A dollar an hour to park in royal oak..I bet businesses love that…not! (via Twitter)

If I had my druthers, the city would stop collecting property taxes and say to all the people and businesses: “You figure it out. The roads, the parking lots, the meters, they’re all yours now. Do with them (or not) as you wish.” So, this is not a defense per se of the proposed increase.

With that qualifier out of the way, I responded with a little Econ 101 knowledge: especially on a Thursday-Friday-Saturday evening, they could easily charge $3-4 per hour that much and there would be no shortage of people willing to pay. This is fundamental economics: when the price of a good or service is set lower than the market will bear, there will be a shortage of that good or service vis à vis the number of people who want to consume that good or service.

If parking were nominally “free”, it would be even more difficult to find a parking spot. Right now, parking is inexpensive, at fifty cents per hour during normal business hours and it’s still very difficult to find a parking spot. This is the number 2 reason why I don’t visit Royal Oak.

The number 1 reason is a preponderance of douchebags. I think the douchebags are attracted by low parking fees.

Stephen responded that, “As a rule, merchants resist parking price increases… they have a tendency to drive away business, but your point is well-taken.”

The notion that these customers (the same people who gladly pay $6 for a pint of beer and $190 for a pair of jeans) are going to be off-put by a 25-cent per hour increase in the meter fees is as retarded as a football bat, by the way.

Let me rephrase that: The business interests downtown oppose any change to this fee structure which would result in them bearing a greater amount (i.e., their fair share) of the burden for maintaining public parking lots in the city. The taxpayers in the City of Royal Oak are providing corporate welfare to the businesses in Royal Oak, predominately in the city’s downtown district. It is a direct transfer of wealth from the people who live and pay taxes in Royal Oak, to the people who only visit Royal Oak.

In a free market, there would be no taxpayer subsidized parking lots just like there would be no taxpayer subsidized bank bailouts, because there would be no taxpayers in the first place! How the parking situation might resolve itself, if I had my druthers (see above) is anyone’s guess. Here are a few options:

• Parking lots could be strictly private: belonging to a person or group of people who may (or may not) choose to explicitly charge for their use.
• An independent parking lot would probably charge daily or hourly fees to maintain the parking lot.
• A restaurant might charge a daily or hourly fee for entry, and validate the charge (or a portion thereof) for any restaurant patrons, or a restaurant might keep the lot for patrons only, building the cost of maintenance/upkeep in to their menu prices, just like they do with the amortization costs of the establishment proper.
• Or parking lots could be communally owned and operated — perhaps by a group of neighbors/citizens, but more likely by a group of commercial establishments with less absolute need for parking lots may pool resources together and establish shared lots, perhaps managed by the group or by a third party.

But instead, we have this pseudo-marketplace where the state or city zoning board sets (more-or-less arbitrarily) a uniform price for all places & times. The fact of the matter is that, although business interests may unanimously oppose fee increases, raising the parking fee is not necessarily “bad for business” or “bad for downtown Royal Oak”. The effects either way are probably de minimis, but I would argue that at least on principle of basic economic theory, subsidizing parking lots is a harmful distortion to market prices.

The results: parking is a clusterfuck during weekends and high-traffic events, and there are too many idiots wearing Ed Retardy jeans and fist-pumping all night long in sunglasses after dark.

So, how can I possibly be opposed to such a program? Because it’s funded by taxes, silly (i.e., legalized theft, extortion). And I am fundamentally opposed to all taxes, except for maybe some sort of “asshole tax”. Yes, if they could find a way to levy taxes only on people who are total assholes, I could be OK with that.

Other than the very vague description given in the press release, I know nothing about the study or its method. What I do know from years of experience in the field, is that “online consumer panels” pose many serious challenges to market researchers in terms of obtaining representative sample (they skew significantly younger), avoiding ‘professional survey takers’, etc. So, take it for what it’s worth.

