Public Choice: The Alabama Auto Industry
Colander (2004) has noted that when governments set economic policies, they are generally faced with the necessity of making important and consequential trade-offs between competing values, potential benefits and drawbacks, and outcomes. In addition, public economic policies are responsive to (and informative of) public responses to state governance as well as local economies that will either grow or stagnate as a consequence of such decisions. In this brief essay, the case of the state of Alabama's decision in 2002 to actively pursue development of the automobile industry within the state will be considered. It will be argued that Brooks (2002) is correct in noting that Alabama's decision to offer Mercedes Benz huge financial incentives to locate a production facility in the state, Alabama also undertook financial programs that resulted in reductions in services that are also as vital to economic growth as the creation of new jobs.
Colander (2004) describes the production possibilities model as a mechanism which depicts opportunity costs in tandem with the anticipated benefits of producing selected goods vis-a-vis other goods. Basically, a production possibility curve is a curve that measures the maximum combination of outputs that can be obtained from a given number of inputs. What this suggests is that opportunities are accompanied by costs and that whenever a government or other entity elects to implement one policy to capitalize upon possible opportunities or advantages, it is then in a position where it cannot capitalize upon other also costly opportunities.
This is significant in the context of the public sector because governments routinely make important choices as to how admittedly limited and at times even scarce resources will be allocated across different programs (Colander, 2004). Governments generally seek, as do firms in the private sector, productive efficien...