Can New Orleans schools thrive in democracy?

New Orleans Times-Picayune "Can New Orleans schools thrive in democracy" (September 14th, 2010) discusses the quality of public schools in New Orleans. It makes the case that New Orleans schools are rather bad, and the article questions whether or not public schools are reconcilable with democracy in New Orleans.

Understand, anybody who tells you the pre-Katrina Orleans Parish School Board had made a good case for democracy is a liar. The truth ain't in 'em. Our schools were mostly awful. The system's finances were even worse, and the board members were hostile to the very idea that they had anything to do with the way things were. Ellenese Brooks-Simms, the president of the board who later pleaded guilty to bribery charges, liked to blame the poverty of its students for the school system's woeful performance.

Corrections would simply note that bad, dysfunctional schools with concordant low taxes likely raise overall utility--at the very least, their presence along with the presence of school districts that aren't dysfunctional is likely a net benefit. Why? Some people have preferences for low-tax, low-quality schools. Others have a preference for high-tax, high-quality schools. Assuming that low quality is a function of low taxes and not simple inefficiency, more options are better.
In order to see this in a "guns and butter" like diagram, imagine there are two types of people, as described above. The first type, preferring disposable income, in depicted in blue. The second type, preferring education, is depicted in red. Then both types are unambiguously better if they are allowed to live (or move to) cities that they prefer. This is depicted graphically on the left (click to enlarge). On the right, we see that individuals forced to have the same measure of income and schooling make both worse off.
As we can see, allowing Tiebout sorting can enhance utility. Not everyone has the same preferences, and a distribution of public services rather than a single quality/standard is likely to make everyone better off.

Seatbelts are the lifesavers in your car

New Orleans Times-Picayune editorial "Seatbelts are the lifesavers in your car" (September 9th, 2010) speaks positively of seat belts.  While they have undoubtedly saved lives, they have also undoubtedly cost them through the externalities their cost-shifting generates.

More Louisianians buckled up this year compared to last, according to the Louisiana Highway Safety Commission, but the New Orleans area actually saw a 1.1 percent decline in the percentage of people using seat belts.

Even with the statewide increase for drivers and front-seat passengers, which went from 74.5 percent to 75.9 percent, Louisiana still lags behind the nationwide usage rate of 83 percent.

That's discouraging, because buckling up is a simple and easy thing to do, and it's a proven life-saver.

The most interesting economic concept when it comes to seat belts and safety regulation is the "Peltzman Effect", as Sam Peltzman discusses in his 1975 Journal of Political Economy article "The Effects of Automobile Safety Regulation" (gated).  Below, we reproduce his diagram graphically (click to enlarge).  What the diagram indicates is that risky driving gives us something we enjoy--for example getting to our destination more rapidly.  Our first bit of risky driving is particularly beneficial--perhaps when we are in a hurry.  As we increase our risky driving, the marginal benefit decreases.  This is represented by the downward sloping red line. Under a regime with no seat belts, we end up at an equilibrium represented by point A on the risky driving schedule.  Under a regime with seat belts, we end up at an equilibrium represented by point B.  As driving becomes safer, we drive more riskily.

This, in turn may cause more pedestrian deaths, whose cost is presumably not fully borne by drivers.  Below, we graphically depict the relationship between risky driving and pedestrian deaths (click to enlarge).  We can see that pedestrian deaths rise as we go from point A and B.  (Point C will be discussed below).

As a thought exercise, famous among Austrian economists, is what would occur if instead of seatbelts or airbags, we installed a large spike in driving wheels, faced toward the driver a driving wheel looking similar to this:

In this case, we would have the following relationship between risky driving probability of death to driver (click to enlarge):

If this is the case, we end up at point C on the diagram above (again, click to enlarge).

This article serves to demonstrate a few concepts.  First, a common refrain on Corrections: when we reduce the cost of behavior that has benefits and costs, we increase the partaking of that behavior.  Second, when that behavior has externalities, as it does with driving, we may actually foist the cost of risky driving onto pedestrians rather than consumers.    

Public housing authorities should adopt smoking ban

New Orleans Times-Picayune editorial "Public housing authorities should adopt smoking ban" (May 11th, 2010) advocates a public-housing smoking ban that is being considered by local housing authorities. However, it fails to note the Coase Theorem's input to understanding the problem of intra-household second-hand smoke.

Non-smokers living with people who smoke suffer the risks of exposure to second-hand smoke. The St. John the Baptist Parish Housing Authority wants to reduce those risks, and cut the cost of building maintenance, by banning smoking inside the agency's public properties. That's a move worth considering.

Corrections suggests that it doesn't suspect non-smokers living with people who smoke are necessarily not-well off. Specifically, we expect that any non-smokers who value a smoke-free household more than the smoker is free to pay the smoker to stop smoking in the household. Being a domestic arrangement, there are low monitoring or enforcement costs. Intra-household transfers are often present enough that every individual has an income of sorts to trade--where they may not pay in dollars, they pay through intra-household transfers, such as cooking, cleaning, television control, etc.

In this case, it appears that in all households where second-hand smoke is present, it is because the smoker values smoking more than the non-smoker values non-smoking. There does not appear to be an externality problem here. Banning smoking would seem to lower smoker's happiness, by definition more than it would increase second-hand smoker's happiness.

Congress' failure to extend flood insurance program is inexcusable

New Orleans Times-Picayune editorial "Congress' failure to extend flood insurance program is inexcusable" (March 30th, 2010) suggests that the decision of Congress to let the National Flood Insurance Program lapse is poor decision-making. Corrections questions the program itself, suggesting that it has caused, and is causing, moral hazard.

Members of Congress acted irresponsibly when they let the National Flood Insurance Program lapse for a couple of days early this month. Now they have let the program lapse again and for a much longer period. That's inexcusable.

Corrections would suggest that government programs that ensure bailouts for flood-prone regions are the more inexcusable phenomenon. The National Flood Insurance Program was enacted in 1968 to force individuals in flood-prone regions to purchase (often subsidized) insurance because government was bailing them out in the event of a flood anyway. Areas that were given government insurance often had to comply with flood standards; because NFIP was a government program, it was relatively rare for standards to be met--according to the August 1990 GAO Report "Flood Insurance: Information on the Mandatory Purchase Requirement", at the time, about 22 percent of Maine and 79 percent of Texas that was covered under insurance rules did not comply with federal standards. Such government incompetence amounts to subsidized insurance for individuals who live in flood plains.

Corrections, therefore, does not see why NFIP is necessary--it seems inefficient to pay people to live in areas that get flooded, and to build houses that don't have proper protection from flooding due to the moral hazard posed by NFIP.