Lisa Schweitzer: Remember when biking used to be a fun thing rather than An Important Thing? « Sustainable Cities and Transport:
“I think one of the reasons why there is a resistance to otherwise nice things like local foods and bicycling concerns the often terminally joyless way their advocates present the Great Social Good that The Better People Who Do These Things create, unlike you, you indolent, planet-killing dolt.”
Having recently experienced a Minnesota state government shutdown (and on the verge of a federal one), we should draw some more fundamental lessons than the left vs. right politics are messed up, personalities affect outcomes, etc. These are all true given the structure of the game. Why must the game be structured this way?
We have over the past two centuries centralized government, removing functions from independent groups of individuals (charities, guilds, clubs, companies) and brought those functions into centralized government. (Well, several single centralized governments: national, state, local). There were reasons for all of these changes as they occurred, but the reasons at the time may or may not still apply. Sometimes the government service emerged from a central government when the economies of scale were large, sometimes the function is a result of state takeover of private institutions.
I propose the lesson to be learned is that, to avoid a total government shutdown, the government should not be totally central.
The budget should not be unitary, with all resources into a giant pot, where it is centrally allocated out to all functions. This structure makes the government fragile. A robust government should not shut down because of an impasse. Each department/division/agency should have its own revenue sources and its own expenditure authority, most of which are not subject to annual legislative approval. So for instance, the Department of Transportation has a gas tax and some miscellany. A transportation commission decides the expenditures and the revenues required to satisfy them, and with approval from a public utilities commission for any changes in rates, goes forth, and collects revenue and spends money as needed to provide services. This kind of DOT is not shut down because of a decision impasse in some other department.
Looking up the functions of state government, I found the list below of the Governor’s Recommendations by agency. The shear number of agencies is almost enough to make one a (big ‘L’) Libertarian.
I believe many of these functions are important, and many of course are relatively small. In the small category, The Barber Board, for instance has $188,000 in expenses and $221,000 in revenue. But does barbering really require (a) state licensure (Matthew Yglesias has been doing a series mocking licensing requirements), and (b) state budgetary approval, i.e. shouldn’t this be self-managing and autonomous, so it does not need to be on budget. Why should a profitable unit of state government be subject to shutdown? Can’t the state just charter a Barber’s Guild (Civil Engineer’s Guild, etc.) and be done with it?
[We could then deregulate, and allow you to get your hair cut by someone not in the Barber’s Guild, at your own risk of a bad haircut. Similarly (if not more controversially) with a Civil Engineer’s Guild, where there would be a regulation for full disclosure so that the building would have to prominently identify the engineers and architects and who certified them. If insurance would not be given on buildings not designed by certified engineers, few would build, live in, or work in such buildings. If insurance is readily given, perhaps the certification is not deemed valuable.]
Many of these regulatory or service units are, or should be, self-funding, suggesting they need not be state agencies. Many of the “Boards” fall into this category.
DOT of course could break even with an appropriate user fees.
Corrections historically was a profitable agency, Stillwater wanted the prison back in Territorial days as the free labor helped the logging industry. I am not suggesting we recreate that, but if we reduced the number of prisoners by decriminalizing more drugs, e.g., and then managed the remainder, we might have companies bidding to operate prisons, rather than subsidizing it.
Police similarly could break-even on many crimes, misdemeanors and offenses, by charging appropriate fines. This might create perverse incentives if carried too far, fines could not be too high or the police would have no revenue due to no crime. But fines instead of, or in addition to, prison could be considered for more non-violent crimes. Other departments also have enforcement/fine characteristics (human rights, agriculture, commerce, labor and industry, etc.) which could be separated. An off-budget Board (appointed by the Governor with Legislative consent) would manage the revenue and expenditures, and would have authority over some revenue stream (e.g. licensing) (as authorized) until the authority was removed.
If we can separate the regulatory and redistributory functions, and rethink what is provided by government vs. what government wants to ensure is provided, we can have a robust network of separate, smaller institutions (public and private), and a minimal centralized structure that can be paralyzed at the whim of a few parties.
This is a blog post, not a thesis, so I won’t go into every department and suggest how it could be given autonomy (revenue + authority), but many of these are self-apparent.
The list of State Departments
Mathematician and Transportation Historian Andrew Odlyzko has just released The collapse of the Railway Mania, the development of capital markets, and Robert Lucas Nash, a forgotten pioneer of accounting and financial analysis
Abstract: It is well known that the great Railway Mania in Britain in the 1840s had a great impact on accounting. This paper contributes a description and analysis of the events that led to the two main upheavals in accounting that took place then, and of the key role played by Robert Lucas Nash in those events. He was a pioneer in accounting and financial analysis, providing studies on the financial performance of railways that were more penetrating and systematic than those available to the public from any one else. His contemporaries credited him with precipitating a market crash that led to one of two dramatic changes in accounting practices that occurred in the late 1840s. Yet his contributions have been totally forgotten.
The collapse of the Railway Mania provides interesting perspectives on the development of capital markets. The accounting revolution was just one of the byproducts of the collision of investors’ rosy profit expectations with cold reality. Shareholders’ struggles to understand, or, more precisely, to avoid understanding, the inevitability of ruin, have many similarities to the events of recent financial crashes. The Railway Mania events thus provide cautionary notes on what even penetrating accounting and financial analysis reports can accomplish. Railway share price behavior suggests that Nash’s contributions had a much smaller effect than his contemporaries gave him credit for.
One of my favorite quotes (p.8), which is still applicable:
On another line, a shareholder complained that his company’s directors kept claiming construction costs were under control for three years, and then “the cloven hoof display[ed] itself” when it was revealed that costs were over 50% higher than projected. When sections of a line were opened for service, the standard claim that shareholders and the public heard was that “traffic had exceeded the most sanguine expectations of the directors,” and it often took years before it became clear this traffic fell far short of initial projections.
Strategic misrepresentation and optimism bias are not new phenomena.
David Levinson, Transportist 
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