Data and Common Sense Be Damned
Chuck Sheketoff
The Cascade Policy Institute’s most recent paper assessing states’ spending levels reminds me of an old joke about an economist, a doctor and a lawyer stuck in a deep hole. The doctor couldn’t operate his way out. The lawyer couldn’t argue his way out. But the economist had a solution, or so he said. “Assume we have a ladder . . . .”
Economic models are only as good as the assumptions on which they rest, and sometimes economists are so blinded by their ideologies that they don’t notice when their models produce meaningless fantasies. The study by economists Eric Fruits and Randall Pozdena, published by the Cascade Policy Institute, is a good example. Their study predicts spending levels for states and compares their predictions with actual spending data.
Odd results for some states, however, reveal that the authors’ zeal to show somehow that Oregon and other states spend too much led them to use false assumptions, bad math, or both.
For example, why should anyone rely upon their predictions for Oregon and other states when they claim that the District of Columbia overspends on public health and public hospitals by a whopping 23,800 percent?
That would be like a doctor saying to a 180-pound man, “Based on my model, you are overweight by a little more than 179 pounds.” If the doctor’s predictor was that far off, wouldn’t she or he realize that there could be a flaw in the model? Would you want that doctor to predict your ideal weight?
Not so with the dismal scientists Pozdena and Fruits and their megaphones at Cascade. To them, Washington, D.C., must be “overspending” by 23,800 percent. The ideological model says so, data be damned.
They didn’t bother investigating why their prediction was so far off. In fact, they didn’t bother investigating any of the absurd numbers that appear in virtually every category in which they rank the states. Why bother actually thinking, when blindly following ideology is so much easier?
Apart from their indefensible numbers, the two economists and Cascade ignore common sense questions such as: “What do the residents of the states get for the spending?” and “What level of services is needed to ensure that all residents have an opportunity to succeed?”
Their study ranks states' spending regardless of the quality or quantity of public services the states provide. That's like being told that you spent too much on groceries because your neighbor spent less. To these economists and Cascade, the only thing that matters is that your neighbor's junk food was cheaper than your healthy square meals; they don't care about the nutritional value for the dollars spent.
Their ideological bias is also obvious when they declare in relation to health and hospital expenditures, “Oregon’s overspending declined since the last study largely because the intervening recession prompted substantial reductions in spending on the Oregon Health Plan.” In the strange world where Pozdena, Fruits and Cascade dwell, an increasing number of uninsured Oregonians is apparently an indicator of good state fiscal health.
But their analysis isn’t just strange; it’s fundamentally flawed. The Census Bureau data that they used does not include most Oregon Health Plan spending in the public health and public hospital spending category that Fruits and Pozdena used to make their claim. They didn’t even bother to learn this basic, crucial fact about the data they were analyzing. They jumped to a conclusion that fit their ideology, data be damned.
And that’s not all that’s odd about the report. The authors’ analysis includes the federal dollars a state spends, not just state tax dollars. Thus, they chastise a state for using federal dollars to supplement state tax dollars in order to provide better state services or for securing a greater share of federal tax dollars than another state.
Based on their twisted logic, we can expect Oregon’s ranking to “improve” in their next report, now that Congress has cut off federal timber payments to our cash-strapped rural counties. That counties must slash spending on roads, courts, libraries and public safety is “good,” according to the ideological model used by Pozdena, Fruits and Cascade.
Oregonians deserve a more rigorous fiscal policy debate than what the Fruits, Pozdena and Cascade model offers. Would you want to end up in a 10-foot-deep hole without a ladder with these economists advising you? It could end up being 2,390 feet deep after they crunch the numbers.
Chuck Sheketoff is the executive director of the Oregon Center for Public Policy. You can sign up to receive email notification of OCPP materials at www.ocpp.org</p
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Jul 9, '08
This post is worthless without facts.
If you don't agree, show us the facts.
5:31 p.m.
Jul 9, '08
GW (nice initials, btw) -- Maybe you should follow the link that Chuck provided to the report he's criticizing.
This is a great post, Chuck. Very accessible and understandable critique.
You might consider adding page numbers or other references to the specific things you're noting in Cascade's report, but otherwise, great stuff!
Jul 9, '08
"Apart from their indefensible numbers, the two economists and Cascade ignore common sense questions such as: “What do the residents of the states get for the spending?” and “What level of services is needed to ensure that all residents have an opportunity to succeed?”"
