Friday, May 18, 2012

A Parable of Modern Mercantilism

Lots of folks think that what the economy produces is a magical product called "jobs."

That's nonsense, of course.  A capitalist economy is focused on producing goods and services, those goods and services that citizens want.  Jobs come and go; consumers rule.

One of the objections to politics that Public Choice scholars make is that politicians try to "protect" jobs at the expense of consumers / citizens.  So where the old mercantilists tried to hoard metal specie, modern mercantilists hoard jobs.  This can do great harm to citizens, the people political theorists claim a democracy SHOULD protect.  But political theorists ignore the actual incentives in the political system:  there is almost no reason to serve voters.  They are ill-informed, apathetic, and distracted. (I mean voters, not political theorists.  Though...)  Interest groups, on the other hand, are focused, tanned, and ready to help the politician out.  Serve the interest group, get reelected; serve voters, get hammered.

Examples are legion.  But a recent example here in NC is egregious that I have to admit to being surprised.  Usually some attempt is made to hide behind made up arguments.  But these guys just straight up demanded that their jobs be protected, even they themselves admit that the jobs serve no useful purpose whatsover. 

Do read the article.  Then go below the fold for some commentary.

Senator Tillman actually comes right out and says it:

Two weeks ago, the House Transportation Appropriations Subcommittee endorsed a budget provision that would delay the required inspections until cars were more than three years old. Proponents said the inspections are an unnecessary expense for motorists, because newer vehicles rarely flunk.
That proposal was killed Wednesday by a 7-5 vote in the House-Senate Joint Transportation Oversight Committee. That means the idea is dead for the “short” legislative session that convened Wednesday.

Sen. Jerry W. Tillman, a Randolph County Republican, protested that the measure would hurt garages, tire dealers and inspection stations – whose trade associations had lobbyists in attendance at the crowded meeting room.

“I know a lot of people who do this, and they sell some gas on the side, but most of their profit comes from these inspections,” Tillman said. “We have 7,500 small businesses that do these inspections.”
Car owners statewide pay $13.60 for the annual safety inspection. The emissions inspection, required in 48 mostly urban counties, costs an additional $16.40. Studies have shown newer cars have fewer safety or emissions problems. State motor vehicle and air quality agencies have supported the proposal to end inspections for cars from the three most recent model years.

Rep. Ric Killian, a Mecklenburg County Republican, said the legislation would free new-car owners from unneeded expense and state regulation.

If we accept Senator Tillman's logic, presumably we will need to get rid of the police force.  After all, criminals make their living by stealing stuff.  The police interfere with that.  So, fewer police means that criminals will have an easier time making a living.

Not an honest living, perhaps.  But there is nothing "honest" about inspecting new cars that we all know will pass the emissions test, and that still have new headlight bulbs that won't burn out for years.

A Modest Proposal
As usual, economics has a way out.  There is a Pareto superior way to continue to provide the income to the inspection stations, and yet save taxpayers time.  Just drop the whole charade of the inspection thing.  I go to the counter, and pay the $28 fee, and get credit for the inspection.  (North Carolina does not have stickers anymore, so it's all computerized).  Easy peasey, and I don't have to make an appointment and then sit in the waiting room for an hour.

Inspection stations still get their money, and citizens avoid the trouble of having to wait around for fake inspections.  There are 4.5 million automobiles registered in our state, and 700,000 of those are 3 years old or newer.  Assuming it takes an average of 45 minutes to get an inspection (even a fake one), and assuming that the value of time is $20 / hour on average, my proposal would save:

700,000 x 0.75 x $20 = $10,500,000

That is, just allowing car owners to pay for the inspections, withouth having to wait for the inspections, since they are pointless, would save the state more than $10,000,000.

Of course, if we got rid of the inspections completely (remember, they are POINTLESS!), car owners would save an additional:

700,000 x $28 = $19,600,000

So, the original bill would have saved taxpayers $30 million.  Our legislature has decided that $20 million of that should be set aside as a subsidy to people who provide pointless inspections, apparently at an enormous profit.  But we could eliminate the charade of the inspection, and just force car owners to fork over the cash directly, and save those car owners more than $10 million.

Why don't we do this?  Everyone is better off.  Station owners get their cash, the mercantilist legislature can hoard their "jobs," and car owners save a lot of valuable time.

The answer is that the charade is the point.  It's important.  If we admit that most government "services" are actually just the new mercantilism of protecting zero-productivity jobs, then we would have to think about getting rid of the jobs.   And then where would legislators get their campaign money?  They'd have to talk to actual voters, instead of lobbyists.  Ick.

It'll never happen.  Wait, I have to go get my car inspected.  Bye.


Anonymous said...

You're confused. There is no such thing as jobs bills. There's only consumer bills. Goods and services only exist when people have money to pay for them.

google: feedback loop.

John D. said...

I love this quote: "Because these are the folks that are catching some of the safety problems that cause accidents."

I believe the evidence clearly demonstrates that 99.997% of the safety problems causing accidents are caused by one part. It is in immediate contact with the steering wheel, gas pedal, and brake pedal. And I am unaware of any car inspection which identified as a problem that "part" of the vehicle.

Joel said...

John forgot the one of the most important parts, contact with the beer can

Unknown said...

Is this the right rate for checking a car's state each year? I am curious with the answer, I am from Indiana, and I want to compare the prices :). I got my website for additional information about me.