Thursday, July 4, 2013

Credit card metality

Credit cards, a fairly recent invention, provide us with enormous convenience at the point of purchase. But there are both proximate and distal by-products. First, as consumers the act of buying and the act of paying are now temporally separated and become distinct. We make a bunch of purchases without worrying much about paying for each individually, and then face the inevitability of paying for all of them (no picking and choosing now) later on.

This creates a sense of normality in this separation of buying and paying that carries over into the legislative process. Lawmakers are happy to vote for programs, for which they have not really felt any obligation to pay, at least for at the time they vote for the bill.

Its exacerbated in California by two thing; ballot initiatives and redistribution. The ballot initiative means that people with less skin in the game can impose their "buy now pay later" mentality on everyone else. And since in the process the 'who pays' it generally a larger number than 'who benefits', we have in effect redistribution. Calling the imposition of taxes on all Californians to pay for one tiny town's pet project - a turtle tunnel for example - the provision of a public good is stretching the concept. In all likelihood, most wouldn’t agree and so the 'public' who benefit isn't really what economist think of as 'the public' (i.e. everyone).

Of course the corollary is that only the lowest common denominator get funded, and that isn't really desirable either. 

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