GLEN TENNEY At the Margin Advertisement

A Pahrump Valley Times article dated April 24 reported on a meeting of the Regional Planning Commissioners where the committee considered changes in the existing provision of the Nye County Code that requires some specific number of feet between the locations of check-cashing and payday lending firms. In the article, County Commissioner Butch Borasky was quoted as asking, "Where's the science why this 1,500-foot rule was put in there to begin with?"

I applaud Mr. Borasky's apparent desire to allow some semblance of "science" come to bear on the political decisions that are made on this issue. In this regard, I would suggest there are two general approaches that might be taken with respect to the question of allowing certain types of "fringe bankers" to locate their businesses where they like. One such approach I would label "unscientific" and the other "scientific."

First, let us look at what I shall call the popular "unscientific" approach to the problem. According to the unscientific approach, the role of the County Commissioners in the context of the matter under consideration is to weigh the benefits to the community of the restriction on these fringe bankers against the costs to the community of such a restriction. Some readers are probably thinking this does indeed appear to be a fairly coherent statement of what they perceive the role of the County Commissioners to be. But, as I will argue below, it is not.

Why does the above statement represent an "unscientific" approach to the problem? It is unscientific because it violates an important -- but not well-understood -- economic principle. In an attempt to make myself clear, I will work into this concept slowly.

There is, of course, nothing wrong with economic actors in society weighing costs against benefits. Weighing costs against benefits is indeed at the heart of economic reasoning. It is, in fact, this weighing of costs against benefits, which gradually creates real wealth in society as individuals take actions that are calculated, in their minds, to provide more benefits than costs. In explaining this point, we educators are fond of saying that, in a voluntary free-market exchange, "both parties benefit." This "economizing" action of weighing costs and benefits assures the ordinary exchange process is a wealth-creation process. A person who deems the costs of a potential action to be greater than the benefits of the action will, of course, choose not to take the action. And thus we can say with confidence all voluntary, mutually beneficial actions are wealth-creating because both parties get more than they give up in the exchange.

What then is the problem with what I have called the unscientific approach where County Commissioners weigh costs and benefits, and act accordingly? The problem is both costs and benefits are individual insights that can only exist in the minds of actual actors in the economy. This means the utilitarian action of weighing costs and benefits is quite vacuous and certainly unscientific when done by anyone other than the economic actors involved -- in this case borrowers and lenders wanting to engage in loan transactions of various kinds. It is impossible for County Commissioners to scientifically know whether it is best for "the community" to restrict the behavior of certain borrowers and lenders because "the community" is not an economic entity capable of having costs and benefits. Of course socialists of several varieties may think otherwise, but they have never been able to coherently explain why they think humanity is best controlled by others rather than having individuals control their own lives.

The "scientific" approach to this problem is for the County Commissioners to focus on their primary role of protecting people's rights rather than trying to divine an answer to the question of whether any particular restriction on the behavior of borrowers and lenders is "good for the community" or not. According to this approach, the operative question would be: Does restricting the behavior of payday lenders and/or borrowers violate the human rights of these people? If people have a moral right to borrow and lend resources on mutually beneficial terms without the arbitrary restrictions of government, then it would seem the question has been answered.

It is doubtful the people of Pahrump want the town to possess a reputation of being a place where the locations of various business firms -- including those that are seen as being on the "fringe" of society -- are determined by political weighing of costs and benefits as opposed to what economists call "free-market competition."

More importantly, it is doubtful the County Commissioners want to infringe on the rights of ordinary citizens wanting to compete in ways that seem appropriate to those citizens. Such an infringement is unscientific as well as morally questionable.

Glen Tenney teaches economics and finance at Great Basin College in Pahrump. He can be reached at glent@gwmail.gbcnv.edu.