Charles Lane has a superb column today on the dangers of numerical policy goals. Here is the ending. The beginning is just as good:
Still, I worry that the pursuit of national numerical targets is a bad way to allocate scarce resources. In 1995, President Bill Clinton announced a goal of 8 million new homeowners by 2000. In 2002, President George W. Bush promised 5.5 million new minority homeowners by 2010.
Both men treated homeownership rates as a proxy for non-quantifiable social goods: economic opportunity, community stability, minority inclusion. They were less interested in how many new mortgages might ultimately foreclose.
The federal homeownership push probably contributed to the housing boom and its subsequent crash, which destroyed trillions in nominal household wealth and left many minorities worse off — not to mention the broader economic damage.
In his 1970 essay “Policy vs. Program,” Daniel Patrick Moynihan decried the government efforts of his day, in which “ambitions are repeatedly proclaimed, and just as repeatedly frustrated.” He blamed the tendency to devise separate federal “programs” in response to each perceived social deficit. Moynihan argued instead for “policies” that accounted for government’s own sometimes unintended or counterproductive impact on society — and measured success holistically.
“The test of a program, when this program is part of a policy,” Moynihan wrote, “is not input but output. It is interesting, and at times important, to know how much money is spent on schools in a particular neighborhood or city. But the crucial question is how much do the children learn. Programs are for people, not for bureaucracies.”
Forty-two years later, we are still struggling to put the late senator’s wisdom into practice.
The government bipartisan push to increase home ownership created the rise in housing prices that created the opportunity for Wall St to use it as a vehicle for leverage.
When Obama relentlessly mentions “the policies that got us into this mess,” I don’t think it’s what he has in mind. But we all should remember it, along with Hayek’s warning:
“The curious task of economics is to demonstrate to men how little they understand about what they imagine they can design.”
F.A. Hayek, The Fatal Conceit