By John Kessler for the Indiana Policy Review Winter 2015 print and online editions.
Second, we must recognize that we live in a world of scarcity were there are not enough resources available for everyone to have everything they want. Because of this we must decide which projects to pursue and, just as importantly, which projects not to pursue. In a market economy, we have profits and losses telling businesses and banks which projects to pursue and which projects to loan money to. When a project is profitable people voluntarily spend their money and tell the business they like what they are doing. If the business is losing money then people are telling them to stop wasting scarce resources creating things we don’t want. How do politicians know that a project is one that the people want? The political process, unlike the marketplace, does not provide a good way for people to give feedback. The voting booth is our primary means to hold a politician accountable if we don’t like what they did with our money. But we only get to vote once every year, two years, four years, or six years depending on which office we are voting for. Even in the best case, when we can vote every year, the fact that you don’t vote for someone doesn’t tell them why you didn’t vote for them. It may not be obvious that they lost votes because of the public-private partnership project instead of some other issue.
Third, public-private partnerships can discourage productive behavior. Businesses begin spending a lot of resources trying to get taxpayer money instead of spending resources on productive activity. Society, as a whole, is worse off because many of those companies that spend scarce resources to get taxpayer money will not actually get the money. These companies and society would have been better off with their energy focused on doing their job better and providing a better quality product at a better price. The public-private partnership model creates an environment of competing for government money that hurts the economy.
Finally, I have a moral concern. When politicians spend money, they are always spending other people’s money. In the case of public-private partnerships the government is using the power of taxation to take money from a relatively poor person and give it to a relatively wealthy person. Instead of forcing people to pay for projects through taxation we should let people keep their money and voluntarily choose to spend their money on what they want. Only then will we have true economic development.
John Kessler, M.A., an adjunct scholar of the Indiana Policy Review Foundation, marathon runner and one-time track coach, is a continuing lecturer in economics at Indiana University-Purdue University Fort Wayne. To book John Kessler to speak at your event, click here