Friday’s Big Idea
Pareto optimal improvements
Given the objectives of the two major parties in Washington, budget negotiations should result in the following outcomes: that wasteful government spending would be curtailed, and more socially useful spending would occur.
So argues Richard O. Zerbe in today's lesson. And yet, Zerbe, a professor at the Evans School of Public Affairs at the University of Washington, points out the problem:
Despite the rational logic, why isn’t this happening?
To this question, Zerbe offers a simple, yet dispiriting explanation: it all comes down to politics. In other words, Congressmen are looking out for the narrow interests of their own districts, even if it means supporting projects that are wasteful. This too often comes at the expense of the greater good.
So can we apply Pareto improvements -- the idea that at least someone should gain and no one loses -- to the budget discussions? According to Zerbe, objective measurements such as Benefit-Coast Analysis can help lawmakers practice fiscal prudence in a way that not only increases the value of government spending, but increases equity as well.