Cost Benefit Jr.™ / Halving It All

So General Dynamics is another run-of-the-mill aerospace and defense contractor offering products and services in weapons, combat vehicles, aviation, and shipbuilding. But the company’s IT unit engages in a service that isn’t defense related: it aids the Department of Health & Human Services’ Office of Refugee Resettlement (ORR) in coordinating placement of “unaccompanied minors” who have been separated from their families under Trump’s immigration rules.

The company has been scrambling to mitigate the backlash of this, including this tweet on what the company **doesn’t** do within the profitable family separation protocol. The backlash hasn’t abated, however, and even CEO Phebe Novakovic is on the receiving end of protests over her company’s profiting from Trump’s immigration policy.

But although General Dynamics’ bevy of lobbyists includes two former aides to members of Trump’s cabinet, Novakovic has her own frustrations with the Trump administration, as reported by *Forbes*: “Novakovic has expressed frustration at the Trump administration’s slow pace in filling Pentagon positions, and she acknowledged in July that the delays are slowing down the process of contracts being approved and filled.”

In addition to working in the Department of Defense, Novakovic also worked as an operations officer for the CIA. And her husband, David Morrison, used to work on the House Defense Appropriations Subcommittee. – writing for Fortune Magazine recounts a cozy story of their …: “Some years ago, when she was working at General Dynamics but hadn’t yet ascended to the top role, a former company executive recalls, “someone suggested we run an idea past David Morrison.” Morrison was then a top staffer on the House defense appropriations subcommittee, a powerful figure in defense contracting. “Phebe said she would talk to him at dinner,” the former executive recalls.” (Novakovic’s first husband, Michael Vickers, was Undersecretary of Defense for Intelligence.)

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This list is shorter than usual, primarily because Trump’s staff includes so many non-professionals who aren’t Washington insiders. This may seem like a good thing to some, as Washington needs more normal Americans participating in the process, rather than just beltway insiders. For what’s it’s worth, Trump’s non-professional staffers include a contestant from his television show and a former petty thief.

Many staffers on Hillary’s campaign staff have lobbied for corporations that are pretty un-progressive.The Grocery Manufacturers Association, that Drane lobbied for, often attempts to weaken progressive GMO regulations through its lobbying efforts. And Abedin’s lobbying firm Teneo did work for Jon Corzine’s MF Global before it went bankrupt.

Well, it’s that time of year again, and as we lack the potential for snow here in Florida, we rely on twinkly Christmas lights to get us in the holiday spirit! The Orange County Park & Rec department (OCPR) here in Florida has been organizing the Cypress Grove Festival of Lights for 15 years. This year, though, it all went horribly wrong. On the festival’s first night, demand increased by 800% over last year. Instead of a 200-car turnout, 1800 slow-moving vehicles turned up, paid their $3, and commenced to clogging the road. What used to be a fun holiday tradition soon became a traffic nightmare, as well as a safety concern.

As usual, we’re witnessing another government entity trying to “do good” through economic ignorance. As a result, people are pissed. Residents are angry, inconvenienced and late home. County officials are angry, frustrated by their inability to handle such a large crowd. And Christmas light enthusiasts are angry, disappointed the event has been canceled. So where did the OCPR go wrong?

They didn’t charge enough for the event. And here’s why economics matters, even at Christmas, even at the county level.

We now know that 1800 families were both willing and able to pay $3 to consume this experience. That’s just a given – think of it as “science”: under the given demographic and financial circumstances present in and around Cypress Grove, Florida in December of 2015, 1800 consumer units are both willing and able to pay $3 to consume this experience.

And that’s OK. That’s even a great thing, if you’re trying to attract 1800 consumer units! But Cypress Grove was only trying to attract about 200. Put another way: Cypress Grove could only handle about 200. That’s because the residents who lived there were either unwilling or unable (or both) to endure the traffic congestion making a 3-mile drive home take 2 and a half hours. Police on duty that night were either unwilling or unable to manage that amount of traffic. And apparently, the county is either unwilling or unable to increase the man hours necessary to manage that amount of traffic.

Economics (the art of not making everyone angry) is all about who is both willing and able to do things. What did 1800 cars willing and able to pay $3 tell the OCPR? Raise the price!

Prices aren’t just something one person can guess at. Markets determine prices. And just as a reminder, markets aren’t some nebulous economic concept or nefarious committee of top hats. Markets are more like soylent green: markets are people.

The market for Christmas Light festivals (people who enjoy Christmas Light festivals), or more specifically, the market for that in and around Orange County, has just given us a valuable message: $3 a car will attract about 1800 of us right now. The market for supplying the Christmas Light festival venue (people living and patrolling in Cypress Grove) has given us another valuable message: we can’t handle 1800 cars a night. So the market (all the people on the both the supplying and demanding side of this event) is telling us the price is too low. In fact, this is exactly how markets determine prices, and why government should never determine prices. The people are telling — nay, screaming — for the OCPR to raise the price!

But of course, the OCPR didn’t do that. It’s government. So rather than figure out how to achieve balance, harmony, and happiness through economics, they canceled the event. Gotta love progress.

John Maynard Keynes hated Say’s Law – the idea proposed by Jean-Baptiste Say that boils down into the well-known phrase (among Keynesian economists, anyway) of “supply creates its own demand.” This meme helps clarify what Say’s Law really means.