Tuesday, July 29, 2014

Public Choice Economics in Action, Caveat Venditor Edition

Via A-Tab, a dog-bites-man story remarkable not for its content, but for its Straussian content.

Staples offered a deep discount on a few items to entice the State of New York to use them as exclusive vendor. To their astonishment, they found that demand curves slope downward. Now there are relatively small bureau offices with minor warehousing problems as they've stuffed their cabinets with more tissue paper than they're likely to need in a month of Sundays.

Big deal, right? Totally predictable if you're taken even a high school level economics class (or, yes, even no economics courses whatsoever).

But look at what it shows: government employees are ordinary people. They respond to incentives just the same as everyone else. There is no mystical alchemy that transforms the clay of humanity into a godhead of divine public service. Assuming away problems of agency or self-interest, dismissing or ignoring human foibles, hand-waving intractable organizational issues detracts from the rigor of analysis. This incident should be yet more evidence in support of the hypothesis that good intentions are insufficient to secure good outcomes.

But is it exploitation? One powerful organization took clear advantage of the letter of the contract, while obviously violating the spirit. Is there a moral duty to refrain from plundering an obvious unintentional loophole? Or must people who write words down on paper be held strictly accountable for the exact content of those words?

NB, as of the time of the publication of this post, Halbig hasn't yet advanced to SCOTUS to the best of my knowledge.

1 comment:

  1. That was hilarious. They did ask "are you sure?". I generally don't morally worry about buying discounted items en masse, assuming that if it wasn't mutually beneficial, the seller wouldn't offer it at that price.


Do you have suggestions on where we could find more examples of this phenomenon?