Center for Limited Government Newsletter – Aug. 11, 2011

1. An Education in Economics

By Edward N. Robinson 

The recent debt ceiling debate in Washington, and the seriously deficient nature of the public discussions of the related issues, lead me to think that one of the best things that Utah could do for its children, and for the ultimate success of the state, is to insist that economics be taught in our public schools.

I don’t mean the economics of intricate formulas, or of prognosticating exact rates of growth, but rather the economics that explains the basics of why free market systems are the best way of meeting people’s needs at the lowest cost. It’s amazing the number of “thought leaders” who talk about profit-making as though it were a bad thing, rather than understanding that profit is the reward for people who produce goods and services that their customers want, and are happy to pay for.

If customers don’t buy enough of what you produce, you fail, and a competitor succeeds, rewarding success in satisfying customers’ needs. That dynamic allows the successful producer to continue to grow and innovate, while the unsuccessful producer must modify his product, or find something else to do. This process is sometimes harsh, but it results in people getting what they want at a price they’re willing to pay, and leads to producers reacting quickly to those demand and price signals.

The alternative most often offered up is some form of central planning, where government officials are asked to decide what people should want, and at what price, and then to produce at the required cost. The problem comes when they get the product wrong, or can’t produce efficiently – and then don’t have to adapt because there’s no competition forcing reality upon them. Or there is competition (such as FedEx competing with the Postal Service), but the government provider can ignore its failures and monetary losses because our “leaders” will use tax dollars to subsidize the money-losing operation.

Here’s another example of leadership failure: gasoline prices. When they go up, consumers and politicians complain and look for a scapegoat. Quite often, they look for and seek to implement policies that force prices down artificially. Sadly, such actions suggest a misunderstanding of economics.

High prices are signals to producers that they should make more of their product, or seek less costly alternatives, since people are demanding something that’s in short supply. This natural response to high prices has the effect of lowering the price of a good over time. On the other hand, artificially forcing prices down encourages people to use, often inefficiently, more of the scarce product, thus leading to even greater shortages in the future, without the offsetting, cost-lowering benefit of producers creating alternatives or larger supplies.

Maybe we should all be going to our local school boards to demand that simple economics be added to our school curricula.

The author, Edward N. Robinson, is director of Sutherland’s Center for Limited Government. He has been a financial adviser to corporations, a senior executive, and a management consultant. Prior to retiring in 2006, he operated Robinson Partners, consulting CEOs on corporate strategy and mergers and acquisitions. Before that, he was an executive vice president of Texas Commerce Bank (later Chase Bank of Texas and now JPMorgan Chase), where he ran the investment banking business, and then created and ran The Private Bank; was an executive director at Azurix, an international water utility business, responsible for corporate strategy and M&A; and was a managing director at First Boston (now Credit Suisse), running the firm’s Los Angeles office and the regional M&A practice. Mr. Robinson has a B.A. from the University of Michigan and a J.D. from New York University School of Law.


2. Budget deal: Utah still addicted to the federal trough

By Matthew Piccolo

A year and a half ago I wrote an article for the Standard-Examiner about how Utah is addicted to federal dollars. Since then, nothing has changed. The federal budget deal has again brought this issue to our attention.

A Deseret News article recently highlighted how Utah Transit Authority officials, “advocates for Utah’s poor and disabled,” leaders of the Utah Public Employees Association, Hill Air Force Base officials, and State Superintendent Larry Shumway are concerned that the newly signed budget deal could decrease federal funds available for the programs they support.

How much do these advocates and their causes actually stand to lose? …

To read more of this story on the Sutherland Daily blog, click here.


3. Utah Valley University employee’s tax-funded California adventure: $2,000

By Alexis Young

After a KSL viewer snapped a photo of a Utah taxpayer-owned vehicle parked near Disneyland earlier this year, the state fleet office identified the minivan as belonging to Utah Valley University (UVU). In mid-April a UVU employee drove the vehicle to a conference in the Anaheim, Calif., area. The journey was in fact an approved business trip, but the employee failed to get permission to drive the van to and from Disneyland.

So how much did this conference cost Utah taxpayers? We did some fact-checking and submitted a GRAMA request to UVU for the expenses, and here’s what we found out …

To read more of this story on the Sutherland Daily blog, click here.


4. Should Utah eliminate safety and emissions tests?

By Alexis Young

Representative John Dougall (R-Dist. 27) wants to pass a bill in the 2012 legislative session that would eliminate safety inspections entirely and loosen requirements for emissions testing. He argues that these requirements are unnecessary for many cars and do little to protect the safety of Utah drivers. Watch this video report to hear arguments for and against Representative Dougall’s idea. …

To see the video report on the Sutherland Daily blog, click here.