Apples and baseballs

…are about the same size and shape. It’s an iron law of sound household management, ignore it at your peril, and I know you will recognize its absolute unvarying truth, that you can put a baseball in your fruitbowl only if you’re willing to take one apple out of it.

So what? Does any sane parent deny his kid a baseball  by saying “not until you eat one of those apples in the fruitbowl so we have room for it”?  Does anyone take room in the fruitbowl as a signal to go buy a baseball (or a hand grenade, or a powderpuff)?

Early childhood education at time t is inversely correlated with crime rates around t + (10-25); crime is part of a reasonable conversation about kindergarten.  But public higher education has little to do with crime, and how much government should spend on each is two (that is, 2, 10 in binary…do I make myself clear?) almost completely disconnected questions.  Not one, two.  If it’s worth spending X more tax money (using up X worth of economic resources) on colleges and universities, it’s because X will create more net value there than all the other ways it would be used, from bigger houses to wider roads to more-meat-and-less-bread in our diets, not because the waste Mark has documented in our corrections practice has about the same number of zeroes in it as X.  It’s worth it (or isn’t) if we’re overspending on prisons or underspending, or have it exactly right.  And not wasting Y isn’t a good idea because it’s about equal to X, but because waste is bad whether the savings are best spent on my salary and Mark’s or on something entirely different: Y can create more net value used in other ways, possibly including any of professing, skateboarding, eating more steak, and all the rest.

Education and prison spending are about the same size and shape, but they have as much to do with each other as apples and baseballs.  Spurious fruitbowl thinking is a rampant, pervasive bane of sound policymaking.  It is a dog’s breakfast of wrong ideas, sloppy language, and imitation common sense.  Let me list a few:

(1) Allowing a phrase like the state to slop back and forth between “the citizens who live and vote in California and their economy” and “the government they have elected” especially and most deplorably in phrases like “the state just can’t afford A”. A sentence like that with almost any A in it (decent schools, social services, public transit) is false.  If the state has the first meaning, it’s wrong simply because California is a rich jurisdiction even with 12% unemployment, and its people could perfectly well afford whatever A is without starving in the streets (the current California state deficit is less than $1000 per person; not chopped liver but nowhere near the “can’t afford” zone); if it has the second meaning, the whole sentence has to be restated as “Californians have chosen not to buy A for now, though they could if they wanted to.”

(2) Using “can’t afford”, as in the previous example, as a device to stop discussion.  “Need”  is an attempt at the same end: if you can get your pet project discussed as a need, it has to be funded, because that’s what need means.

(3) Budgeting from revenue.  Deciding which goods and services we want to get through private markets and which we want to run through the government system is one set of decisions, and deciding how much of each we want is another.  The government share of the total economy should be the result of those two, not a prior constraint.  Deciding how big the overall government budget should be and then parceling it out is simply nuts, like forcing a family’s purchases of round objects to fit in its current fruitbowl, or buying a tiny fruitbowl because it’s cheaper than a big one before you think about how to allocate the family diet across steak, bread, and apples. A family’s whole income creates a budget constraint, but not its housing expenditure, or apple spending.  And a government is not a family, or a business, despite hokey right-wing metaphors.

(4) Having baseballs by foregoing apples.  Why apples? There’s plenty of room for a baseball on the shelf in the hall closet. What I refer to here is ‘deals’ like the idea of tying the higher education budget to prison reform, and there is more of this around than you might think.  California’s Department of Fish and Game was originally funded by service charges to hunters and anglers, in the form of game licenses. Acceptable fees for these happened to be about equal to the predicted cost of the agency, and if you think protecting wildlife is a service specifically for people who like to kill and eat it, it made some sense.  But since that time, the legislature has assigned F & G a whole raft of important new duties, like managing wildlife reserves and dealing with oil spills in waterways, while demand for hunting and fishing has fallen steadily, but not appropriated funds to do its work because “F&G is funded by licenses”.  There’s no reason but ignorance to think the willingness of people to pay for hunting and fishing licenses measures the optimal level of F&G services now, but that’s the way we’re making those important decisions.   Another example is the 1930s  “deal” that funded rural fairs in the state with taxes from parimutuel betting at horse tracks. It looked at the time like a very clever political deal between conservative rural voters who didn’t like gambling and city slickers with loose morals, but the latter have pretty much lost interest in betting on horse races, at least where the horses actually are; maybe we should have smaller or fewer fairs, but that can’t be the reason, or even a reason.

