In southern California, municipalities that received stimulus money they couldn't use according to the shovel-ready criterion are instead auctioning it off. Los Angeles' transporation agency allocated money to the cities in its service area, and the money is getting moved around (I assume the agency is acting to clear the market and enforce transactions.) The going price was a little more than sixty cents on the dollar. Josh Harkinson of Mother Jones notes:

I'm sure many cities have higher priorities than transportation. And I would have liked to have seen more direct aid to ailing local governments in the stimulus bill. Still, MTA's approach strikes me as a bit too creative. What's next, stimulus money credit default swaps?

Now that would appear to be efficient; if a city in LA County wanted to, say, finance a couple extra police officers rather than five new shelters on a bus route, it could make that choice; the buyer gets $500k of transportation spending for $320k or so, which might make a transportation project that had benefits of $400k now a winner. Seems like a win-win?

Of course it was too good an idea to survive government: the plan has been canceled. (h/t: Tyler Cowen.)

Labels: economics