Distributed Costs, Concentrated Benefits

One popular argument is simply the magnitude of the problem an. Spend $12M to generate $600M in revenues. I understand the difficulties in organizing competing businesses in some sort of consortium, but seriously this should be a no-brainer. “Difficulty” in organizing is simply not a valid justification for taxing people. It’s “difficult” to make a No.2 pencil — so difficult in fact that nobody really knows how its done — but we have them anyways. It’s “difficult” to raise money to build a factory to manufacture vehicles, but people do it all the time. Lots of things are “difficult” and require imagination, ingenuity, and the sacrifice of risk. But that doesn’t justify taxing people.

At the very least, it seems like an opportunity for dominant assurance contracts or real-life community-building. Less “competition” and more “cooperation”, if you will.

And it clearly fails the popular “public goods” test.

Macro explanations for the micro boon

Although it is not clear whether the authors are suggesting that the macro-economy had a positive or negative impact on these numbers, they do qualify the research, stating:

These results should also be considered in light of the economic conditions in the United States in 2009 which had a constraining effect on travel and traveler spending

In my grossly uninformed opinion, against the backdrop of a faltering economy, 2009 was probably a down year overall for vacations in the traditional sense, as families abandoned luxurious plans in favor of the “stay-cation.” It certainly seems plausible that the “stay-cation” phenomena could skew midwest travel, as people substitute Michigan vacations for the more extravagant vacation they might take under different economic circumstances.

Marginal consumption, and small margins

The hospitality industry operates on small margins. A fortunate restaurant might increase its sales by 10% but net profits increase maybe a fraction of a 1% (or less). This isn’t the sort of revenue that enables capital-intensive investments. It’s not creating long-term growth opportunities, it’s simply moving finished goods from one place to another.

Most of this spending is marginal, and purely consumption; i.e., it doesn’t really matter whether the gas station sells 1M gallons of gas in 2009, or 1.001 million gallons of gas. It doesn’t matter if a restaurant sells one extra steak dinner or one single extra beer. That is, it requires no additional labor, brings no unemployed people in to the labor force, and generally does not measurably improve the lot of anyone already in the labor force.

Seen and unseen

Every dollar funneled into, or otherwise diverted to the tourism industry is a dollar which can’t be used on other productive endeavors. So to some extent, tax-funded promotions like this encourage the mis-allocation of productive resources (labor and capital) in favor of the hospitality industry, and at the expense of every other sector of the economy.

Conclusion

The only palatable argument for such a program is if its used to offset resident’s taxes. So, if MI plans to reduce their property taxes by the net of $29M, or if they plan on refunding $29M worth of sales taxes paid by MI residents, I guess it’s not such a bad thing. But that’s not how it operates.

Instead, it is a direct transfer of wealth, corporate subsidies, if you will. Use $12M worth of money taken from taxpayers (an extremely distributed cost) in order to fund an Advertising/Marketing campaign to support business interests which, although still distributed, are significantly more concentrated than ‘taxpayers’. Hey, it’s better than spending their own money, and coming up with their own solutions to the problems they face.

Ad spending, and private business revenues/profits is not a public good which would arguably justify some sort of redistribution, and since it’s not a public good, we have to reject the Reagan-esque, trickle-down-economics argument which is mostly bullshit anyways.

Addenda

I swear when I was walking the dog yesterday evning I had one more even better response, but I lost that train of thought and it hasn’t come back yet…

Michigan had $23B worth of tax revenue in FY2009 — in all honesty $41M is like pissing on a forest fire.

I want some water.

I can’t put water in my mug, because after you’ve tainted a stainless steel mug with coffee, everything tastes like coffee.

I could walk to the drinking fountain every few minutes, but that’s not terribly productive. Or I could walk to the vending machine and purchase a bottle of water. But that means I’m wasting money, and to be honest, a plastic bottle is about as recyclable as a styro-foam cup, isn’t it?

This was ushered in under an “environmentally friendly” memo. I suspect it’s really a “cost-cutting” policy.

