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Monday, April 28, 2008

Tax-Subsidized Recreation Brings Conflict

The following article originally appeared in Grand Junction's Free Press.

April 28, 2008

Fruita rec center another zero-sum game

by Linn and Ari Armstrong

In our last article, we discussed Barack Obama's confusion about zero-sum games, situations in which one person's gain comes at another's loss. Michelle Obama perfectly summarizes the zero-sum mentality (as reported by Neal Boortz[via Myrhaf):

"The truth is, in order to get things like universal health care and a revamped education system, then someone is going to have to give up a piece of their pie so that someone else can have more."

We don't think that people's pies, or their pay checks, belong to national politicians. Or to local politicians, for that matter.

A defining characteristic of a free market is that people are able to make mutually-beneficial transactions. One person's gain is the other person's gain.

A fun place to view the workings of the free market is Down Town Grand Junction during Farmers Market. But even here the invisible hand that Adam Smith talked about can go unnoticed. We do not see the thousands of exchanges of goods and services that came before a single apple could be sold at the Farmers Market. Breeding, planting, irrigation, fertilizer, tractors, haulers -- the list goes on and on -- made possible the apples we buy at market.

The free market system is beautiful to see, so why would anyone want to upset the apple cart?

Farmer John's apple cart competes with other apple carts and also, to an extent, with many other businesses. If we buy apples, we have less money to spend elsewhere. Yet if Farmer John offers quality apples at a good price, he'll make sales.

Now imagine that, one day, Farmer John notices a new apple cart across the street, one run by the government. The latest freeze was less frightening. These apples are subsidized by taxpayers, whether they eat the apples or not. Because the government forces people to subsidize its apples, Farmer John suddenly faces lost sales and, perhaps, bankruptcy.

Moreover, because people lose more money to taxation, they have less to spend with the lemonade stand, the dance teacher, and so on, who in turn have less money to spend for goods and services that they want.

The government's apples are seen, as Henry Hazlitt would say, whereas all the goods that are not produced, and all the services that are not offered, are unseen.

Subsidized apples are an example of a zero-sum game. Some people's gain -- the employees and customers of the government's subsidized apple cart -- imposes a loss on others -- Farmer John and everyone else who loses business.

True, there are winners and losers in a free market, but the difference is that, in a free market, exchanges are voluntary, so the losers are those who fail to satisfy their customers; the system remains one of positive gains. In zero-sum politics, the resources of some are forcibly transfered to others, creating a net loss.

Substitute a recreation center for an apple cart and we arrive in Fruita, notably a town that did not get its name from government-run fruit production.

Recently the people of Fruita voted on a measure to use tax dollars to build a city-owned recreation center. The measure failed on a tie vote.

This issue has divided the community of Fruita, and this is not surprising. Half of the community is willing to use governmental force, ultimately at the point of a gun, on their neighbors to build the center. (If our claim strikes you as overly dramatic, try writing a letter explaining that you choose not to pay your taxes, and see what happens to you.)

Is a recreation center a good idea for Fruita? We don't know. If it is, then it will be profitable on a free market. Those who want the center can raise the capital, build the facility, offer the services, and pay for it all by charging their customers (or collecting voluntary donations). Just like any other business.

But if the recreation center cannot be built without government force, it shouldn't be built at all. The government has no more business offering recreational services than it does selling fruit. The government should not subsidize some people's pet recreational activities at the expense of movie theaters, dance instructors, ski slopes, Boy and Girl Scouts, restaurants, 4H, tour guides, outdoors stores, rafting companies, and so on.

Even a small tax can have large effects when spread out over a city's population. Moreover, a government that can forcibly transfer a little wealth can forcibly transfer a lot of wealth. A few dollars here, a few dollars there, and suddenly the total tax burden approaches half our income. Families that would rather spend their money on an ice cream cone or put it toward the college fund, rather than toward a recreation center, have that right.

Zero-sum politics diminishes neighborly trust because it harms some to benefit others. The alternative is the positive-sum, voluntary free market.

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1 Comments:

Blogger Ari said...

Keith J. Pritchard sent the following comments on April 28. I held off publishing them, because I thought I'd reply quickly. I still plan to reply, but I have a number of other projects to finish first. For now, here are the comments, to which my reply will come later:

Regarding the article "Fruita rec center another zero-sum game," the author is missing an important economic concept -- Beneficial Externalities. He wrote that the Rec Center would only be a good idea if the free market could support it. He isn't considering the marginal social benefit. For example, it could provide a nurturing environment for youth who might otherwise be on the street experimenting with drugs. If the center kept these youth out of trouble with the law and out of prison (paid for by taxpayers), that is a beneficial externality. Using the author's logic we should auction off all public parks, BLM land, State Parks, and National Forest to the highest bidder!
Keith J. Pritchard

May 5, 2008 1:22 PM  

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