The return of central planning

Written by Tim Worstall

Monday, 08 October 2007

I really do wonder about the mental health of our rulers at times :

From April 1, those aged 60 or over will be entitled to free travel after 9.30am on buses all over England.

I can see the political value of it. Millions of grannies get something free while tens of millions of taxpayers cough up for it. A group gains a concentrated benefit and the wider public suffers a smaller per person harm: classic electoral bribery. But the economic story isn't so sensible – how is this to be paid for?

Under the rules, the local authority has to reimburse the bus company for each elderly passenger carried, regardless of where that passenger lives. Each authority will receive a grant calculated according to a formula set by the Department for Transport.

So the marginal demand for bus travel is no longer to be set by price, the most efficient method we know of to do it. Further, payment for such travel is to be calculated by bureaucrats in Whitehall. Those omniscient beings, possessors of perfect information, will work out exactly who is due what.

So we've thrown out the ideas that prices and markets are discovery mechanisms, that we have scarce resources and that said mechanisms are the best way to allocate them, we've centralized yet more of our economy (double-devolution? Hah!) and we've reverted to the insane thought that The Man in Whitehall really does know best.

And all to buy a block of votes. Who says that politicians don't face perverse incentives?

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