People who overestimate the malevolence of human nature are quick to conclude that, upon legalizing marijuana and cocaine, for example, all of these drug dealers would quickly find another lucrative, criminal enterprise in which to engage. I reject this hypothesis for (at least) two reasons which come immediately to mind, but first let’s put the picture in perspective.

• In Holland, the cannabis trade alone is valued at $3 Billion^[1]. It is so profitable only because competition is artificially hindered.
• Globally, the illicit drug trade is something like $1 Trillion per year. Even the production of opiates in U.S. military occupied and embattled Afghanistan has been increasing!^[2].
• The U.S. alone spends over $20 Billion per year on the “drug war”, about one-third of which is used to incarcerate 250,000+ non-violent offenders, at an average cost of about $70/day^[3].

If that sounds expensive, don’t stop there. The true cost of the drug war is far greater.

The explicit cost of incarceration is $70/inmate/day. The true cost would correctly include whatever productivity wouldn’t have been sucked out of the economy by the 1 in 3 state employees currently working in a correctional capacity. I’ve previously estimated that the true cost of incarceration is not the $28,000 widely reported, but rather that the true economic cost is closer to $100,000 per inmate, per year^[4].

That works out to be $25 Billion annually, or about the size of the GM Bailout, in the U.S. economy alone!

The profits accruing in the illicit drug trade are kept artificially high by prohibition.

Any restriction in supply (partial or complete prohibition, etc.) only serves to cement the profitability of foreign cartels and warlords. If the cartels aren’t making money, then neither are the footsoldiers and corner dealers. Take away the monopoly profits, or eliminate the institution which encourages monopoly profits, and few people will want to waste their time on these endeavors.

Although some people would have you believe that your average, run-of-the-mill drug dealer is truly a “bad” person, the fact of the matter is that for most of them, they believe (rightly or wrongly) that selling controlled substances is the most lucrative opportunity afforded to them, even given the extreme risks involved^[5].

In a report funded by the Wisconsin Policy Research Institute, researchers concluded that “drug sales in poor neighborhoods are part of a growing informal economy which has expanded and innovatively organized in response to the loss of good jobs.” The report characterizes drug dealing as “fundamentally a lower class response [to the information economy] by men and women with little formal education and few formal skills,” and the report notes “If the jobs won’t be created by either the public or private sector, then poor people will have to create the jobs themselves.”

At least one factor contributing to all crime (not just pseudo-crimes like drug-dealing) is lack of employment opportunities. Unable to earn a licit living, they will find another way to put food on the table. Some of them work off the books fixing cars, painting houses, etc. Others sell dope.

The availability of alternative means of earning incomes is artificially reduced.

There is a chapter in Freakonomics that examines drug gangs^[6]. If I recall accurately, the authors find that the average drug dealer only earns something like $3 an hour, so, much less than minimum wage across the country which make it illegal for a gas station owner to hire someone for $4 an hour. There are so many other restrictions on who can be hired, how they must be employed, what they must be paid, what actions people are “permitted” or “licensed” by the state to perform, and the costs of these restrictions are borne disproportionately by the poor and the unskilled (who often happen to be poor). Inner cities everywhere are blights: vacant houses and buildings that man is forbidden to occupy, state-housing projects in gross disrepair, open fields that no man may farm. Unable to find employment, some of these people will eventually decide to take the other $4/hour job, where they face a one-in-four chance of being killed over a few rocks of crack.

Almost all violent crime can be traced back to the drugs, not because of some inherent quality in the drug itself, and not because of some malevolent human element, rather because the monopoly profits earned by cartels in the drug trade are sufficient to compensate for the costs of war, and the illusion of these profits is sufficient to entice those willing to do the dirty work. In reality, if we eliminate all of the pseudo-crimes like smoking pot or selling cocaine, pretty much all that’s left are actual crimes, against person and/or property, crimes against which it is infinitely easier to protect oneself.

