11 Mar 2015

When government failure wastes your time

In economics (and perhaps elsewhere), we say that deeper "institutions" affect "transaction costs" in daily life. In an honest community, e.g., people do not need to use as much security to protect their possessions.

In the case of the United States, it seems obvious that a "young country" full of "new thinkers" from "diverse backgrounds" would be eager to dispose of old, inefficient and counterproductive traditions, but some seem to persist far longer than they should.

  • Using paper notes for dollars when more convenient coins would last longer. (The 5 Euro note is the smallest here. Canada's smallest note is $5.)
  • Using pennies that cost more than a penny to make. (The Dutch and Canadians have abandoned pennies but kept prices in cents; amounts are rounded at the register.
  • Using Imperial measures when the metric system is far easier to teach and use.
  • Dialling 011 for international calls when most of the world has switched to 00.
  • Setting prices without taxes that must be paid. (Most of Europe shows taxes as a line-item but prices are inclusive of taxes.)
There are many examples of low transaction cost efficiency, but they tend to come from the private sector and markets. Amazon's one-click buy-download for e-books, 800-numbers, ATMs, and pay-at-the-pump are good examples.

What I wonder -- and the purpose of this post -- is not exactly why the US seems to hold onto counter-productive "traditions," as there are explanations for those (examples: the zinc lobby for pennies or Imperial system as a form of trade protection). What I wonder is why the US -- and many countries continue the practice of changing times twice per year -- on different dates in different places -- when this "tradition" does nothing for energy efficiency, happiness, or any of the other (disproven) theories. All I see now are the ripples of twice-annual confusion (transaction costs) as people miss meetings, planes, dinner dates, etc.

Bottom Line: Governments should make rules that reduce, rather than increase, transaction costs for the majority of citizens. As a measure of "costs now for ongoing future benefits" I'd recommend a five year payback. The metric system may take as long to implement, but the end of pennies or daylight savings would probably have an instant payback. Your thoughts?


  1. There aren't many issues that split Congress along any line other than the traditional "aisle." DST, pennies, even drug policy, are among the very few issues that can mix things up a bit. If we were to finally do away with pennies, DST, or the failed war on drugs they'd never get a chance to play nice together. Maybe Congress just wants to be able to hold hands and sing kumbaya every once in a while.

    1. Hahahaha... So it's "mom, apple pie, and pennies"?

    2. It's really hard to find reasoning ridiculous enough to be worthy of the ridiculous policies themselves but I think I made a good go at it.

  2. There is some hope for DST though: http://www.huffingtonpost.com/2015/03/12/end-daylight-savings-time-oregon_n_6852880.html


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