Government as Competitor:
Eliminating the 'public option' produces a market
21 Nov 2009 in Regulatory Economics
Local governments across the country arte having to cut services to balance their budgets. Roanoke (VA) has cut curbside leaf collection, and the result is a vibrant private market.
Roanoke Times reporter Duncan Adams says the Shenandoah Valley city expects to save about $250,000 this year by terminating its curbside leaf collection program. Apparently, these savings will be obtained by reallocating existing city employees, not reducing the city's employment.
The result is that local entrepreneurs are "raking in piles of new business." One company, Yards Year Round, has invested in a large vacuum (pictured on the right) to increase productivity, and presumably, profits. Because no special skills or equipment are required, however, Adams reports that "competitors are popping up like fall mushrooms."
It can't be shown without carefully comparing the costs whether private or public leaf collection is more efficient. For example, public collection might have significant economies of scale if an entire street of leaves can be scooped up at the same cost that one or two homeowners would pay for removing leaves from their own yards alone. On the other hand, nothing except transactions costs prevents neighbors from banding together to hire a common leaf collector, thereby capturing for themselves the cost savings from scale economies.
Still, it is clear that there are private sector alternatives to the "public option." And in Roanoke, because the city has provided this service at no (apparent) cost, private sector options had trouble competing.
Adams says that in nearby Salem, the city has decided not to cut curbside leaf collection, but its motives are broader than just publicly providing a service that otherwise the market would provide, as it is now doing in Roanoke:
Locals routinely say Salem does sports right -- providing first-rate facilities, skillfully hosting NCAA tournaments and attracting athletes, fans and families who spend money.
It seems the small city of Salem might also boast the region's leaf collection Cadillac -- offering loose and/or bagged collection for months.
"If you can't get your leaves picked up in Salem, you're not trying," said Mike Stevens, city spokesman.
Mike Tyler is Salem's director of streets and maintenance.
"We didn't want to cut back on our leaf collection because the citizens are used to this type of service, and also because, in the long run, getting the leaves up helps preserve the integrity of the storm drain system," Tyler said. "The drains are much less likely to back up when they're not full of leaves."
Which is one reason Roanoke objects this fall to loose leaves loitering like unruly teens at curbsides.
It is possible that the public provision of curbside leaf collection enables Salem to save enough money on storm drain cleanup to make it worthwhile, even today when budgets are tight. Whether each city's decision is the result of careful analysis is less clear. Sometimes these programs exist because of historical practice. In Roanoke, the elimination of curbside leaf collection was not popular everywhere:
Autumn's palette of red, yellow and orange inevitably yields to monotone brown.
This year, some city residents still see red -- reacting to Roanoke's budget-crunched cessation of curbside collection.
Has Bob Bengtson, the city's director of public works, fielded a few testy phone calls?
"That would be accurate," he said.