Common sense dictates that all government expenditures are redistributive in nature; some people gain at the expense of others. It is unfortunate that Oregon ranks so poorly in respecting people's life and property.
People like Chuck Sheketoff seem to think that government expenditures reflect payments for services rendered. If anything, making such an assumption is more "ideological" than the report he criticizes. It shifts the burden of proof to the taxpayer instead of the government.
6:29 p.m.
Jul 9, '08
julia: Common sense dictates that all government expenditures are redistributive in nature
No, Julia. Long discredited right wing ideology says that. Common sense says that you can't make any actual statement about something as broad and vague as "government expenditures", which range from military spending, to pollution enforcement, to tax expenditures, which are special only-for-you tax giveaways Republicans like to give to their best political donors.
I really hesitate to go any further with you, given your initial statement. I could present a bunch of facts, but it's kind of like arguing with someone who starts off a conversation saying "Common sense dictates that science is wrong, and that evolution is all the plot of the devil to deceive us".
Jul 9, '08
Chuck, thanks for this. For some reason, Cascade maintains respectability in the Capitol. Almost every contention they make regarding the nexus between land use, transportation, and a healthy economy is unfounded - and proven wrong over time.
They are infuriating.
Jul 9, '08
"That counties must slash spending on roads, courts, libraries and public safety is “good,”"
I understand after two sentecnes into his invective he doesn't like Cascade's approach.
My question is how do we force govt to spend money where it is needed and not on streetcars, trams, subsidies for $600K condos, PGE Park, blah, blah, blah?
Jul 9, '08
FWIW, I have heard that one way Jesse Ventura became Gov. is that there was a stadium deal being debated. In the Gov. debate, when the major party candidates gave vague, "politician-speak" answers, Jesse Ventura said he had studied the finances of the teams wishing to play in a new stadium and concluded they had enough money to build their own stadium!
The government is not an uncontrollable single-celled organism. It is made up of elected officials. Anyone who doesn't like what the government is doing should leave blogs behind, go out and meet local candidates (and others to the extent possible) and support the ones who make sense (volunteer, contribute, talk candidates up to their friends).
Or someone can just be an anti-government complainer and wonder why no one has any sympathy for them.
BTW, Steve, those of us downstate don't have streetcars, trams, PGE Park, etc--that is a Portland concern.
8:48 p.m.
Jul 9, '08
Chuck,
Before her retirement, my mother was a child psychologist at a non-profit children's hospital run by the Catholic Church in Boston. She dealt with kids whose physical problems caused psychological problems, and the other way around, and kids who came to the hospital due to severe mental illness. There were also issues posed by families in once kind of crisis or another, affecting the kids, as well as families with physical or sexual abuse.
A significant part of her job was trying to place some kids in appropriate settings for continued care, either as an alternative to hospitalization at her hospital, or when the hospitalization ended. In other words, it overlapped with social work functions. A large number of her clients were eligible for one form or another of public assistance, some due to family income levels, others due to disability issues, special ed. issues and so on.
During the 1980s Massachusetts had a conservative Democratic governor named Ed King (people who want to simply label Massachusetts as liberal really ought to examine who the good citizens have elected as governor since Dukakis). King ordered his department of human services to throw a proportion of those in certain assistance programs off the program every month, something like 10% a month. Overwhelmingly these people were eligible for the programs, but reapplying and getting reinstated took about 2 months, during which time they were off the books. At the end of the year, voila, the King administration had reduced the caseload and related expenses for the year by 20%!
Of course, kicking eligible people off arbitrarily was illegal, as a court eventually ruled, and caused tremendous pain, harm, hardship and disruption to some of the most vulnerable families and individuals in the Commonwealth. But none of that mattered -- savings had been achieved!
Jul 9, '08
So let me get this straight, I am supposed to believe the questionable assumptions of a lawyer from Silverton over the studied conclusions of two Ph.Ds in Economics?
Kind of like when you leftoids criticize conservatives for taking the word of a preacherman over the claims of scientists when it comes to evolution.
Sorry Chuck, your whining just doesn't ring true.
Your real problem here is that you disagree with the conclusions of the article, because the article doesn't square with YOUR ideology.
People are allowed to disagree with you Chucky, it doesn't make them wrong or illegitimate.
Jul 9, '08
"BTW, Steve, those of us downstate don't have streetcars, trams, PGE Park, etc--that is a Portland concern. "
THat's OK, you are paying for it anyway with matching fed funds.
