People respond to encouragement. Translated somewhat, this simple sentence summarizes much of what you will learn in any good undergraduate economics course. The challenge, of course, is to see whether this is always true or not.
For example, imagine for a moment that you are in a situation where you have to make decisions. In your decisions, there are three ways to choose: you can get the right decision or you can get it wrong. “But Dave,” he says, “that’s only two options!” In this next nuance lies the heart of this piece: there are two ways you can go wrong. You can act where you shouldn’t or you can fail to do what you should do at the time.
Getting things right is not always possible. So what kind of error are you most likely to watch out for? It depends on which one you are going to take out.
In most government settings, feedback is largely biased (and predictable). This is what economists call it asymmetric accountability and it occurs when the effects of one type of error are visible, caused, and (potentially) end the job, while the effects of the other are diffuse, invisible, and no one’s fault in particular. These incentives lead government agencies to be more wary of doing wrong than failing to act when action would help. The resulting problems are not due to incompetence, but to rational self-defense. We see this all the time with the FDA, the TSA, and the ever-increasing national debt.
Take, for example, the FDA. They can authorize treatment that turns out to be unsafe or delay (or deny) it that could save a life. Endorsing an unsafe treatment leads to patient referrals, newspaper headlines, and possible congressional hearings. Failure to consent to treatment usually does not have these effects. The continued suffering (and sometimes even death) of untreated patients who never gain access to the market is rarely linked to regulatory issues.
The motives behind this are obvious. An FDA reviewer who stays on an application for two more years does not face the death penalty that the delay may have caused. A reviewer who later approves something that causes potential harm faces a career disaster. The result? The center is leaning towards a cautious delay, which requires more studies and more clinical trials before approval.
The same pattern explains why the TSA confiscates your water bottle. If a safety inspector raises a hand to a rider who goes on the offensive, the consequences can be catastrophic and, importantly for the inspector, traceable. If instead they inconvenience 10,000 passengers with “security delays,” missed flights, and ritual humiliation, the costs are still real but no one gets fired. The travelers complain but eventually move on.
The inspector, the manager, and the agency all face great accountability when they allow a real threat, but not when they treat everyone and everything as a threat. The predictable result is one of defense theater designed not to minimize total harm, but to minimize some type of harm that might arise from a congressional investigation.
Asymmetric accountability also helps explain the problem of persistent government deficits. Budgeting is not difficult. Most people, including elected officials, are able to do it in their lives so often that we don’t notice it. But doing so with real government spending requires every policymaker to agree to curb spending, including their own state. This is where he falls apart. Self-control only works if everyone goes along with it.
Spending money, in comparison, requires cooperation, but this cooperation is much easier to protect than to prevent. Every politician knows that spending money today gets quick, affordable credit. They are marked as someone who “gets results” and are rewarded with ribbon cuttings, press releases, and appreciation elements. The bill, however, comes much later, often footed by taxpayers who weren’t old enough to vote when the spending was originally approved. And herein lies cooperation: politicians can trade votes in a process known as “logrolling.” That way, everyone gets to cut the ribbon, press releases, and thank you elements. No one is campaigning to give our grandchildren a big tax bill.
These examples all look like failures of different kinds, but they are all the result of the same problem: asymmetric accountability. In each case, from the perspective of the decision maker, one is visible, affected, and personally called. The other is invisible, pervasive, and ineffective. There may be good reasons to be frustrated by this fact, but the fix isn’t getting better people or improving training. For building better accountability structures.
After all: people respond to encouragement.
