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Monday, December 18, 2006

Avoiding Bad Bets and Eliminating Bad Apples

This article from David Warsh's Economics Principles web site asks whether we should insist on more personal responsibility (i.e. that people be "good apples") and upon spending money where the expected benefit per dollar is greatest ( i.e. on "good bets") in our social programs:

Bad Apples and Good Bets , by David Warsh, Economic Principles: ...[R]ecently ..., serious analytic thinking [has] begun about making social programs work better, more often than not under the banner of neoliberalism. ... Now Peter Schuck [a Yale Law professor] and Richard Zeckhauser [professor of economics at Harvard's Kennedy School of Government] have given a solid analytic underpinning to ... reform ... in a remarkably clear-headed and good-hearted little book, Targeting in Social Programs: Avoiding Bad Bets, Removing Bad Apples...

Schuck and Zeckhauser are leading proponents of what in the realm of social policy are called "targeting" measures. The basic idea is to spend money where it will do the most good. Conservatives dislike targeting because they think that it lends credibility to a "welfare state" they are still trying to abolish. Traditional liberals don't like it because they think it smack of triage -- assigning priorities among aid recipients as if they were battlefield casualties with varying chances of survival, and writing off some altogether..

The basic vocabulary developed by Schuck and Zeckhauser underscores the problem. The programs they are concerned with are those that seek to ameliorate the lot of unfortunate, disadvantaged, usually low-income individuals that they call "bad draws."  "Bad draws" are party to a social contract that insures them against certain random misfortunes... "That is why the government pays for medical care for the sick, unemployment benefits for those who lose their jobs, and food stamps for those who otherwise would be hungry or malnourished."

But among the population of "bad draws" are two groups whose situations warrant special attention...  There are "bad bets" and "bad apples."  Bad bets are persons who receive benefits from which they are likely to gain little relative to other bad draws -- the 90-year-old candidate for a heart transplant, for example. Bad apples are persons whose conduct in the past (and, presumably, the future) is undeserving of a stream of benefits -- the drug dealer in a public housing project, the habitually disruptive child in a public school.  Bad apples' behavior usually is self-destructive, too, but it is their effect on others with which the authors are principally concerned.

(There are plenty of bad apples among life's "good draws," as well, the authors note -- tax cheats, corporate charlatans, loophole-exploiters of all sorts who make life harder and more expensive for others.)

Especially pernicious has been a general unwillingness to talk about the existence of bad apples, amounting to a "conspiracy of silence," the authors argue. Excessive delicacy, they say, is often cited as a means to avoid "blaming the victim,"...

A quintessential bad apple is "Million Dollar Murray," the subject of a two-part profile last winter by Malcolm Gladwell in The New Yorker. A chronic substance abuser, Murray disrupted his homeless shelter to the point he was removed by social workers and installed in a single-room occupancy apartment of his own. When he rendered it uninhabitable, he was moved to another, not only siphoning off resources that might have been applied to better bets, but undermining local support for homeless programs in general.

Wrote Gladwell, "Thousands of people in the Denver area no doubt live day to day, work two or three jobs, and are eminently deserving of a helping hand -- and no one offers them the key to a new apartment.  Yet that's just what the guy screaming obscenities and swigging Dr. Tich gets.  When the welfare mom's time on public assistance runs out, we cut her off. Yet when the homeless man trashes his apartment, we give him another." 

If removing bad apples from social programs -- from public housing projects, homeless shelters, public school classrooms -- is to become a goal of policy, then it is obviously important to think hard about predictive accuracy and procedural attention. So the authors devote a chapter to describing various mechanisms designed to classify and protect people against erroneous classification. ...

It's necessary, too, to think hard about what is done for those who are screened out. America is justly proud of its reputation as a land of second, even third chances. Bad apples can't be abandoned entirely, even if they never get any better...

Adopting targeting practices in social programs that benefit the poor is not a matter of abandoning our dreams of equality. It is about recognizing the extent of the various inequalities that have arisen, and making some tough judgments about personal responsibility and interpersonal comparisons of welfare.  We've already got a world that is good for rich people. To make it better for the poor and disadvantaged, without undermining public trust in the programs that are designed to help them, means first learning to speak frankly and think carefully about bad bets and bad apples.

    Posted by on Monday, December 18, 2006 at 02:09 AM in Economics, Income Distribution, Policy | Permalink  TrackBack (0)  Comments (18)

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