Jul 9, '08
Jim,
Almost everything Cascade says about the nexus between land use, transportation, and a healthy economy has been proven wrong?
Get specific. I'd be happy to defend our work, since I've written most of it.
Jul 9, '08
Interesting commentary, Mr. Sheketoff, but I am not sure what the point of your piece is other than to poke a finger in the eye of your ideological competitor Cascade Policy Institute. A good rebuttal piece should give some basic facts, or at the very least, provide footnotes and/or links to the appropriate information. Simply to make statements or pose questions such as "What do the residents of the states get for the spending?" and "What level of services is needed to ensure that all residents have an opportunity to succeed?" without actually answering those questions, does nothing to help prove your point. First of all, it is not the government’s responsibility or any part of its function to take care of, nor ensure that you or I have a means to succeed. That is our responsibility, period.
Your timing is also interesting, given that you sit on the state “Task Force on Comprehensive Revenue & Restructuring” with one of the other members of that group being a Cascade employee. See http://www.leg.state.or.us/comm/lro/home.htm for the list of members. If the schedule posted on the state site is correct, it looks like the next meeting is tomorrow, July 10. This should make for an interesting discussion topic for the meeting.
In response to LT who stated: “BTW, Steve, those of us downstate don't have streetcars, trams, PGE Park, etc--that is a Portland concern.” Beware LT – A lot of what happens in Portland begins to find fingers in other parts of the state. Just to name a few – zoning regulations having to do with residential construction, storm water management rules and regulations for residential and commercial. There are issues having to do with “climate change”. Right now the next over priced leg of Light Rail in being built between Portland and Wilsonville – where do you think the push will be for it to go after that?
As for Jim Edelsons comment: “For some reason, Cascade maintains respectability in the Capitol. Almost every contention they make regarding the nexus between land use, transportation, and a healthy economy is unfounded - and proven wrong over time.” I am sure the good folks over at Cascade will be very glad to hear they are held in such high regard in the Capital. All joking aside though, would you please demonstrate where and how they have been proven wrong over time.
But really, exactly what is it that you disagree with that Cascade advocates for? I do not mean to digress from the Sheketoff piece, but so many of the good folks here at BO and at OCPP seem to take great offense at Cascade. Do you not feel that people should be personally responsible? Do you not feel that people should be able to prosper economically? Do you not feel that an individual should have personal property rights, whether land or other personal property? (If not, please let me know where you live, so that I can come over and share some of your “non-personal” possessions – do you have a good stereo that perhaps I could borrow for a few years?) Do you feel that it is morally right to have someone “legally” steal some of your hard earned money so that they can re-distribute it in some way that they believe it would be better used? (If so, forget the borrowing of your stereo above and just give me some of your money and I will go out and buy my own stereo with it. You see, I just don’t have enough to buy my own right now. I would like to buy a bike too because gas is really expensive and I need a way to get around – so could you help fund that expenditure as well – I mean it is good for the environment and all, it’s good for my health and I do think it will help with that nexus between land-use, transportation and the economy.) And buy the way, speaking of that nexus between transportation and the economy – would you please tell the City of Portland and all the groups fighting against a new I-5 bridge to quit having more meetings and just build the damn bridge and stop worrying about more bike lanes. How many loads of freight can you carry on a bike anyway? We are not going to have an economy if we cannot effectively and efficiently transport people, goods and services into, out of and through this state. If you want to live on an island – move to Hawaii!
10:36 p.m.
Jul 9, '08
Patrick --
Since you seem to hate government so much, I recommend the following.
Stop using government-built roads. Stop using your government-provided sewer service (fun!). Stop using your goverment-provided hydropower. And stop using your government-created internet.
Good luck!
Jul 9, '08
Stop using government-built roads. - I may have to since they are bottom of the list for maintenance.
Stop using your government-provided sewer service (fun!) - You're right I am not crazy about most of it dumping into the Willamette since once again it was low priority with CoP to fix it until they gort sued.
Stop using your goverment-provided hydropower. - Nuclear power leaves a lot smaller footprint and we ant to breach dams anyways.
And stop using your government-created internet. - Thank you Al Gore. I believe the ArpaNet project was a product by/for the Dept of Defense, so well-spent taxpayers dollars on the war juggernaut. However, I think most of the backbone that makes today's Internet has been put in place by private enterprises like Global Crossing and is maintained by mostly private enterprise.
Next example?
