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Subsidies

In: Business and Management

Submitted By mohass
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Whether the city should build and run a facility for guarded car parking
It is indisputable that car- related theft is one of the most common offences city dwellers encounter. People often feel hurt or experience a sense of loss when they lose their valuable belongings to car thieves and this in turn has a negative impact on the general public.
Though the problem with car burglaries may seem to be petty crime but local governments cannot afford to not concretely and comprehensively solve or minimize. After all, car- related thefts not only affect one man or woman on the streets but also impact the whole society with cars who either live in the city center or drive from distant locales to get to the city in order to attend to their different interests and duties/responsibilities. For a city to have a harmonious coexistence among its inhabitants, security and the protection of individual properties is one of the major pillars to achieve this goal. In order to achieve this kind of objectives, there must be an efficient, transparent and accountable body to be trusted with resolving the matter. The issue can be solved but requires the effort of entrusted entity to guarantee the safety of every car owner who comes to the city. One has to take into consideration the fact that the city has the vital responsibility and a valid interest in the provision of secured car parking to the public for protecting its image and attractiveness. On the other hand, this can come at a high price with respect to the dynamic of free market. Looking at the approach from different angles a number of different solutions with either lower efficiency or higher efficiency present themselves, but then as an advice to the city mayor then focusing on the most efficient ways to finding solution with their welfare consequences and of course the alternatives in achieving the same result, then assume it’s upon the city mayor to decide which approach to consider.
Unlike trains, airplanes, and ships, which require their respective ports, cars are much vulnerable to burglaries because they demand several parking spaces in the city and not only in one special place. To contain these problems, the city must have a guarded car parking within the city as one of the solutions to the burglary problem. However, every approach to looking for a lasting solution has its merits and demerits. One rationale that would advocate to achieving secured city is to privatize the car parking. Privatization of parking facilities has been a key issue and one of structural government reform programs in both developed and developing countries. This could be one of the ways to achieve higher microeconomic efficiency by ensuring that the little parking spaces available in a given city with ever growing number of people are fully utilized. As a result, the burglary problem will be minimized, encouraging more people to travel to the city by car, thereby saving time and fostering economic growth. Though the mayor is responsible for his city’s wellbeing, the rationale does not fit into a government intervention to build and run a parking facility. In fact, during certain times of budget constraints, it could be costly for the local government to initiate such projects or sometimes government initiated projects could be delayed for a longer period of time due the longer bureaucratic processes existing in most government offices. In addition, privation will empirically reduce the burden of public borrowing, since public sector borrowing requires sometimes unnecessary subsidies and through privatization this could easily be eliminated. Moreover, microeconomic theory informs us that incentive and contracting problems create inefficiencies due to public ownership (Eytan Sheshinski 1999). This is widely depicted in many public offices, given that managers of government- owned enterprises could be lobbied to pursue objectives that differ from those of private firms due to political views which could lead to diverting the objective of having the parking facility properly managed and maintained for a longer time. Well- renowned economists have for sometime argued that governments sometimes end up employing managers who are unqualified for the particular job portfolio. These managers are mostly motivated by political pressures rather than sound and productive economic outcome. For example a government- owned enterprise may end up employing more (surplus) workers, which may result in inefficiency. For one reason or another, the government may even be reluctant to shed off the excess inefficient workers because bad publicity that could result from unemployment and this indicates how government owned enterprises are inefficient. `` Efficiency requires that provision of a public good be expanded until the point at which the sum of each person´s marginal benefit for the last unit equals the marginal cost´´, Harvey S. Rosen and Ted Gayer. The Book by Harvey Rosen and Ted Gayer also emphasizes on the fact that economists focus a lot of attention on marginal quantities because they usually convey the information required for rational decision making. In deciding whether the city council should provide the car parking facility, the key question is whether the marginal benefit is at least as great as the marginal cost. It does not make sense to spend $10 to create $8 worth of benefits. It is not bad ideas to create employment but it would be a waste of resources and lack of efficiency when the costs exceed the benefits.
Public enterprises managers often face less monitoring from the local authorities and this could result in mismanagement of various government resources such as public funds, and therefore, requiring always to be subsidized in order to prevent government projects from failing. On the other hand not only are the managers of public enterprises objectives distracted, but also the kind budget constraints they are facing are also compromised . The compromised budget constraint could emerge from the fact that irrational actions that could lead to bankruptcy which are not a threat to the credibility of public enterprise managers, because it is in the interest of the government to provide bail outs in the worst case scenario in order to ease distress arising from financial problems. In recent economic downturn, empirical evidence shows a robust corroboration of theoretical implications: privatization increases profitability and efficiency in both competitive and monopolistic sectors (Eytan Sheshinski, 1999).
Total Privatization has a higher impact than privatizing partially, in the sense that the problems arising from risks are going to be left in the hands of the privately-owned enterprise which could make it more careful in responding to complaints from clients and hence be able to diagnose problems quicker and innovate new strategies .Nevertheless, the private sectors have also shown a higher increase in profits that could be as a result of accuracy in the work done and their commitment to the services that they provide. Privately owned car facilities are more concerned with the profits it makes in the ultimate end. This depends mostly on the quality of the service being provided by it and how the public could respond to the services it provides. Due to the fact that profits can be maximized if the parking facilities are efficient and reliable, the transparency and commitment becomes the vision of most private enterprises and that is the component explained in increasing productivity, which reflects their market power.
Furthermore, the city mayor and his team should also recognize the fact that by privatizing the city car parking facility then the private companies in charge of the parking will eventually generate much revenue compared to government enterprises and therefore indirectly benefit the city council revenue profile by earning from taxing the private entities. Generally, we realize that private companies will ensure customer support and satisfaction because it is of much interest in private enterprises comparatively. It has also been proved that governments tend to focus mostly in terms of the next elections. Therefore, a government -managed parking facility may be unwilling to put more effort into investing in improving infrastructure that may benefit the whole city in the long run because government is more concerned with projects that are of benefit just before the elections. The city mayor should keep in mind before making decision that he/she should make decision based on the public interest and of also for the future generation but try avoid to focus on building the city council’s public image and end up with a ‘ white elephant project’.
I, therefore, would urge the city mayor to consider the preceding arguments which mention in detail the benefits of having the car facility privatized but the choice and the ultimate decision is with his office. There exists also alternative ways of solving the issue of car burglaries, such as government initiatives that create employment opportunities because once unemployment is reduced then crime rate would also go down. These two seem to have strong correlation. But the mayor is to keep in mind the fact that from an economic perspective that no conclusive evidence can be drawn, but the trends are more favorable.

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