1. Kucharz, Christel. Holland: Cannabis Trade at All-Time High.
2. No Third Solution archives: Afghanistan and Prohibition. 20-September-2006.
3. Drug War Facts: Economics.
4. No Third Solution archives: Police State. 2-May-2008.
5. Hagedorn, John M., Ph.D., The Business of Drug Dealing in Milwaukee (Milwaukee, WI: Wisconsin Policy Research Institute, 1998), p. 3. (via Drug War Facts: Economics).
6. Levitt, S. and Dubner, S. Freakonomics, Chapter 3: Why Do Drug Dealers Still Live with Their Moms?

The unintended consequences of government intervention in individual retirement planning is terrifying: it’s so massive and affects so many people. I suggest that, as the working population grew over the last several decades, this process created its own macro bubble, for which there are a few contributing factors:

1. Even if prospects are poor, it seems foolish to turn down “free” and tax-deferred money.
2. The individual has relatively little control over the allocation of his funds, especially he can not “cash & hold”.
3. The individual can’t liquidate his holdings unless he’s unemployed, deqlinquent on your mortgage, or otherwise altogether financially f**ked.
4. There is no opt-out mechanism: even if fund managers think there is nothing worth buying, they have to buy.

For most people making small/minimum contributions, even abstaining from contributing to these plans would only make a barely noticeable difference in their take-home pay. Individuals, faced with the prospect of “free money” via employer-matched funds, as well as tax deferral, have a huge economic incentive to invest in these vehicles. People, faced with severe economic incentives to invest in these vehicles (“matching funds” and tax deferral) will more often than not, put 3% or 6% or 10% into a 401(k) type plan. Corporations get to include matched funds as part of total compensation, which is tax deductible, it’s like health insurance: “We offer this awesome Health Plan/401(k) plan as part of our total compensation package. You don’t have to sign up, but you don’t get any substitutions if you don’t, though.”

So, why wouldn’t someonesign up? Keep in mind that they’re not actually making a trade-off between A and B, they’re making trade-offs between A and nil. Now, the individual has essentially delegated her retirement savings to the fund. And the fund takes care of her retirement, so she doesn’t have to &mash; indeed 60% of working Americans think of their 401(k) as their primary retirement fund! But here’s the rub: The level of control which any individual can exercise over his account is relatively limited, for instance, Vin Suprynowicz tried to convert his holdings to physical gold, gold ETFs, mining shares, and finally to cash — he couldn’t do any of these! There are also strict limits on how and under what circumstances an individual may withdraw from her account, but typically one must be unemployed, delinquent on her mortgage, or have suffered the death of an immediate family member.

The bottom line is that people are contributing to these funds because they really don’t have another meaningful option. This is interesting, and terribly frightening, because I don’t think we’ve seen the tip of the iceberg yet.

The “value” of these funds have previously been buoyed by (essentially) forced contributions burgeoned by a growing workforce. Funds were being bought because money was coming in, and managers had no other option but to buy.

As the growth of the workforce slows or potentially declines, what happens to the values of all these funds? Or, to make mattes even worse, when the baby-boomers begin drawing down these funds (i.e., selling them) in order to draw a retirement income, what happens to their value when there’s nobody buying them on the other end?

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(H/T: Vin Suprynowicz’s recent editorial.)

But I’m fairly convinced that these machines are saving Meijer stockholders a boat-load of wage expenses. Installing a dozen more U-Scan registers was probably a substantial initial capital outlay, but it’s also eliminating a number of low-wage employment opportunities. Because the minimum wage is in the midst of a 40% hike, which came as no surprise to anyone, a number of people who were making $10 an hour (plus incidental benefits, taxes, etc.) scanning groceries are now unemployed (or about to be unemployed) and watching a machine scan groceries that they can no longer afford to buy without welfare assistance. When the wages due to labor are held artificially high, a few lucky employees are able to reap the benefits, but the rest of them are out of luck as labor-substitutes like capital equipment are made artificially more attractive from a profit-and-loss POV.

