How a society is like a bus.

Imagine you want to start a business to provide people in your community bus service so they can improve their lives getting from place to place to work, shop, and play. You plan to use your savings (capital) for a down payment on a bus and ask the bank for a loan to finance expenses - labor, materials, taxes, etc. Imagine you get what you need and begin operating the bus business. As expected: the community is serviced; customers can ride the bus, employees, suppliers, and the tax man get paid. There is only one problem...

You don't get paid. Your business has no profit. Who would go into business for nothing? Would you? Worse, it’s losing money. Your invested savings are at risk. So is the bank’s capital (their depositors’ savings). You are being ‘red lined’ by the bank and your loan not extended. The bank threatens foreclosure. Ruin! Your business fails; your workers lose their jobs; riders lose bus service; supplers stop supplying; taxes don’t get paid. You lost your investment (savings).

Now imagine the exact same bus service existing as a ‘public authority’. The Capital District Transportation Authority (CDTA) is such a ‘business’. The CDTA operates a bus service in several counties comprising the Capital District of New York. The public 'invests' instead of people and banks.

The CDTA always loses money. According to its budget the CDTA expects an 87% shortfall between revenue (from its riders) and expenses. This level of loss happens every year. For the CDTA that is a $130,000,000 ‘loss’ during fiscal year 2022.

Would you invest your savings in the CDTA?! If not, you are pretty normal. But the 'Public' calls that business model a 'Public Interest' and the loss a 'Public Good'.

There are many entities similar to CDTA (Click here for one example) and many other activities, agencies and entities that also lose money (for exaples click here and here). All government subsidies represent failed business models. “…government contributes nothing to the national product and its activities sap the national product and channel it into unproductive uses.” (click here for more)

The libertarian solution would be to simply eliminate the CDTA. This would immediately stop $130,000,000 in wealth destruction.

So why are libertarian solutions not accepted? Why is the CDTA (and other variants) allowed to lose money …year after year?!

Economics is about what people want to pay for. Politics is what people want other people to pay for. (Click here for more) Economic failure can (and does) become political success. Politicians tell voters CDTA is an ‘investment in the community’. Many voters will embrace this claim. In so doing, they embrace the consumption of savings & destruction of wealth (capital).

CDTA must be continually bailed out. How is this accomplished? One way is by expanding and exploiting The Commons - shifting losses to other people (The Public). Those who ride busses essentially become ‘free riders’. Taxpayers from all over NYS and the nation who never use CDTA busses must subsidize these free riders and keep the CDTA from bankruptcy with $130,000,000 of their money.

That’s not the whole story! The insidious nature of such a business model is that from the perspective of Capital District residents, a ‘loss’ can become a gain. Capital district residents can also be 'free riders'. Although the libertarian solution would certainly stop this wealth destruction, it would also stop the $130,000,000 bailout money being sent to the Capital District from elsewhere around the country. So, although the bank would ‘red line’ this losing business model politicians and their voters would want to keep it going because the wealth being lost is not their own. The economic term for this is 'Rent Seeking'. People are said to seek rents when they try to obtain benefits for themselves through the political arena instead of free market supply/demand.

Would you still eliminate the CDTA knowing more money (10 x more) is coming into the Capital District than was lost?

Conclusion:

Most people think CDTA is a solution. Isn't that why it was created in the first place?

For people who have (or who care about the use of) limited resources (capital) losing money is not just a problem but a path to insolvency without government funding. With government funding that path to insolvecy becomes a Public Problem... No problem. Benefits are privatized and losses socialized. Incentives to reduce losses become incentives to exploit The Commons. And if money is lost, it’s not their loss. It’s someone else’s.

The CDTA serves as a model of the larger system - our state and country. The model explains how money is lost - Big money. This shows how Politics As Usual can prevail until capital has been consumed and brought the nation to ruin. Then everyone will see a problem and want to become more libertarian.

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