The Houston Chronicle carried the story On July 8th, 2010, that the Renew Houston charter amendment campaign had reportedly garnered 30,000 signatures which they turned into the City Secretary's office for verification and certification for going on the November 2010 ballot.
The Wizard has heard CM Stephen Costello speak twice on the Renew Houston initiative, and intends to blog about the matter, but before writing about the charter amendment campaign, the Wizard decided to quote Renew Houston itself as to why the promoters are pushing this agenda:
Houston is an aging city. Over 60 % of all drainage and streets are past their useful life; 80% will be past their useful life in the next 20 years. When a street is assigned for re-construction, it takes the city 12 years before the work will commence due to lack of funding. ...
Americans are seemingly bombarded left and right with stories of aging infrastructure that hasn't been worked on for decades, that of course needs billions of new tax dollars over and above what governments already spend to be successfully maintained. At the same time, America has witnessed spectacular infrastructure failures in recent years, including the failures of the levees in New Orleans after Hurricane Katrina and the collapse of the I-35 bridge in Minneapolis. President Obama's new head of the FTA, Peter Rogoff, made a speech in Boston in May 2010, where he stated that the six largest local government transit agencies in America had $50 billion in deferred maintenance of their rail lines, and now Houstonians are being told by an interest group campaign that 60 percent of Houston streets and drainage are past their useful life.
So, this begs the question: Why is it that governments, whether local, state, or federal, seemingly fail over and over and over again not to do needed maintenance on existing infrastructure? The easy answer to such a question would be, "What do you expect Wizard? Of course the gummit don't do things right! Why should this be any different? Why do you want to waste our time on this?" Well, if that's your answer, then maybe we should be privatizing public infrastructure. After all, this is an endemic problem!
But as though on queue, last month the Wizard received his most recent issue of The Independent Review. In the issue, economist Dr. John Bratland addresses the neglect of public infrastructure through comparing how a private entrepreneur handles capital (and capital goods), verses how politicians and bureaucrats spend their political and bureaucratic capital.
Dr. Bratland's article makes for great reading. Without going through the entire article, the Wizard will focus on the high points of what Bratland is saying.
Market signaling: Bratland notes that there is a distinction between capital and capital goods. Capital could be construed as everything that an entrepreneur has at their disposal in order to make judgments that help maintain, and hopefully increase, the income and profit stream of the enterprise. This includes labor, land, cash receivables, whatever. Capital goods are individual pieces of capital, including that land, labor, finance, machinery, etc. Bratland points out that the entrepreneur operates in a framework of contracts and private property rights that help guide the entrepreneur towards making the best decisions, and that the entrepreneur often faces competitive pressures and operates under some uncertainty about the future.
Bratland goes on to say that entrepreneurs will incorporate decisions on the purchase and maintenance of capital goods, based on whether they will maintain or increase the income stream. Entrepreneurs may decide, for example, to defer maintenance for a while on capital goods, if the entrepreneur judges that there will be little or no effect on the overall income stream. But, Bratland points out that successful entrepreneurs always incorporate maintenance costs into maintaining the capital goods in their purview. The entrepreneur will get market signals and feedback that help the entrepreneur make decisions on maintenance and replacement of capital goods.
Verses no market signals: Needless to say, none of this framework exists in the world of public infrastructure maintenance. Bratland points out that there is no market of exchange when it comes to public infrastructure and there are no private property rights. Most importantly, there is no market signal to indicate that a street, a freeway, a sewer line, drainage culverts, or any other element of public infrastructure needs to be maintained or for that matter be replaced! There is no income stream available to tell governments that maintaining existing infrastructure is the correct thing to do.
Politicians and bureaucrats will have, and pursue, conflicting agendas upon assuming office and during the course of their careers. Politicians may come under political or competitive pressures to keep taxes and expenditures low. Politicians may or may not be in a position to obtain substantial monies for infrastructure maintenance via the legislative process for their districts. Politicians will also spend monies on infrastructure if they can perceive that it will enhance their power, career goals, or affect roll call votes in other issues. Politicians may perceive for example, that they can gain more votes or power through voting to devote monies towards health care or education, rather than infrastructure maintenance. Politicians or bureaucrats may deny maintenance monies to other politicians, bureaucracies, or geographical areas, if it were to meet certain goals. Bureaucrats may have career goals that include obtaining jobs in academia or the lucrative private sector, which often have little or nothing to do with maintaining public infrastructure. Politicians and bureaucrats often correctly perceive that they often can gain more power, prestige, or favorable press, through building new infrastructure over maintaining existing infrastructure. Both politicians and bureaucrats may or may not be particularly publicly spirited in their actions.
But most of all, bureaucrats and politicians really are not in a position to be able to weigh whether building new infrastructure or maintaining older infrastructure is the best use of public dollars, since there is no market mechanism to guide their decisions. Making such decisions inevitably involves making some judgment about opportunity costs and social welfare, of which there are no real answers. Considering all these factors, as stunning as this sounds, neglecting existing infrastructure for years or decades and letting it go to pot could be - and often is - the best political outcome from the perspective of people who are involved in the political process.
Next, the Wizard will address the Renew Houston charter amendment.
Wizard
Posted by The Mighty Wizard at July 11, 2010 05:55 PM