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The Problem of Diffuse Costs and Concentrated Benefits

Do you ever find yourself observing a seemingly illogical government program, spending decision, or other strange practice and ask “how is it that no one has fixed that?” If you are like me, you encounter this phenomenon regularly. This often takes the form of a curious headline (Save Federal Funding for the Cowboy Poets!) that most people see and can’t believe is real. I would like to suggest that this phenomenon often results from the problem of diffuse costs and concentrated benefits.

To understand this concept, consider a hypothetical law that assessed a $1 tax on everyone in the United States with the proceeds to be given to one individual for unrestricted use as he sees fit. The people harmed by such a law—the individual taxpayers—will not be very motivated to spend the time and effort to convince Congress to change the law. They might resent the dollar taken from them for a silly cause they don’t support, but the lost dollar isn’t worth the trouble of doing something about it.

Recent posts

Spending It Like They Stole It

When does government have the right to spend taxpayer money? Or perhaps, more pressingly, when should the government be forbidden from spending taxpayer money?
1889 Institute has previously written on the issue - developing five questions that should be asked before any government entity spends a single dime. These questions are:
1. Is a program or agency consistent with the mission of Oklahoma’s state government? This purpose was spelled out in our state constitution: “Invoking the guidance of Almighty God, in order to secure and perpetuate the blessing of liberty; to secure just and rightful government; to promote our mutual welfare and happiness, we, the people of the State of Oklahoma, do ordain and establish this Constitution.” Secure and perpetuate liberty (notice this is the first order of business). Secure just and rightful government (not any government, not the domino of the majority over the minority - just and rightful). Promote (not provide, ordain or establish) mutual welf…

School Teachers Begging for Basics

What if a hospital’s administrators regularly told surgeons to make do without bandages, with dull scalpels, and little to no anesthetic while claiming tight finances? With all the money hospitals have, there would be questions about the administrators’ competence and possibly audits to look for malfeasance. Something like this needs to happen at Oklahoma City Public Schools.
My wife is a teacher working in the Oklahoma City Public Schools (OKCPS) system. Last year, she came home telling me how there was no paper available for the notoriously few and regularly broken, undersupplied duplicating machines at her school. What’s more, there was no plan for the district to provide any. In the past, she was told, a parent had donated paper to that particular campus, but that parent had transferred his child to a private school. The school had surplus paper from previous years, but that was gone. There were no plans for the district to provide more.
Now, I am well aware that education fundin…

A Waste of Talent; A Loss of Opportunity: Mandating Excessive Credentials

Governor Stitt recently had a second candidate he wanted to appoint to an administrative position hit a statutory road block. His candidate to head the Oklahoma State Department of Health doesn’t have at least a master’s degree in science. This, and another a mandate requiring an advanced degree for anybody acting as secretary of the Commissioners of the Land Office, were placed in law by the legislature (and, of course, a governor signed the law). Governor Stitt’s candidates for these offices are well-qualified in experience and temperament, but the law dismisses them outright. Thus, the question to ask is not why Governor Stitt isn’t finding people with advanced degrees to head agencies. The right question is, “Why did a law with degree requirements get passed in the first place?”
The answer is that we, as a society, have come to think university-granted degrees are far more valuable than they actually are. The consequence is that college degrees are often demanded in order to qual…