Posts tagged ‘public choice theory’

Materials I Use to Teach My 90-Minute Economic Class

I teach one 90-minute class a year in the senior economics elective at my kids' high school.  The teacher gives me a pretty free ability to cover whatever I wish.

Rather than trying to cover some school of thought, I instead focus the class on the seen and unseen (starting with quotes from Bastiat and Hazlitt).  We have about 12 economic problems, where we start with the seen, and then introduce the unseen.  We start with the classic broken window as the first one.

I teach the class with role play.  I give every student a couple of business cards with their role typed on them.  When I call on them I have them advocate for their role.  I have started to give a small food reward at the end of class to the student who best gets into character -- this has helped the role play immensely.   Let's take one example I do towards the end of the class involving price gouging after a hurricane.

We begin with the governor of Florida who has just signed an anti-price-gouging law.  We talk about how everyone hates price-gouging after a disaster.  What could be worse, right?

We then talk about a woman who spends most of her time at home, but rushes out to fill her gas tank right after the storm hits.  She has to wait in line for gas for 2 hours because everyone else has done the same as she, racing to the station, but she doesn't mind because she doesn't have anything else to do and feels better.  If asked if she would have topped off her tank if the price jumped to $6 from $3, she says no way.

Then we have an owner of a roofing company enter the fray.  His men are working 14 hours a day to put roofs on houses.  He is making a lot of money, and doing a lot of good as well.  Nothing is more important to people than fixing the roof before the next rain.  He may be the most important man in Florida at that moment.  But he can't keep up with demand, and worse, his guys are having to sit for 2 hours at a time to fill up their company trucks, when they should be repairing roofs.   He would gladly pay $10 a gallon if he could just keep his men on the job and not in gas stations.

So at this point we discuss "fairness".  It seems fair not to raise prices to "take advantage" of a disaster.  But is it fair to allocate gas away from the busiest and most productive whose time is most valuable to the people who are least productive and have the lowest value for their time?  We discuss how price caps shift rationing from price to queuing, and the people who get the product shift from those who most value it to those who assign the lowest value to their own time.

Finally, we discuss a guy in Georgia who has a tanker of gas he was going to send to a station in Atlanta.  They need the gas more in Florida, but they aren't paying more for it under the new price-gouging law, and so with his higher costs of driving all the way to Florida vs. Atlanta he is going to sell the gas in Atlanta.  If the price of gas in Florida were to rise to $6, he would send his truck of gas to Florida in a heartbeat.

This is the kind of discussion we have.   We will end up in a debate, with kids pointing out all kinds of things -- eg poor people who have a life or death need and might be shut out at $6.  We don't try to resolve things, but want them to understand there are unseen consequences to actions like price-gouging laws that must be considered along with the seen.  They may end up dismissing the unseen as less important than the seen, but it should not be ignored.

If anyone finds themselves in the same situation as me needing to teach a group (it could be adults as well) you are welcome to use my materials.  I actually print the business cards on Avery two-sided business card paper.  Attached are separate files for the front and back of cards as well as a sort of discussion key I use to guide the conversation.  We get into things, at least tangentially, like public choice theory and concentrated benefits / dispersed costs.

If you want to use the materials, you are welcome to email me with questions.  But these are all public domain so help yourself without permission.  (By the way, in trying to match the front to the back of each card in your mind, remember there is a mirroring effect, so the text on the right card on the backs in any given row goes with the front of the card on the left of the same row in the other file).

economics class discussion guide

economics class biz cards front

economics class biz cards back

Public Choice Theory and State Pensions

Good stuff from Josh Barro.  He discusses pension issues and pension accounting in depth, but this struck me as the key takeaway

Another major flaw is inherent in the very nature of pensions: They allow lawmakers to give valuable benefits to public workers (and to placate their unions) today without ever having to deal with the ugly future consequences. Handing out a wage increase, after all, generally requires coming up with a significant amount of money in this year’s budget, which can pose enormous financial (not to mention political) difficulties. Sweetening pension benefits, on the other hand, achieves much the same political end—and while it does increase a pension system’s unfunded liability, that cost is spread across pension payments that will be made for many years. In this way, legislators can please public employees now and leave it to future legislatures to clean up the mess....

Defined-benefit pension plans thus provide lawmakers with both the motive and the means to seriously abuse state finances. All over the country, state lawmakers face enormous temptation to appease government workers now, and let someone else figure out how to pay the bill in the future. At the same time, the complex accounting rules that govern defined-benefit pensions make it easy to cover up the costs of the scheme.

The only way out I see is not just a current fix (which can and often is undone in better times) but some kind of procedural fix, ala what CA Prop 13 did for property taxes, permanently binding the hands of legislators on these issues.  In addition, we really need to see the GASB adopt government pension accounting rules that parallel private standards, though I am not holding my breath on that one.  Of course the ultimate solution is to do what nearly every private company has done -- get out of the defined benefit pension business, and substitute a 401k with employer contributions and/or matching.

Public Choice Theory

I asked Don Boudreaux his opinion of the best primer on public choice theory, a topic of interest to many libertarians.  He recommended William Mitchell & Randy Simmons, Beyond Politics (1994).  I have ordered a used copy from Amazon and will give my thoughts on it once I have had a chance to peruse it.

Conservatives and Police

Radley Balko is having a back and forth with a guest blogger at Patterico over the drug war and violent crime.  Balko is always worth checking out, because while many of us bloggers may call ourselves the new media, we are mostly just a bunch of op-ed pages.  Balko is one of the few major bloggers out there doing real reporting.

One part of the discussion caught my attention:

Second, JRM leaves out the rest of my discussion of police militarization in the piece, which includes the very real, not-made-up statistic based on police department surveys done by Peter Kraska showing the number of SWAT deployments in the U.S. jumping from a few hundred per year in the 1970s to 50,000 or more per year today. Most of these SWAT deployments are to serve drug warrants. JRM can disagree, but my point is that even if these raids don't produce a single gun shot (though we know that's far from the case), that's a disturbing trend. The image of state agents dressed in black, kicking down doors, and wresting people out of bed at gunpoint in order to police nonviolent crimes just isn't one I associated with a free society (oddly enough, some prominent conservatives agree, at least when other countries do it).

Perhaps because I read this as my inbox is filled with Minuteman missives (I don't know how they got the impression I was somehow sympathetic to their cause) asking me to send a valentine to agents Compean and Ramos, but I sometimes really wonder about conservatives.

Conservatives distrust government and government bureaucrats.  Many understand public choice theory.  Many understand how faulty incentives within government can turn even good, smart people into stupid bad actors.

So I am left to wonder why conservatives feel ever so much better about the situation when the government employee is given a gun, and the unique authority to use it on the citizenry?