Stories that provide real-world confirmation of our core beliefs are
all but irresistible—even if fundamentally intellectually unchallenging. Two
of my core beliefs about analyzing policies at the intersection of law
and economics are:
- a "static" analysis that assumes people and market forces will not
react to the new policy loses to a "dynamic" analysis that assumes
they will, every time; and - beware the long arm of the law of unintended consequences.
So this piece by the admirable Virginia Postrel (a fellow Princetonian,
but don’t hold that against her) is a must-read. It discusses the
"catastrophic failure" of Texas’ school finance reform initiative nicknamed
the "Robin Hood" project, which was designed to shift property tax receipts
from wealthy districts to poorer ones by "confiscating" all property
taxes above a certain "threshold" value level. For example,
when the threshold was initially set at $340,000, 50% of the property
tax collected on a $680,000 house (double the threshold value) would
be redirected by the state elsewhere and would not be available to fund
local services in the $680,000 house’s district.
Now, how long do you think it will be before buyers decide that (relatively)
service-deprived $680,000 house isn’t such a great deal? But you
have to read the article to the end to learn who the geniuses behind
this well-intentioned scheme were.