(5) What is the sound of one scissor cutting? I despise Arnold Schwarzenegger (despite his pretty good environmental record) because he’s the poster boy for enabling infantile thinking in our electorate by never, to my knowledge, using the words taxes and services in the same paragraph…maybe even never in the same speech.  A general choice between a low-tax, low-service government (New Hampshire) or a high-tax, high-service government (Vermont) is a discussable, reasonable political issue.  But New Englanders understand that they can’t live in the middle of the Connecticut River; if you try to have high services and not pay for them, you drown in debt.  Arnold didn’t need his job, or its salary: of all people he could have told us the truth, but instead got elected deploring taxes tout court and has played the same game to the present day.  Of course higher taxes are bad and low taxes are good other things being equal, but this is an emotional, vacuous instinct (other things are never equal!), not a political principle.  No grownup buys a movie ticket instead of a car because it’s cheaper, nor turns down a purchase without knowing what it is because it costs more than nothing.

What the pug in Men in Black noticed about humans has some resonance here.  We tend to think something is bad if it costs a lot, but if it’s a good deal (creates a lot of value for us per dollar) that’s a reason to buy lots and lots of it.  Big spending on worthwhile things is a feature, not a bug!

The coincidence of how much less we spend on higher education and how much more we spend on prisons lately is  meaningless:  whether to spend more on education has nothing to do with whether we can squeeze savings out of the prisons, especially when the overall size of the budget is a completely absurd artifact of Republican cruelty, opportunism and defensive cowardice and ill-conceived constitutional choices like term limits, safe districts, and tax limitations.  Mark is right about the existence of good options for less, cheaper, and better imprisoning, but I wish he would eschew the conversation that embroils it with funding education, because that conversation legitimizes all sorts of bad practice and careless thinking down the line.

Author: Michael O'Hare

Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training. He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management. Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at Università Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs. At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4×5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.

14 thoughts on “Apples and baseballs”

  1. Analytically, of course Mike is completely right.

    As matter of practical politics, I see the potential for a coalition between people who want fewer prisoners (and less crime) and people who want more higher education. If I'm right, that coalition could achieve two good things, neither of which could pass on its own.

    Laws and sausages.

  2. Like the fairs and horse tracks. But these deals always have a price down the line: how much are we willing to corrupt the political choice process in the future by bad precedent to get how big a benefit now? The sausage factory's future operations are determined in part by the way the last deals were set up and what principles (external to the deals themselves) they implicitly legitimated.

  3. Last year when UCLA students protested the Regents meeting I noticed a lot of chants and signs made the same point, and I thought of it as Michael does. But a week later, the Governor was reciting the same equation. It seems to work for Vienna sausage at least.

  4. Mike, I like the idea that the Cali political process is pure and clean and susceptible to corruption if people act badly now. If I didn't know from personal observation that you are human I might ask, 'what color is the sky on your native planet?'

    There are a couple of arguments on Mark's side of the scales: people tend to accept current tax levels, and squeal when they are raised. Colbert, he said: "The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing". I'm for that – if you can show equal reductions in other spending, and prisons are a good candidate expenditure, voters will hiss less when spending on UC Berkeley (which I, alum that I am, care greatly about) and UCLA (which is probably a good idea, though far less urgent, of course)is raised. There's also the question of Cali capacity to be taxed – at what level do the trustafarians who like the redwoods and Peet's Coffee decide that life is possible in North Carolina, or the Silicon Valley folks decide that they hear the siren call of Research Triangle? California is just lovely, and far more different from the other states, in really desirable ways – so it can get away with a lot, compared with, say, Maryland and the lure of low-tax Virginia. But at some point, the geese will waddle across the line, to Portland or Seattle or RTP.

    Jails are awful places, where people's lives get wasted and they produce nothing and there is anal rape and racial gang conflict. If we can get people out of them and into a situation where they have an incentive to behave, and save money, besides, what's not to like? Phillip Garrido aside, of course.

  5. "A family’s whole income creates a budget constraint, but not its housing expenditure, or apple spending. And a government is not a family, or a business, despite hokey right-wing metaphors."

    If you don't like analogies between family budgets, and government budgets, don't indulge in them, and especially don't indulge in such incredibly bad ones. A family that borrows to buy a house then spends the next 20-30 years running a large surplus, in order to pay the mortgage. When was the last time we ran a surplus, never mind large?

