Should Cost/Benefit Analysis Consider Only Benefits?
By David Henderson
There’s no such thing as a free lunch.
Don’t worry. I’m not going to produce a new insight that cost/benefit analysis should consider only benefits. But the reason for the title of this post is that a logical conclusion to draw is that Josh Barro thinks so. In “The Real Conservative Echo Chamber,” his criticism of a poll of Floridians done by the James Madison Institute, Barro writes:
Finally, instead of asking for a straight yes-or-no answer, the pollster asked if respondents favored Medicaid expansion “even if it results in tax hikes and spending cuts.” This isn’t a poll designed to figure out how Floridians feel about the Medicaid expansion; it’s one designed to get them to say they oppose it, so the organization commissioning the poll can say it’s unpopular.
First, I’m guessing that Barro is right that the poll was designed to get them to say they oppose expanding Medicaid. But his implication in that paragraph and throughout his article is that that means it was badly designed. That amounts to saying, though, that in asking people whether they favor expanding government programs, we should refrain from mentioning their costs. Which is a weird conclusion for an economically literate writer like Josh to draw.
I’m reminded of a section of one of my favorite books in economics, The Economist’s View of the World, by Steven E. Rhoads. In his chapter on opportunity cost, Rhoads writes:
Seventy percent of respondents wanted more spent on the elderly. Sixty percent favored increases both for the needy and for education. And 54 percent wanted more spent on hospitals and medical care. But when the same people were asked if more should be spent even if more taxes were required, those favorably disposed dropped to 34, 26, 41, and 25 percent, respectively. Making clear who will pay the taxes can also have a dramatic effect. One poll that found 50 percent support for the use of tax monies to supplement the cost of operating bus services found only 27 percent support a few months later when the words “personal income tax monies” were used instead of “tax monies.” We, the public, seem quite willing, if given half a chance, to believe that there is such a thing as a free lunch.
HT to Michael Cannon.