Tomorrow the Wichita City Council will consider policies relating to the award of subsidies for development in downtown Wichita. While the policies have the sheen of government authority, that the policies are government policies means that downtown development is certain to miss out on the benefits of free markets, capitalism, and the dispersed knowledge that only markets can generate and channel. In its place we’re left with a form of social engineering that seeks to remake Wichita in the vision of planners and their supporters.
Perhaps the most absurd idea surrounding the revitalization of downtown Wichita is that planning and subsidy is required. The idea that government officials know what the people of Wichita would really like and can then deliver that is nonsense. Yes, there have been many meetings with downtown planners. We paid $500,000 to a firm to plan for us, and based on recent news of additional consultants being hired, that wasn’t enough. The planners dutifully solicited the opinions of citizens, which is almost always that people want more of everything. That’s natural. But citizens sitting in focus groups are not markets. They make decisions in the abstract, without the constraints of the actual world.
One of the most absurd concepts of the plan is that the city is limited to investing only in money-losing projects. As a “minimum threshold criteria” for a project to receive city assistance, the document requires: “Economic analysis confirms that the project is infeasible ‘but for’ public investment.”
Is investing in otherwise money-losing projects a wise course for government to follow? The fact that something is economically infeasible tells us something: people don’t want it as much as they want something else. But, thanks to our city’s politicians and bureaucrats, Wichitans will be forced to pay for it anyway. It is thought by some that there is “market failure” here, that Wichitans aren’t smart enough to know what they really want or should want. But just because people make decisions that downtown visionaries don’t approve of, that’s not market failure.
The distinction that public dollars will go only towards things that have a “public purpose” — parking is most frequently mentioned — is really a distinction without a difference. An example might be a multi-story parking facility located between a residential building and an office building. The theory is that residents use the garage mostly at night and the office workers use it mostly during the day, so the two uses complement each other. But — aren’t we supposed to have a downtown where people live near where they work, and the whole place is walkable and transit-oriented?
Constructing parking spaces on a surface parking lot outside of downtown is expensive, too, although not as much as in multi-story parking garages. And we’re still left with the fact that downtown developers get their parking for free is an example of the entire city subsidizing something that benefits relatively few.
The proposed policy has a matrix that will be used to evaluate a project. Based on how well projects meet criteria, points will be awarded. A certain minimum number of points must be achieved for a project to be considered for public subsidy, and then the terms of such subsidy.
We can sort of understand the motivations of government officials when creating policies like this. They want to let citizens know that they are dishing out subsidy in a responsible manner. They want to avoid the appearance of giveaways to the politically-favored at the expense of everyone else. Now, it looks like we’re implementing policies to route taxpayer giveaways to the bureaucratically-favored. I’m not sure if one is better than the other.
The fact is that planning even a relatively small area such as downtown Wichita is an incredibly complex tax that is beyond the capability of government. Except — government will still try. And its regulations — that’s what this downtown plan is — will lead to something less than what downtown could be if government stepped aside. Israel Kirzner explains:
The perils associated with government regulation of the economy addressed here arise out of the impact that regulation can be expected to have on the discovery process, which the unregulated market tends to generate. Even if current market outcomes in some sense are judged unsatisfactory, intervention, and even intervention that can successfully achieve its immediate objectives, cannot be considered the obviously correct solution. After all, the very problems apparent in the market might generate processes of discovery and correction superior to those undertaken deliberately by government regulation. Deliberate intervention by the state not only might serve as an imperfect substitute for the spontaneous market process of discovery; but also might impede desirable processes of discovery the need for which has not been perceived by the government. Again, government regulation itself may generate new (unintended and undesired) processes of market adjustments that produce a final outcome even less preferred than what might have emerged in a free market.
Firms will still be free to develop in downtown Wichita if they forgo the subsidies that are available by conforming to the plan. I wouldn’t expect many to do so, however.