Economist's Notebook: Doing it Now or Later

My background is in policy and economics, but though it seems a natural intersection, it can often be a frustrating place to spend time. The reason for this, for me at least, is the fact that policy is informed and influenced by politics as much as (or often much more than) economics. And politics and economics are not always happy bedfellows.

I was thinking of this when I read of the huge backlog of deferred maintenance projects in the Portland Public School system and my own trials and travails at OSU: Heat blasting on 97 degree days and absent on 30 degree days, a ventilation fan that disrupts class about 10 times a lecture and has been that way for at least two years, a leaky roof dripping on the Chair's desk, etc., etc., etc.

As an economist, intertemporal problems are routine. You have to weigh the present value of the costs and benefits when taking a decision about fixing something today versus letting it go a while longer. This would seem a fairly easy problem for an institution like PPS (though it is in no way an answer to the overriding problem of resource constraints). But the reality is that parents have a time horizon that is much shorter than the school district itself. If a parent knows their child will be in a school for only 5 years, the present discounted value of deferred maintenance cost is much smaller than for PPS itself which is thinking of school buildings lasting for 50 more years. This is true in many aspects of government business - it is often hard to get the public to be far-sighted (especially true when you talk about very long time horizons and add some uncertainty like in global warming).

It seems like an appropriate response would be to put some welfare weights on the current concerns of parents and the concerns of future parents and be explicit/transparent about it. Simply deferring maintenance and hoping for better times in the future seems like a fool's errand. It is likely to never happen and often you end up having to pay a much higher price when systems fail like the heating system at Cleveland. Once we decide how to weight the concerns of the current generation and future generations, we can then start to allocate resources systematically. Why is this a good idea? Because it is often very hard to resist fulfilling urges today - people tend to place undue weight on current needs and desires. Ex post, however, they often regret not having exercised more self-control. This idea has been popularized recently by Richard Thaler and Cass Sunstein in their book 'Nudge.' In the parlance of the book, my welfare weights idea would be introducing 'architecture' to the choices made by the PPS. This architecture acts as a commitment device and will ensure that we are not shortchanging future kids for the sake of the current ones. Instead what we have is a bunch of discretionary decisions that add uncertainty and inefficiency into the system which serves no one well.

And, by the way, the title of this post comes from a theoretical examination of this issue by Matt Rabin and Ted O'Donoghue (whom I was lucky enough to get to know when I was a grad student).

Quiz: Name the PPS school pictured above.