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Radically Inept
Wednesday, May 19, 2004
  MaxSpeak, You Listen!: GET ON THE BUS, GUS Woo Hoo.MaxSpeak, Congress listens.. Well sort of. But he does a good job of teaching the concept of Marginal Costs in "MaxSpeak, You Listen!: GET ON THE BUS, GUS:
"Similarly, the bus company operators reflected outrage that their local governments would pre-empt their own business ambitions. They too wanted the Big Fed Gov to come down like a corporativist ton of bricks.

It remained for MaxSpeak to hold high the banner of communist-libertarianism. We said the Federal government had no business telling Sacramento how to do bus service unless they were using buses to run over Christians, and that as far as economic efficiency is concerned, governments are perfectly well-advised to consider creating monopolies that run private busines firms into the ground. There is no economic reason to automatically afford a business firm a contracting opportunity.

The Amador owner characterized transit agencies as 'predators,' desiring the extermination of private operators. Ha ha. Of course Adam Smith pointed out that business persons desire the annihiliation of their competitors, including public ones we would add.

The potential merits of a government monopoly go to whether it does what people want at acceptable cost. Acceptable means not excessive and better than alternatives, including contractors. Usually, cost narrowly considered is an inadequate basis for judging who should do the work. Public services differ from private ones.

Even so, evidence on higher costs is less real than it might appear. Some of the cost studies employ a controversial model known as 'fully allocated costs' (FAC). Under FAC, the marginal cost of a specific activity is supplemented by some proportion of the agency's fixed cost. Fixed cost is what you need to spend before you can provide one unit of service output, or serve one customer. Marginal cost is what you spend by producing that unit, or save by not doing so.

In research, long-run FAC comparisons of public v. private often favor the contractor. Short-run MC comparisons favor government."
I think local government needs to keep as much flexibility as they can in issues like these. What happens in the event that things change? And they will. Sacramento, and the citizens there of, should be able to make a decision on a topic like this, far better that any federal govt including ours'. 
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