Organizational Charts versus Public Choice
By David Henderson
“You can’t just say the word ‘government’ three times and think you’ve solved the problem.”
—Harold Demsetz, speech at the University of Winnipeg, January 1970.
More generally, we would like organizations tasked with protecting the public from low-probability, high-cost events to be funded on a permanent basis that is not subject to budgetary discretion or degradation. Instead of yearly appropriations, it’s preferable to have a one-time appropriation to finance a stream of investments. The financial means of doing this is to buy a bond with an earmarked revenue stream. That is, instead of selling bonds the government buys long-term safe bonds which pay out dividends that are earmarked to a program, in this case to pandemic preparation.
This is from Alex Tabarrok, “A Pandemic Trust Fund,” April 30, thecgo.org.
If Alex were to get his way, he would solve the funding problem.
But he wouldn’t solve the problem.
Alex wants to make sure that his ideal organization would prepare for pandemics. But nowhere in the article does he say what the organization’s incentive would be to do that. The organization gets $7 billion a year and . . .? It does what?
We actually have an organization that was supposed to deal with disease. It even has disease in the title: the Centers for Disease Control. How did it do in this pandemic? We know that it actually slowed the reaction by insisting on its own test kits rather than using the good-enough kits from the World Health Organization.
We also know that the CDC’s Office on Smoking and Health spends $210 million a year on combatting that other well-known virus: cigarette smoking.
The problem with virtually all the proposals I see for the government to do anything good is that almost never do the proponents specify the structural incentives that will cause the government to do those good things.