Lest you say I hate govt, that is not true. My issue is most people in govt want to work on the fun/sexy things like streetcars/trams or witch hunting while roads/sewers/schools go to heck.
Jul 10, '08
Kari,
Are you serious with your comment? "Since you seem to hate government so much, I recommend the following." Where, anywhere in my post did I say I hated government? What I do dislike is governmental waste and government doing things it has no business doing. The government does not need to be the baby sitter of the people. That is not its purpose, nor its function.
Go back and actually read my post. I did exactly two things; I critiqued Mr. Sheketoff’s piece and I responded to two other writer’s comments. If you want to try to answer some of the actual questions that I posed, please do so. But please, do not make dishonest statements and avoid the actual subject mater at hand.
Jul 10, '08
Kari,
Are you serious with your comment? "Since you seem to hate government so much, I recommend the following." Where, anywhere in my post did I say I hated government? What I do dislike is governmental waste and government doing things it has no business doing. The government does not need to be the baby sitter of the people. That is not its purpose, nor its function.
Go back and actually read my post. I did exactly two things; I critiqued Mr. Sheketoff’s piece and I responded to two other writer’s comments. If you want to try to answer some of the actual questions that I posed, please do so. But please, do not make dishonest statements and avoid the actual subject mater at hand.
9:13 a.m.
Jul 10, '08
"Interesting commentary, Mr. Sheketoff, but I am not sure what the point of your piece is other than to poke a finger in the eye of your ideological competitor Cascade Policy Institute."
You must be high. Cascade couldn't carry OCPP's jock. OCPP is an independent public research organization. Cascade is an industry hack-nest, funded by and existing to put out the misinformation industry wants put out.
Jul 10, '08
I for one am happy to see "Your-Buck-Is-My-Buck" Chuck and the rest of the leftoid bobbleheads here at BO yammer against the "ideological bias" that Cascade displays in their research and publications. It means we're getting that much closer to an honest and basic debate over which is the superior governing philosophy: Deference toward individual autonomy, economic freedom and personal liberty on the one hand, or collectivist central planning and massive might-makes-right wealth redistribution on the other.
10:37 a.m.
Jul 10, '08
"Deference toward individual autonomy, economic freedom and personal liberty on the one hand,"
Funny stuff, considering that Cascade is beholden to its privately funded industry masters...
Jul 10, '08
John
Maybe you can tell us all about how MAX has so miserably failed us. And talk about MAX's failure to the hundreds and thousands of folks from around the country and around the world that come to the region to see how we did it. And how a better alternative would have been to privatize some roads and the bus system, or at least charge enough to use them to make sure only the wealthy can get around.
http://www.cascadepolicy.org/pdf/env/drain.htm
Jul 10, '08
Torridjoe - "You must be high. Cascade couldn't carry OCPP's jock." No, not high, sorry, I don't do those types of things. If you are referring to a “jock” in a mocking tone, as in a certain type of undergarment typically worn by male athletes and often sophomorically joked about in male high school locker rooms, then you are probably correct, Cascade would not carry OCPP’s … why would they want too? I think they would be happy to let OCPP keep their drawers on and take care of their own “jock” and instead, focus more on serious issues and real information.
Again, as I posted to Kari C’s comments earlier, you too have completely ignored the entirety of my post and have not addressed any of the questions that I posed. I see also that John Charles of Cascade has posted as well stating that he would be happy to defend his and Cascades work if someone could point out where it has been proven wrong as noted by an earlier poster.
I would suggest that you actually do some homework on Cascade and others like them. They are anything but corporate puppets as so many on BO seem to think. Believe it or not, what they and other Think Tanks do is engage in rigorous, intellectual work and put forth ideas and information that is in your, and all of our best interests. OCPP does some of the same, only they come at it from the opposite direction. We, as a populous and/or our legislators, then have the opportunity and the responsibility to take that information and those ideas, look at them critically and intelligently, then determine whether they have merit or not.
Far too often we confuse principles with the actions of man. Neither side of the isle has a clean slate. However, I happen to believe that the basic principles for which Cascade and similar groups advocate for are solid, fundamental ones. They will make each of us as individuals, and in turn our society as a whole, much better - economically, morally and socially. Government intrusion into this only brings everything and everyone down.
So, please, go back and reread my earlier post and then answer my questions.
