takes is work when the reality is that most people will never come close to the set of circumstances that allow for great wealth, while many others are essentially guaranteed wealth and position, no matter how little ability they have, based off of nothing but an accident of birth.
“Fortunately for us, business tends to do much more of the latter.”
True, but when the it does the former it tends to be quite spectacular and life-shattering, Enron and WorldCom in the space of just a couple years for instance.
“Come on, let other people have their own preferences.”
Fine, I guess we can’t force people to be remotely intelligent. But that doesn’t address the second point, it’s much more profitable to treat indefinitely then to cure, so should health care professionals treat or cure? Should commercial research go towards treatments or cures?
May 1, 2007 at 9:21 pm
Jeff
Geh, that was me
May 1, 2007 at 9:57 pm
cdfox
“the reality is that most people will never come close to the set of circumstances that allow for great wealth, while many others are essentially guaranteed wealth and position, no matter how little ability they have, based off of nothing but an accident of birth.”
I totally with the first part, but about the second, you may be surprised. Here’s a link that might interest you:
http://www.marginalrevolution.com/marginalrevolution/2004/01/the_return_of_h.html
“Enron and WorldCom in the space of just a couple years for instance.”
It may be that I don’t yet have all the tools and information to really know this, but I intuitively believe that all of the recent corporate scandals represent a tiny part of what’s going in business and that the good that comes out of the system, the wealth that is created, makes these problems look miniscule in comparison. Not these scandals didn’t mean the world to the people who were affected, but my gut feeling is that they are a poor basis for a systematic criticism of our modern economic order.
“it’s much more profitable to treat indefinitely then to cure, so should health care professionals treat or cure?”
Wow, so many questions are coming in the context of this one post! Much of this really should go in separate posts, but oh well.
In “free market” healthcare system (i.e. no government health insurance, no publicly funded hospitals, no subsidy via tax exemption to non-profit hospitals, and absolutely no regulation of health insurance or healthcare, e.g. no licensing of doctors), we would treat healthcare much like we do any other good. Hospitals, clinics, etc. would compete for our business. It is true that a hospital that treats but does not cure patients would make more money — assuming the patients are stuck with that hospital. However, in this more competitive and price-driven system, such an unscrupulous healthcare provider would garner a bad reputation. Competitors would avertise that they can provide lower cost healthcare (e.g. curing in one go rather than prolonging treatment), and the bad apple would not long survive.
Alas, let us not discuss this too much in the obscurity of these comments! I should make a post about healthcare.