Iin the wake of other mega-catastrophes like hurricane Katrina, the bad publicity surrounding the CA wildfires doesn’t help the reputation that insurers have. Who knows, someday we might even see a class-action suit against P&C insurers in California, exceeding the $3 Quadrillion settlement demanded by some of the Katrina victims.

I will take a brief moment to remind my readers that insuring against some of these perils, in certain locations, is actuarially impossible. People respond to incentives. This much is elementary. Legislation however, often with large subsidies, has been crafted in defiance of the laws of probability and economics in order to combat the problem of people who want to have their cakes and eat them, too. The end result is a moral hazard of epic proportions, and one which is to an extent, self-reinforcing. Also, it’s communism.

Anyways, when legislation perverts the incentives in such a manner as to transfer the risks associated with certain geographies*, the laws of economics take hold: when behavior is subsidized, we get more of it. The increased demand causes either the construction of more homes in the risky locations, or raises the market values of existing homes. Or both.

These factors exacerbate the losses incurred by disasters like hurricanes and wildfires.

To the point, the article cites a contributing factor: a large number of underinsured homes, citing an 11/13 NYT article reporting that nearly 40 percent of California homeowners lack adequate (replacement cost) coverage. The industry of course, “rejects the notion that large number of underinsured homes is their fault.” Some go so far as to call such a notion “a figment of… political imagination.”

The article cites “failure to report improvements to the insurance company” as the principle cause of underinsurance. Aside from the fact that most people, in most places, are simply idiots when it comes to their financial security, I think that government manipulation of the market has been a contributing factor, as well. In some of the fire-prone counties in California, property values doubled in the 5 or 6 years prior. If the value of your property rises, and you do not have a guaranteed replacement cost policy, you’ll quickly find yourself up Shit Creek, sans paddle, when you try to file a claim. And it does not matter whether the property increases in value because of improvements you’ve made, or because of inflation. The latter is arguably more difficult for the lay person to recognize as a problem.

The moral hazard created by the regulatory agencies is, to be sure, part of the problem. Excessively loose monetary policy, which caused the run-up in housing prices and the mortgage bubble and the current “economic downturn,” was simply (no pun intended) adding fuel to the fire.

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* The risk, of course, doesn’t disappear. It is simply transferred from those people who want to live in pristine (but risky) areas, to those who don’t. Hardly fair, by any notion.

White House counselor Ed Gillespie, describing Bush’s plans for a new school initiative, said it would be called “Pell Grants for Kids.” If approved by Congress, it would provide money for poor kids in struggling schools so they could shift to private schools or a better public school outside their district.

Federal assistance for private schooling will do (for private schools) exactly what federal assistance did to higher education. As more students strive for a limited number of seats, costs will increase. And as long as the federal government continues to subsidize the expense, the costs will increase without bounds. Rising costs will crowd out some of the non-poor who were previously able to afford private education without assistance, adding them to the queue of poor-folk no longer able to afford a way out of the shitty public schools they had previously worked so hard to avoid — even going so far as to continue paying for them in addition to the private school tuition. Their children will then be forced to compete for “need-based” assistance…

The thin end of the wedge argument is that federal funds tend to come with strings attached (e.g., military recruiters on college campuses which accept public financing, the creation v. evolution curricula debate, etc.) Is there any valid reason to suppose public financing of private schools won’t suffer the same politicization?

In any event, the problem is poverty. And any policy needs to be directed towards the eradication of the problem, not it’s symptoms. End the war on drugs, which disproportionately destroys the family structure of the urban poor and minorities (who are, disproportionately, the urban poor). End the Social Security/OASDI fraud which reduces by 1/8 the incomes of all people, a tax-scheme that disproportionately affects the poor who by definition are under the contribution cap.

