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Who’s lying? Follow the money!

Who’s lying? Follow the money!

We recently were looking at a public policy debate, whose adherents on both sides kept sending us compelling information. When looking at these kinds of issues it is difficult to figure out what is going on because each side presents its point of view in a way that best makes its point, and because objective journalism is hard to come by. So you have to do the basic research on your own.

From a law enforcement and investigative perspective, one way to make a preliminary judgment is to follow the money, and see who profits most from their lies. Now, in some cases, the profit will not necessarily be financial:

We knew a man who worked hard to get a building declared a landmark. He didn’t actually care anything about the building; he just didn’t want construction going on outside his window. This kind of behavior needs to be examined and recognized.

In general, however, we are really looking for competing financial gains, or financial gains in conflict with some social benefit. Because these issues can be complex, you often have to do a lot of work to find a valid answer. As an example, one can look at the financial problems of pension funds. In theory, these should be self-sustaining. People put in money, the money is invested, and the growing pool sustains future demand. In practice, however, the surplus is sometimes shifted to other uses. The fund gets into trouble because benefits then need to be paid out of current revenue, not the missing reserve. Since the issue that will be discussed is the fact that there is not enough current revenue going in, rather than that the reserve has shifted, the solution chosen will be unlikely to be optimal.

When you follow the money, you often get a better handle on who is lying, and what needs to be done. You can then make a rational decision that will minimize unintended consequences.

As with all policy decisions, whether it is regarding airport security, Social Security, health care, or drilling for oil in fragile ecosystems, five questions need to be asked:

1. What problem is the policy or measure trying to solve?

2. How can it fail in practice?

3. Given the failure modes, how well does it solve the problem?

4. What are the costs, both financial and social, associated with it, and flowing from its unintended consequences?

5. Given the effectiveness and costs, is the policy or measure worth it?

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