Rotten Apples
Filed Under (Economics) by Don C on 08-05-2007
Peter Schuck guest blogs at The Volokh Conspiracy with a post on Targeting in Social Programs: Avoiding Bad Bets, Removing Bad Apples.
It’s an interesting look at how to improve the effectiveness of public money used to help people. Part of the argument focuses on identifying and weeding out the “bad bets” as a way to minimize the costs and maximize the effectiveness of the various social programs.
Society rightly wants to improve the chances of people who have drawn a bad ticket in life’s lottery (”bad draws”), yet the government often spends substantial resources on the wrong people. We need to avoid “bad bets” and remove the “bad apples,” so our dollars go further and better serve those who will benefit the most. Bad bets are people who will not benefit as much from outside help as would others in equally bad or worse situations.
<*snip*>
Bad apples are people in a program whose irresponsible, illegal, or immoral conduct harms the far more numerous good apples in the same program. Bad apples also harm the good ones by stigmatizing the group, making voters less willing to support programs to benefit it. The classic bad apple is the chronic disrupter in public housing or schools. Parochial schools, which remove bad apples more readily, outperform public schools in educating equally disadvantaged students at much lower cost.
Here is my take on that:
It is easier to find and focus on the good bets than it is to identify the “bad bets”. Unfortunately such common sense doesn’t play well in public policy.
Take a barrel of apples, for example, and start picking out the apples one by one. Normal behavior, and I think empirical evidence obtained from any produce stand will bear this out, is to pick out the best apple available. The biggest, juiciest, reddest, sweetest-smelling apple. Repeat. Once you reach the bottom of the barrel, there will be all the bad apples.
The biggest obstacle in realizing a decent return on public monies spent helping the losers of life’s lottery is that the politicians and bureaucrats are obsessively compelled to help “those who need it most” instead of those who will put any resources received to the best use, thus earning a bigger return on investment. In other words, the entire “welfare” program in all its forms is operated by picking the apples from the bottom of the barrel.
Furthermore, the bad apples could also be addressed more effectively because the bad apples are sitting in the bottom of the barrel all by themselves.
If there was a 10% dividend–compounded daily–on all the billions invested in social entitlement programs instead of the black hole effect that currently exists, I doubt the payers would have a problem with increasing the amount invested.
Competitive market forces will ensure the success of the apple barrel methodology of identifying the bad bets and improving the effectiveness of social spending. If in order to receive assistance one has to be picked from the top of the stack of apples, then one must be prepared, willing, and able to fight to get to the top of the stack before the top reaches the bottom.
