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Jul 9 2007 7:29PM EDT

New York State's Mind-Boggling Economic Irrationality

Michael Bloomberg is an economically rational animal. The federal government has half a billion dollars or so that it would love to throw at a New York City congestion-pricing scheme. So Bloomberg put together such a scheme. Result: half a billion dollars in free money! Or, not so much. For of course this isn't just New York City, home of bankers and economists and billionaires who know a good opportunity when they see one. This is New York State, home of ridiculously arcane politics, a place where a personal beef between the governor and the senate majority leader carries much greater weight than any federal dollars. This is New York State, where one man, Shelly Silver, whose constituents almost without exception support the congestion charge, will happily watch it wither on the vine for reasons which even the New York Times editorial page can't begin to fathom.

Insofar as there's formal, reasoned opposition to the congestion charge, it's being led by assemblyman Richard Brodsky, who (aside from getting huge campaign contributions from the owners of Manhattan parking garages) is quibbling over such minor details as the exact cross street at which the congestion charge will start, and the exact hours during which it will be in effect.

Of course, if Brodsky actually cared about those details, he'd make sure that New York got the $500 million from the Feds first, and would then try to use that money as best he could. But in New York State, there's precious little in the way of economically rational thought: much better that the city lose half a billion bucks than that it should have the opportunity of reducing the enormous costs in terms of time and money and health that are paid by New Yorkers every day while negotiating traffic jams and belching cars.

Question for Tyler Cowen, or anybody else who likes to use economics to explain human behavior: Why on earth would the New York state assembly leave $500 million lying on the table like this? All they need to do is approve in a timely manner a plan which will happen anyway. And why is Silver, in particular, being so spectacularly unhelpful? I said back in 2003 that New York behaves much like a dysfunctional Latin American nation. Since then, most Latin nations have got their act together, certainly in terms of fiscal policy. New York, meanwhile, has gotten precisely nowhere.

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