Jul 10, '08
"OCPP is an independent public research organization" ? Oh good grief they are a left wing, socialist, public employee union boiler room, who supoprts every tax increase, every government program and every government agency, without ever chimming in on any of the mammouth waste such as with Urban Renewal. There are many BIG problems with our light rail and streetcar transportation system and the government land use land spending that accompanies them. OCPP hasn't a concern at all.
Jul 10, '08
Patrick,
See my post at 10:53 am;
I have specifically asked John Charles to defend his series of inaccurate contentions made in July 2000 about MAX in:
http://www.cascadepolicy.org/pdf/env/drain.htm
He has not responded.
11:19 p.m.
Jul 10, '08
Do you not feel that people should be personally responsible? Do you not feel that people should be able to prosper economically? Do you not feel that an individual should have personal property rights, whether land or other personal property? ... Do you feel that it is morally right to have someone “legally” steal some of your hard earned money so that they can re-distribute it in some way that they believe it would be better used?
Patrick, in the first instance, you aren't getting responses to these questions because they are posed rhetorically, and tendentiously, and propagandistically if not in outright intellectual dishonesty.
But I'll play. Of course I believe in individual responsibilty. I just don't believe exclusively in individual responsibility. I believe in solidarity, mutual support, common decency to one another, features that have served as paradigms of good life and good human morality across millenia and cultures. The cramped individualism reflected in your remarks and the CCPI-type propaganda lock-step talking points are based in an impoverished sense of morality by excluding the individual responsibility toward others in "individual responsibility", just as so-called free market economic theory is based on an arid theory of human motives, psychology and ends, and an inversion of the purpose of an economy. Margaret Thatcher famously said there is no such thing as society, just individuals and families. She was famously wrong, and so is CCPI and so are you when you act that way.
Further, there is in your question a snide insinuation that anyone who has difficulty, who is not "succeeding" in your terms, is in that condition purely because of lack of individual responsibility. Again, it just isn't true. Structures of inequality can defeat highly responsible people, while rewarding the irresponsible (viz. President Bush). Moreover, the ideological claim that "everyone can succeed, if only they try," is transparently false. Take unemployment and the Federal Reserve under that follower of Ayn Rand, Alan Greenspan. Now, when unemployment (on national average) was held to get "too low" and thus inflationary because it improved the bargaining power of workers vis a vis employers, Greenspan would act to raise unemployment. But of course thost averages disguised wide geographical variation in unemployment, e.g. in minority communities located far from sources of employment, or deindustrialized areas like Oregon's timber country or many of the formerly great manufacturing areas. So jacking unemployment up hurt people in those areas even more. Are they responsible for Greenspan's policies? Are they responsible for the trade policies and corporate decisions that relocated manufacturing? Are they responsible for the policy decisions that changed logging policies? Are they responsible for the private corporate decisions to export raw timber rather than process it here? No, no, no, no, and no.
And conversely, I also believe that ideologues of your ilk like to pat yourselves on the back, and suck up to the wealthy, by pretending that their success was purely based on "personal responsibility," when in fact it is based in large measure in myriad forms of social support
And that is to never mind such crasser matters as say the amassing of capital by government dispossession of Indian lands and turning over alternate 20 sq. mile blocks of it on either side of railroad routes to railroad companies, so that the vaunted "risk" by investors was minimized, or such matters as slavery (south) and slave trade and slave-produced goods commerce (north) or gross exploitation of industrial workers and dispossession of small farmers between the Civil War and the New Deal. So if you want to talk about "theft," we'd better acknowledge how much of private sector wealth derives from it.
Yes, certainly I think persons should have personal property rights. But I don't think they should be unlimited. I don't think that I should be able to do with my property things that will grossly harm the property of my neighbors, or damage the commons that we all share, including air, water, processes in the soil and biosphere and atmosphere and rivers and oceans that sustain us all. The theory that property should be such leads to the Hobbesian war of all against all -- I don't know if your individualism makes you solitary, or if your life will be long or short, but Hobbes "rude, nasty, brutish" adjectives certainly apply to your atttitudes.
