Math Formula

Wednesday, October 17, 2012

The Tragedy Of Public Spending In Six Sentences

Political leaders are supposed to give precise spending forecasts, even when the details of the projects to be approached are not yet known.

If a project budget is not fully used up, the politician is said to be a poor forecaster, and less money than actually needed will be allocated to her future projects. Thus, a project budget is always fully used.

If the forecasts are exceeded, the politician is said to be a poor forecaster as well, plus he has to struggle to get the additional funds needed. Thus, there is an incentive to make the initial forecast bigger than actually expected.

As there is no incentive to counter these increased costs, always more money is spent than actually needed.

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