    1961?

    If you have to make an analogy, it would be between the government, and a family that's borrowing money to pay the rent, and make it's credit card payments.

    But no analogy is needed. As has correctly been pointed out, the government is very unlike a household, in that the average household lacks the power to arbitrarily increase it's income as needed, while the government sets the tax rate. That being the case, why the hell would a government run a deficit every year for 49 years straight? If the spending was worthwhile, why not just pay for it with taxes?

    Because the government faces a political constraint; People like government services, but dislike being taxed. Borrowing isn't done to make the spending possible, it's done to make the spending politically palatable. Even for expenditures everyone agrees are worthwhile, there are costs, and cost benefit analysis to be done. And the voters might not agree with the rulers about that balance, if they saw the entire bill.

    The government borrows to hid much of the cost, in order to bias the public's ongoing, and mostly informal, cost/benefit analysis.

    I happen to think that anything which hides a cost from somebody doing a cost/benefit analysis is bad. Do you disagree, and think the public SHOULD be voting on the basis of an inaccurate impression of how much the government they're buying really costs?

  6. "As matter of practical politics…" Hold on there Mark. You have told me in an LA Times op-ed no less that politics is not relevant when discussing policy. I find it strange you would defend your argument in that way.

  7. Brett, I think you are pretty much advocating pay as you go. That's okay, I think, for current expenses – I don't think you borrow as a family to buy groceries, or as a state to pay this year's welfare/unemployment. I do think it's fine to borrow for things that will be used far into the future – You can buy a house with a mortgage, or a freeway with long-term bonds. Similarly, you can build a prison with bond funds, but you ought to pay the guards with this year's receipts. I don't have a really smart way to clarify, for voters, what they are getting into – maybe something on the lines of, if we build this new $80 million dollar high school with 4% bond money and it lasts twenty years and we pay it off in twenty years, that will cost the County $4.5 million a year for the next twenty years, and add $2250 per student/year to our costs.

  8. Yes, I'm advocating pay as you go, and don't see an exception for things like building prisons.

    Look, why do people take out mortgages to buy houses? Because a house costs several times a person's annual income. If a house cost a tenth or less of your annual income, you'd be nuts to borrow 30 years out to pay for it. You borrow to pay for it, because you need it, and you have no other way of affording it.

    But extremely large expenditures relative to your income are, (How to put this?) subject to power laws. Statistics. The larger an entity, the less often it's going to be hit with such expenses. A family? Pretty much always going to have to borrow to afford a house, unless they're very wealthy. A town? Borrowing to build the town hall is more of a convenience. A state? A state as large as California?

    Almost never going to be confronted with expenses which actually require borrowing. You might be building things which will be useful decades into the future, but you're going to be doing it every year for decades.

    No, California isn't going into debt for anything like a good reason. It's going into debt to pay regular, ongoing expenses. The very fact that the deficit is small compared to the overall budget underscores this. That deficit represents the gap between the demand for spending, and the willingness to tax to pay for it. And all it's going to do is make that gap larger next year. Because they'll still want to spend more than they want to tax, AND they'll have the debt to service.

    Joel, you caught me, I forgot for a moment this was California, not the federal government. California is only starting down the slippery slope the federal government has reached the near vertical portion of. It actually has time to pull back, and escape that fate.

  9. It's not just a matter of California (or US) voters' willingness to pay. It's a matter of the minority party's ability to block what the majority want to do. Both California and the US are becoming ungovernable for that reason.

  10. Brett, most all public finance economists would disagree with you. Yes, California can build a prison this year, and fifty miles of freeway next year, and a branch of the peripheral canal the next – but nearly everyone thinks you are better off to think about the cost stream of financing things like that, and to decide if the availability of the prison/high school/freeway offramp is justified compared to that cost stream.

    If you do pay as you go, the immediate cost of a lot of things (the high school I wrote about above) is going to swamp its benefit in any one year.

  11. Most public finance economists are employed directly, or at most at one remove, by the government. And the government is in the market for excuses to borrow. It's getting what it's paying for.

    Yes, the cost of any particular project will dwarf it's benefits in the first year. And then it's benefits will dwarf the costs for each following year. Borrow to build it, on the other hand, and by adding the cost of financing, you increase the chance that it's costs will exceed it's benefits every year of it's life. Financing adds cost. That's why you shouldn't finance anything you could afford out of current revenues. And for a large state, that's very little.

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