Making government smaller, we’re told, is an idea that increasing numbers of Americans find appealing. Accomplishing that may be a long trek, but the city of Golden Valley took a first step this week when, breaking with past practice, it announced it would not assist residents in removing debris from storm-damaged trees.
If Milton Friedman and Ayn Rand were not dead, they would applaud, as might Alan Greenspan and Ron and Rand Paul. That is because removing storm-damaged private property is not only a government action scorned by Libertarians, such as the five cited, but it also doesn’t clearly meet the criteria for government action accepted by mainstream economics. There is no clear evidence that private markets fail to meet society’s needs efficiently in such situations.
Indeed, just as one TV channel ran a story featuring residents disgruntled with their city’s decision, another channel showed many private contractors seeking the business of removing trees and repairing other damage from the weekend storms.
That matched our experience when a spring storm in 2004 blew down dozens of trees in our neighborhood, including one of our 35-foot spruces and a boulevard tree in front of our house. The next morning, four different contractors had given me bids on sawing up and removing the spruce. There was plenty of competition and good information about alternative prices and services, two of the essential elements for markets to work well.
Nor are there significant externalities in cases like this. Yes, if my tree lands on adjacent property, my neighbor is affected. But my legal responsibility to remove the tree and pay damages is well defined in law, widespread storm or not. And when just one decaying tree falls instead of many in a storm, a city isn’t going to haul away the debris free of charge.
Yes, when trees fall across streets, there is the external effect of impeded public travel. Tree owners cannot remove all such trees immediately, and there may be a broad public purpose in a municipality doing some cutting and pushing aside to open traffic lanes. They could then bill the tree owners for the costs incurred. But this is no reason for a city to shoulder large portions of the general cleanup. Thus, Golden Valley’s decision to ax an unnecessary freebie will make the economy more efficient.
The above is a general sketch of how many economists would evaluate the situation. There would be a few dissents along the following lines. For one, the transaction costs of hiring a contractor may be high relative to the total job, especially for homeowners with limited damage. And a citywide pickup may benefit from economies of scale. Moreover, since most municipalities have trucks and other heavy equipment, largely for snow removal, the marginal cost of debris cleanup in summer may not be that great.
But the recent storm does provide one more case in the ongoing debate about the proper functions of government, one that will grow as recession-driven budget pressures bite deeper and deeper.
Another example is municipal-owned golf courses. The private sector clearly can provide golf courses and has done so for decades. Yet, cities also have built them, and while some city-owned courses are entirely self-supporting, at least in terms of annual operating costs if not in terms of returns on the value of the taxpayer-owned property and facilities, many newer ones are losing hundreds of thousands of dollars per year.
Yes, there are external benefits to courses in the form of open green spaces and space for winter activities such as sledding and cross-country skiing. But with the right arrangements, privately owned courses can provide the same amenities.
Ditto for the expensive quasi-water parks that have replaced bread-and-butter municipal swimming pools in many suburbs. The private sector provides many such facilities and might provide more if not for taxpayer subsidized competition.
And then there is Burnsville’s $20 million Performing Arts Center that lost more than $500,000 in its first year of operation. It is the most financially troubled of the several such suburban facilities built in recent years, but nearly all of them impose some fiscal drag on the city governments that built them. Most provide beautiful space, but the fees necessary to operate them have kept many community theater and civic music groups in traditional venues such as high school auditoriums or churches. Do these centers really meet an important need created by the private-sector failure or inadequacy of existing government?
The debate will be lively as the state’s “fiscal doo-doo must flow downhill” approach to solving its own budget problems increasingly pressures local government.
I’m not particularly exercised by local governments deciding to act in ways of which many orthodox economists disapprove. But I don’t think my taxes are too high, either, and I see my local government running at least as efficiently as some businesses I know. Many friends and readers obviously don’t share these sentiments. Expect to see local government services cut in bigger ways than curtailed storm-damage cleanups.
© 2010 Edward Lotterman
Chanarambie Consulting, Inc.