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Opening Arguments

Economies of scale

Economist Morton Marcus, formerly associated with Indiana University, writes about the "overly simplistic" argument that government consolidation will bring cost saving, using libraries as an example:

 Public libraries are often cited as ripe for consolidation. There are 238 of them serving Indiana's 92 counties. Why is it that Huntington County has but one school district but four public libraries? Grant County needs eight libraries to serve its needs?

The fundamental argument for consolidation rests on the idea that the costs of central services and administration will decline without any deterioration in the quality or quantity of services. Where are the facts that support this idea?

Will expenditure data help us discover economies of scale that argue in favor of consolidation? In 2006, according to data provided by the Indiana State Library, the Whiting Public Library led the state with operating expenditures of $163.88 per resident. Whiting has 5,137 people, just a few more than the 5,050 served by the Churubusco library at a cost of $15.86 per person. Are we to believe these two institutions offer the same services?

Without any disrespect for Churubusco, we could easily believe that Whiting offers a broader selection of services. Whiting may have more new books, more large print books, more tapes, CDs, DVDs, recordings for the blind and reference tools. It may be open more hours per week with more trained staff available for consultation. It could have story hours for children and many computers for patron use. Should we use Churubusco or Whiting as the standard for libraries serving populations of 5,000 persons?

The average per capita library expenditure was $47.49. That made the Hartford City and Brownstown libraries average. Are they to be the standard others are to emulate? The largest library in the state (Indianapolis-Marion County) had a per capita expenditure of $37.04, just five cents over the much smaller Steuben County public library. Allen and St. Joseph County public libraries rank 36th and 37th in per capita expenditures, just behind the public library in Oxford (Benton County).

There are no apparent economies of scale to be found in a simplistic analysis of the available public library data. Will the Kernan-Shepherd commission dig deeper before they recommend library consolidations?

I'm not sure I understand his argument. He talks about consolidation and the economies of scale from cooperative buying as if they are the same thing, and that doesn't have to be so. Schools in Indiana have regions that cooperate on purchasing in order to get a better price, and no one expects all the school districts to operate the same kind of schools of the same size offering some perfectly average curriculum.