Tuesday, October 4, 2016

Asking the Right Question

What stifles change?

Though Alex Tabarrok's post on the Marginal Revolution blog focuses on the motivations for policies by self-interested political parties, it's reasonable to ask if all public officials and figures are motivated by something other than constituent and consumer benefit.

Building more roads or public transportation may ease traffic congestion, but it doesn't ask about the root of the problem: is there a need to commute to work? And as Edward Glaeser points out, infrastructure investment "too often it goes to declining areas that don’t require it and winds up having little long-term economic benefit."

Providing subsidies for homeownership may appear to reduce the cost of housing, but it drives up demand for and thus the price of housing without asking the important question: how well are people housed regardless of who owns the structures? And homeownership subsidies lock wealth (and loss) into an undiversified, immobile, illiquid asset that stifles labor mobility.

On CNBC this morning, Jack Gerard of the American Petroleum Institute spoke of the "American energy renaissance" and the need to get resources to market to keep prices low. But are energy firms doing this to benefit consumers or themselves? And traffic congestion boosts fuel demand, reduces productivity and efficiency, and produces a negative externality in pollution.

When running for Congress four years ago, a former IRS official cautioned: "Every line in the tax code has a Congressman's name attached to it." For better or worse, Congress is very attached to things it creates and industry is very attached to its consumers.