The more radical solution is to eradicate the entire, rotten infrastructure of public schooling, severing the ties between local governments, property taxes, and education — freeing up more money to be used for educational purposes, and setting the poor free from the arbitrary and oppressive school district boundaries that are part-and-parcel to the government system. When the entire system is broken, and even the proposed solution mirrors another system which is also demonstrably broken, the proper course of action is to allow a new system (or systems) to take its place.

A free-market is the superior means of providing all goods and services, at the lowest cost and highest quality, to all — wealthy and poor, alike.

The writer recommends Maker’s Mark bourbon, and although enjoyable, I’d prefer the (slightly) more expensive Knob Creek. Of course, I’m no expert on these things — but the experts will always tell you to go with what works for you. It’s always a good idea to stock a few bottles of wine, perhaps some Cabernets which go well by the fireside. A few sparkling wines or champagnes for aperitifs or dessert wines are nice to have, too. In the after-dinner drink category, Port wines and Scotch (I’m partial to Laphroaig) should always be included.

The diversity of tastes and preferences among beer lovers knows no rival, so despite our beer-snobbery, keep a few Bud Lights on hand for the less adventurous. Rogue Ales makes a robust Christmas ale which reminds me of something else I’ve had before, although I can’t place my finger on it. Samuel Adams also makes a very interesting and complex Christmas seasonal, Old Fezziwig which I’d also recommend for those seeking something richer than the typical American-style light lager beers, which I try to avoid at all cost. Local to Michigan, the Third Coast Old Ale brewed by Bell’s, might be a little (or a lot) harder to find throughout the rest of the country, but if you see it on tap at your local brewpub, or in the aisle of your favorite purveyor of fine spirits, give it a try.

In related news, The Economist is reporting that Law of Unintended Consequences, Federal Farm Subsidies, and the common thread among them: Energy Independence, for your inconvenience.

The Erie Community Foundation, in Pennsylvania, has received a pledge of $100-million from an anonymous donor.

But a more appropriate answer would be: Just about everyone. Drive down Main Street of any suburb during holiday season and watch as drivers roll down their windows at red lights to donate to the Knights of Columbus and the retarded children. Or to the local Salvation Army volunteers who pose as Santa Claus, ringing the bell outside your grocery store. Or to the local Fire Department when they host a pancake breakfast. For over a decade (perhaps longer) Big Boy restaurants in conjunction with the Boy Scouts, has coordinated a food-drive of undeniably epic proportions. I’m sure that wherever you live, there are dozens of charity-minded individuals and organizations just like these described above.

But some people insist that individuals aren’t giving enough. To them, the answer is clear: Government needs to give more. But the only way this can occur is if Government first takes more to begin with, from each and every one of us. Entirely neglecting to notice that Government is itself, (by crowding out private charity) the root cause of the need for more charity, increasingly, it begins to appear that Government intervention is the only viable solution. But this solution is fatally flawed.

What these advocates of intervention “see” is the government redistribution of incomes. What they don’t see is at least twofold: How that income would’ve otherwise been spent (the demand for goods and services creates opportunities for work) and how much more of that income would’ve otherwise been given to charities. One point that I never tire of repeating (OK, I do get kind of tired of it) is that by-and-large, people continue to give in spite of, and in addition to the onerous levels of taxation that many of them face. And virtually none of these people give any surplus charity to the government, although they certainly could. These people are facing aggregate tax rates approaching or exceeding 50% (sum of income taxes, sales taxes, sin taxes, property taxes, etc.) of their gross income, yet they still give to charity either through monetary donations or volunteering in-kind. Clearly, the evidence suggests that most people have a very strong sense of community and charity — yet we are led to believe that without government (to whom nobody voluntarily gives), donations to charity would simply dry up? The logic required to arrive at this conclusion is simply mind-boggling.

Would you stop giving to charity if you had more money to give?  Or would you give a little bit (or even a lot) more?    The bottom line is this: There are many, many people just like you, who express concern about the plight of the less fortunate. You and the Anonymous Millionaire Benefactors, are the answer.