David R. Henderson  

Should Cost/Benefit Analysis Consider Only Benefits?

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Economics and Fallibility... Measurement Error and the Educ...

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.


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COMMENTS (9 to date)
Hans PUFAL writes:

When asking if government should expand programs even at the cost of increasing taxes, is it not logical to also ask if that person is a) a beneficiary of the program in question and b) if they pay the taxes to be increased? I suspect that the proportion of favorable answers who pay the taxes but receive no benefits would be significantly lower.

Jim Rose writes:

The Yes Minister has a classic dialog from the show on the value of opinion polls

Sir Humphrey: “You know what happens: nice young lady comes up to you. Obviously you want to create a good impression, you don’t want to look a fool, do you? So she starts asking you some questions: Mr. Woolley, are you worried about the number of young people without jobs?” Bernard Woolley: “Yes”

Sir Humphrey: “Are you worried about the rise in crime among teenagers?”
Bernard Woolley: “Yes”

Sir Humphrey: “Do you think there is a lack of discipline in our Comprehensive schools?”
Bernard Woolley: “Yes”

Sir Humphrey: “Do you think young people welcome some authority and leadership in their lives?” Bernard Woolley: “Yes”

Sir Humphrey: “Do you think they respond to a challenge?” Bernard Woolley: “Yes”

Sir Humphrey: “Would you be in favour of reintroducing National Service?” Bernard Woolley: “Oh…well, I suppose I might be.”

Sir Humphrey: “Yes or no?” Bernard Woolley: “Yes”

Sir Humphrey: “Of course you would, Bernard. After all you told you can’t say no to that. So they don’t mention the first five questions and they publish the last one.”

Bernard Woolley: “Is that really what they do?”

Sir Humphrey: “Well, not the reputable ones no, but there aren’t many of those. So alternatively the young lady can get the opposite result.”
Bernard Woolley: “How?”

Sir Humphrey: “Mr. Woolley, are you worried about the danger of war?” Bernard Woolley: “Yes”

Sir Humphrey: “Are you worried about the growth of armaments?” Bernard Woolley: “Yes”

Sir Humphrey: “Do you think there is a danger in giving young people guns and teaching them how to kill?” Bernard Woolley: “Yes”

Sir Humphrey: “Do you think it is wrong to force people to take up arms against their will?” Bernard Woolley: “Yes”

Sir Humphrey: “Would you oppose the reintroduction of National Service?” Bernard Woolley: “Yes!”

Sir Humphrey: “There you are, you see Bernard. The perfect balanced sample.”

Jay writes:

To Proggers, the point about higher taxes is irrelevant because they will collect 100% of the tax they need to pay for the programs from 1% of the population.

Thomas writes:

As on most things, I think J. Barro is letting his partisan leanings get in the way.

The hospital association in Florida published a poll, linked to by Barro, finding strong support for Medicaid expansion. That poll received statewide news coverage. Though everyone understands the games that pollsters can play, surely there's nothing wrong with, and perhaps some value in, presenting an example of the same for the other side.

Tom West writes:

While I'm often in favor of such social spending, I have to admit the idea of trying to "pull a fast one" by failing to mention the costs has always bothered me.

I've often encountered the paradigm of "the people are too stupid to know what's good for them" from both left and right and I understand the framing makes a big difference to how people react, but I cannot let go of the idea that if you cannot lay out *all* the facts and still make your case to the people, then maybe it's your case, and not the people that have a problem.

(Or more charitably, maybe the people are not ready for you policy *yet* and you need to do a few years preparing the ground.)

David R. Henderson writes:

@Tom West,
Good comment, on all counts.

Silas Barta writes:

@Tom_West:

...if you cannot lay out *all* the facts and still make your case to the people, then maybe it's your case, and not the people that have a problem.

For once, I think you and I are in complete agreement -- although I'd limit "the people" in this definition to those that are willing to take the time and effort to hear out and trace out the inferential distance in the justification of the policy.

Given the path dependency of policy, political rights, and traditions, that may not be trivial.

If costs couldn't be hidden there would be no politicians.

Tom West writes:

> inferential distance

Hey! I learned something from the Internet today!

Thanks, Silas.

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