More economic wisdom from the Library of Economics and Liberty

In a post today at Econlib, David Henderson writes:

Postscript:

There was an unusually high percentage of good comments on my op/ed on the WSJ site. Here’s one I just noticed:

In Michigan, our Governor ordered auto insurance companies to issue rebates – due to folks driving less I guess.

But amazingly, our Governor who is owned by the teachers union, gave no such order  to rebate the portion of property taxes that go toward public schools. Even though there is no way teachers, who stopped in school teaching in March, provided the same level of service.

This needs to change.

Indeed!

This is, in fact, an absurd comment, strictly on economic grounds.  The cost of producing auto insurance has gone down due to the pandemic – people are driving less and having fewer accidents.  In fact, many auto insurance companies are offering rebates to customers as a good will gesture.  In contrast, it is not at all obvious that the cost of producing public education has gone down.  Of course, the quality of public education has gone down – on line learning is, for many students, a decidedly inferior alternative to in person instruction, and on line instruction does not provide child care to parents.  But as Henderson is well aware, price is driven by cost, not quality.  The bundle of goods and services I get when I go to the grocery store today is decidedly lower quality than it was 6 months ago, because I risk getting COVID-19 when I shop.  Yet the price of food has risen because the cost of grocery store inputs has risen.  (To be clear, I am not defending the governor’s order on auto insurance, or her handling of schools and property taxes, just explaining why the two situations Henderson is comparing are not at all comparable, on narrow economic grounds.)

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