A Chart Your Councilman Doesn’t Want You to See

September 16, 2015

THE FOUNDATION asked John Kessler, who teaches economics at Indiana University-Purdue University Fort Wayne, to design a chart that would help the membership determine whether a public expenditure before their city council was economically sound.

No, that’s not exactly true. Our impetus came from a couple of decades of frustration listening to self-proclaimed fiscal conservatives slipping and sliding on this vote or that, telling us it all was too complicated to explain, that we didn’t understand how modern government worked.

Well, the chart below, which functions as a decision tree, dispenses with such folderol. That is true even though it concedes for our Democrat friends that some things give social benefits to everyone when people consume more of them and therefore could be subsidized.

This, of course, is what politicians claim for every proposal they raise. But economists make distinctions, dividing those proposals into at least four groups of less or more economic justification.

Education will serve as an example: the more educated people are, the better off we all are. If we apply it to the chart, though, we can see that this in itself does not make education a “public good” in the eyes of an economist. That is because it is “excludable” and because it is possibly “rival” in consumption (see definitions in the chart).

“The rule of thumb is that if the government is going to subsidize something, it should always subsidize the consumer and never the producer,” Kessler advises.

None of this means that there are not reasons to vote for measures outside our chart’s parameters. It just means that those reasons may be uneconomical and involve personal ambition, cronyism and crass expediency — not the motivations we like to see in our public policy.

Click here for access to Kessler’s full article “The Role of Government.”

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Kessler chart



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