The best laid plans

Why do so many government programs fail? We’ve seen it time and time again. A need is identified, a program is formulated and put into place, everything starts out well enough, and then, perhaps over time, something happens. The program doesn’t achieve its goals. Or the amount of resources needed for it to achieve its goals are vastly more than expected.

We’ve seen this in Social Security, Medicare, the Great Society programs, and the public school system. Is it waste, fraud, and abuse (those favorite whipping-boys of legislators)? Welfare cheats? Incompetence? Just needs a little fine tuning? We’re not spending enough (no matter how much we seem to be spending)?

If you haven’t been reading Jeff Jarvis’s Issues2004 series you really owe it to yourself to start reading them. Follow the links. Read the comments. I was reading the comments in one of the series and spotted the comment from frequent commenter there (and around the blogosphere) Charlie (Colorado):

Jeff, there is an assumption underlying all this that I don’t think holds: the assumption that spending more money necessarily correlates with better results.

Everything I’ve seen suggests, in fact, that spending is negatively correlated with outcomes. That is, the more spent per child, the worse the results.

There’s a name for this: Gammon’s Law:

Dr. Max Gammon was a British physician who sought to solve a public policy riddle: In the 1960s, the government spent significantly more on health care than it had previously, but the National Health Service didn’t seem any better for it. After an extensive study of the British system of socialized medicine, Dr. Gammon formulated his law: “In a bureaucratic system, increase in expenditure will be matched by fall in production.”

Dr. Gammon reasoned: “Such systems will act rather like ‘black holes,’ in the economic universe, simultaneously sucking in resources, and shrinking in terms of ’emitted production.’ “

Milton Friedman has written this about the application of Gammon’s Law:

I have long been impressed by the operation of Gammon’s law in the U.S. schooling system: Input, however measured, has been going up for decades, and output, whether measured by number of students, number of schools, or even more clearly, quality, has been going down.

The recent surge of concern about the rising cost of medical care, and of proposals to do something about it — most involving a further move toward the complete socialization of medicine — reminded me of the Gammon study and led me to investigate whether his law applied to U.S. health care. There clearly have been major advances in medical care in the past half century. Indeed, I would not myself be alive today if it were not for some of them. Yet the question remains whether these gains were promoted or retarded by the extraordinary rise in the fraction of national income spent on medical care. How does output compare with input?

Why does this happen? Does it have to happen? The short answer is yes, it does. Unfortunately for those who contemplate grand solutions to the genuine problems in the world. In a modern society the implementation of the kinds of plans we’re talking about here requires a bureaucracy. And Gammon’s Law is an intrinsic feature of bureaucracies.

Max Weber was the first student to consider bureaucracy seriously. Weber is a fascinating character. Quite a few of the ideas we take for granted e.g. work ethic, Protestant ethic (later applied to Japanese, Jews, and non-Christians), the state’s monopoly on the use of force, etc. all derive from Weber.

You can read what Weber had to say about bureaucracy here. From Wikipedia:

A bureaucratic organisation is governed by following principles:

  • official business is conducted on a continuous basis
  • official business is conducted with strict accordance to following rules:
    • the duty of each official to do certain types of work is delimited in terms of impersonal criteria
    • the official is given the authority necessary to carry out his assigned functions
    • the means of coercion at his disposal are stictly limited and conditions of their use strictly defined
  • every official’s responsibilities and authority are part of a hierarchy of authority, with respective rights of supervision and appeal
  • officials do not own the resources necessary for the performance of their asigned funtions but are acountable for their use of these resources
  • official and private business and income are strictly separated
  • offices cannot be appropriated by their incumbents (inherited, sold, etc.).
  • official business is conducted on the basis of written documents

A bureaucratic official:

  • is personally free and appointed to his position on the basis of conduct
  • he exercises the authority delegated to him in accordance with impersonal rules, and his loyalty is enlisted on behalf of the faithful execution of his official duties
  • his appointment and job placement are dependent upon his technical qualifications
  • his administrative work is a full-time occupation
  • his work is rewarded by a regular salary and prospects of advancement in a lifetime career

An official must exercise his judgment and his skills, but his duty is to place these at the service of a higher authority; ultimately he is responsible only for the impartial execution of assigned tasks and must sacrifice his personal judgment if it runs counter to his official duties.

Note that bureaucracies are not about outputs. They are about process. And it’s been known since Weber’s time that bureaucracies take on lives of their own. They’re like one-celled organisms. Their only objective is survival. And survival in a bureaucracy is not about output but about process.

There’s a kind of entropy in a bureaucracy: it becomes more and more organized and less and less work gets done. There are fewer outputs.

The urge to advance in one’s profession and to prosper is natural in human beings, human nature if you will. How does one advance or prosper in a bureaucracy? First, you must conform to the established processes. Second, you must rise in the hierarchy and have more people reporting to you. This explains the tendency of bureaucracies to grow over time. And the application of a little network theory should show you that this growth can be very fast, indeed.

It’s the simultaneous features of process, organization, and the tendency to grow that results in Gammon’s Law. And, since these features are intrinsic to bureaucracies, it’s inevitable.

There are only two known organizing principles in modern societies1: bureaucracy and the unpredictable large scale group behaviors of complex systems known as emergent phenomena. Reliance on emergent phenomena to solve the great problems requires an enormous amount of faith and hope.

But if we rely on the grand solutions we’d better be prepared for a lot of failure and to spend more than we can really afford.

1 There are also the various forms of autocracy but these are present in both modern and non-modern societies.UPDATE: Submitted to Beltway Traffic Jam.

6 comments… add one
  • Ludwig von Mises said, “…economic history is a long record of government policies that failed because they were designed with a bold disregard for the laws of economics.”
    Human Action
    Chapter II. The Epistemological Problems of the Sciences of Human Action
    10. The Procedure of Economics

  • Indeed. And the other laws of human nature as well. I first read Human Action more than 30 years ago. It was a revelation. Another revelation was Science and Sanity by Korzybski. I’ll have to blog about it sometime.

  • Bureaucratic behavior, and the patterns you mention here, are also illuminated nicely by James Buchanan’s studies in Public Choice Economics. A couple of really mind-expanding books on the subject are Buchanan’s The Calculus of Consent and Mancur Olson’s The Logic Of Collective Action.

    Because I labor in a field whose products (warplanes) are a monopsony of the federal government, I’m hip-deep in these effects all the time.

  • You have my greatest sympathy. Thanks for the tips, Francis, and welcome!

  • Also check Parkinson’s Law by CN Parkinson and Systemantics by John Gall.

  • Absolutely, J Thomas. I first read C. Northcote Parkinson’s Parkinson’s Law shortly after it was published in the early 60’s. Most famous for Parkinson’s First Law (“Work expands to fill the time allotted to it”) it has several other pieces of wisdom as well. It fits into a very narrow genre humor cum satire cum sober truth.

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