I was driving back to NY the other day when I started thinking about economies of scale. Its such an important concept in business. Essentially, its spreading out fixed costs over a larger customer base so their percent impact shrinks. It's one huge advantage big business has over small business. Its essentially why Walmart prospered at the expense of mom and pop stores. It has the end effect of lowering costs for consumers, and this is why its so powerful.
As stated, economies of scale is one of the best things about becoming a big company. With that, generally as volume goes up, per unit price goes down. They simply can deliver the same good or service cheaper because they can spread their fixed costs across more sales. This is generally looked at as a good thing among business people.
Now considering I was driving from rural Pa to NYC, that started me thinking about the local gov't between the two locations, and their tax rates. My house in Pa, if that house were located in Essex County NJ, the property taxes on that house are $60,000 per year, minimum. In rural Pa I pay $3,700. Why the difference? Rural kids need just as much support if not more per kid than urban kids. Same for adults. That these people are fewer and more spread out says the economies of scale for servicing these folks should be lesser in impact than for city folks. Economies of scale would dictate that rural taxes on the per diem basis would be higher than city taxes.
But this is not what we see. When moving from urban to rural, we see tax dollars plummet on both a nominal and relative basis. On a nominal basis, we would expect this - urban areas just have more people. But this is exactly what we should NOT see on a relative basis. Because of larger economies of scale, larger urban gov'ts should be able to pass economies of scale savings on to their taxpayers. But this is not what happens. What happens typically is relative rates in cities are higher than rates in rural areas, often by huge orders of magnitude. Something is clearly wrong here.
There are a lot of inferences you can make that explains this phenomenon, and none of them good. Some of the first that come to mind -
- Rural kids just somehow don't need even remotely the same per kid attention/services that an urban kid does. Why I have no idea, but hey.
- Ibid, for adults.
- Maybe gov't is just so grossly inefficient that no economies of scale are realized, so increased rates are necessary to compensate for this inefficiency.
- Because no one earns the money they spend, gov't is inherently corrupt, so when you feed it, the corruption goes with it. Corruption is expensive, and tax rates need to go up because of it.
Really - what else explains this? As gov't gets larger the per unit cost should go down. It doesn't, it skyrockets. So with that we're left with an explanation that comprises some combination of racism, incompetence, and/or corruption.
As stated, economies of scale is one of the best things about becoming a big company. With that, generally as volume goes up, per unit price goes down. They simply can deliver the same good or service cheaper because they can spread their fixed costs across more sales. This is generally looked at as a good thing among business people.
Now considering I was driving from rural Pa to NYC, that started me thinking about the local gov't between the two locations, and their tax rates. My house in Pa, if that house were located in Essex County NJ, the property taxes on that house are $60,000 per year, minimum. In rural Pa I pay $3,700. Why the difference? Rural kids need just as much support if not more per kid than urban kids. Same for adults. That these people are fewer and more spread out says the economies of scale for servicing these folks should be lesser in impact than for city folks. Economies of scale would dictate that rural taxes on the per diem basis would be higher than city taxes.
But this is not what we see. When moving from urban to rural, we see tax dollars plummet on both a nominal and relative basis. On a nominal basis, we would expect this - urban areas just have more people. But this is exactly what we should NOT see on a relative basis. Because of larger economies of scale, larger urban gov'ts should be able to pass economies of scale savings on to their taxpayers. But this is not what happens. What happens typically is relative rates in cities are higher than rates in rural areas, often by huge orders of magnitude. Something is clearly wrong here.
There are a lot of inferences you can make that explains this phenomenon, and none of them good. Some of the first that come to mind -
- Rural kids just somehow don't need even remotely the same per kid attention/services that an urban kid does. Why I have no idea, but hey.
- Ibid, for adults.
- Maybe gov't is just so grossly inefficient that no economies of scale are realized, so increased rates are necessary to compensate for this inefficiency.
- Because no one earns the money they spend, gov't is inherently corrupt, so when you feed it, the corruption goes with it. Corruption is expensive, and tax rates need to go up because of it.
Really - what else explains this? As gov't gets larger the per unit cost should go down. It doesn't, it skyrockets. So with that we're left with an explanation that comprises some combination of racism, incompetence, and/or corruption.
