July 24, 2004

Wanted: Department of Anarchy Methods I

Russ Nelson provides a useful device to determine whether a subsidy creates value or destroys it:

As a perfect example of why subsidies are wrong from the start, look at the subsidized bus service between Plattsburg and Watertown (NY). Riders pay $10.30 to ride from Canton to Watertown, and $15.90 from Canton to Plattsburg, but the ride costs $115.

I think that, as penance, Andy should have to ride the bus himself, and whenever somebody tries to get on it, offers them a check for $115 if they'll find another way to get there. Anybody think he won't get any takers? Think anybody will refuse?

Who would do such a good deed, offering users the cash equivalent of the subsidy to a service in order to see how many would take the cash? Nobody would really do it for free. You'd have to make it into a job. And what Department would you put that job into? You couldn't realistically put it in the department offering the subsidy. There would be a strong incentive to sabotage the one subsidy checker to protect the jobs of all the subsidy administrators (and therefore protect the department head's power).

This sort of thing is a perfect fit for a Department of Anarchy. Simply go to the various departments offering subsidies, calculate what the costs are, and on an irregular schedule see if the subsidy is actually worth it. If more than x% take the cash rather than the subsidized service, the subsidy destroys value and should be eliminated.

Posted by TMLutas at July 24, 2004 11:04 AM