And again, there is the refusal to recognize the dependence of basic capitalist social relationships on the state. Private property is not natural, particularly in land or other means of livelihood above the level of personal tools. It is a most unusual system in human history, something in which those who create it as an idol to be worshiped actually revel in at other times to make different ideological points. It came into existence as a matter of laws created by a very particular kind of state. Likewise, although market ideologues like to tout the value of freely made contracts as the basis of a truly liberal (i.e. free) society, they tend to hide the fact that it is impossible to make markets without authority to enforce contracts and debts and punish fraud. Markets without states don't exist on any substantial scale, and even the small scale ones have authorities to which the bad actions of market actors are referred for adjudication. Further there is the utter dishonesty of the pretense that contracts are made in perfect freedom, and that the manipulation of extreme vulnerability to drive wages to survival (or below, for families) and labor to the point of physical bodily destruction, as unregulated markets do, is ultimately a form of extortion (theft again) by the threat of starvation. Once again it depends on an impoverished morality: "What is it to me if you starve, it is not my responsibility, my property matters more than your life."
So how is it that we avoid such things, create a society in which many of the grandchildren of people exploited in that manner are in a position to take "personal responsibility" and develop their lives and families in better ways? Well, mostly the limitation of the rights of property, and the proper deliberation and adjudication of the claims of those rights against the claims of other rights. That takes the form in part of regulation and limitation on the uses of property that damage others. It takes the form, in the last century and a half, of forbidding property in humans and "contracts" of self-enslavement.
But it also takes the form of redistribution via taxation, which you call theft, but I deny is theft. Since the very content of the property itself is defined by the law and the social system and the social relations that embody and protect it, making it a condition of being able to hold property in certain ways that you must pay taxes to support the system that creates and protects the property is simply part of that definition. And that includes taxes appropriated and used to keep the playing field relatively even, as far as ability to be "personally responsible" goes, and to mitigate the effects of unfettered markets in immiseration and externalization of costs onto the commons.
Although about now I expect you to be screaming "socialism," it's nothing of the sort, it's just regulated capitalism, which is what liberalism really is, which is why real socialists mostly tend to dislike liberalism, refuse to support the Democrats electorally and so on. The debate is over the degree of regulation, and upon whom it should be imposed. E.g. you may not like it if I want to regulate your land use so that you can't hog water from an aquifer on which a whole neighborhood or community depends, but if it comes to the freedom of a businessman in downtown Portland to run a business which for accidental reasons draws, in part, a clientele whose presence other business owners think hurts their business, they are right there asking the city government to terminate the lease.
11:33 p.m.
Jul 10, '08
Two other small points: I did not quite close the loop on Greenspan and unemployment -- the system depends, he says and all conventional wisdom today agrees, on there being sufficiently high unemployment. So it is overtly stated that not everyone can succeed, and in fact that some proportion of people must be actively prevented from succeeding, and that policy is deliberately and openly pursued. Under those circumstances, to claim that non-success derives only from personal irresponsibility is fatuous and a bold, bald lie. Because if every single individual in such a system were exactly equally personally repsonsible, some of them still would fail, would be pushed to the margins, would be pushed down. Just like in musical chairs.
Secondly, in discussing the reasons for just limitations of private property, I did not refer explicitly enough to direct harm to the physical health of persons by uses of property, whether it be in processes of production or work, or in creation of dangerous "attractive nuisances," or in renting unsafe and unsanitary buildings, or harming persons through unsanitary or toxic pollution of soil, food, water and air.
Jul 11, '08
"OCPP is an independent public research organization."
THat is about as accurate as saying torridjoe spends more time working at CoP than blogging. OCPP main purpose in life is pushing for more taxes. They enter the discussion with a less than objective view on anything financial.
Jul 11, '08
From OCPP's 2006 tax forms, its primary tax-exempt purpose is to: "Study and educate on human resources issues that impact the low-income, aged, disabled, and other vulnerable populations that need public assistance."
Jul 11, '08
Seems to me the most significant problem with the Cascade analysis is the mis-use of the terms "overspending" and "underspending". These two economists have thrown together some data, run a regression, and then irresponsibly assigned a subjective term to their regression's predictions.
Their regression analysis cannot answer the question unless these two economists have the hubris to believe they know what the "right" level of government spending should be for any given service, in every location.
If Oregonian's (or at least a majority of voters) choose to spend more on service X to get better quality or quantity, that is not "overspending". It is making a different policy/fiscal choice than voters in other states.
If two states pay different amounts for the same exact good, that could properly be called "over/under spending", and might stem from inefficiency, poor management, corruption, or anything else that might cause "overspending".
But if Oregon chooses to buy more expensive hybrid cars for its fleet, it is not "overspending" when compared with Michigan, which may choose to buy cheaper non-hybird cars. Both states are making legitimate policy and budgetary choices, driven by their voters' distinct views. The value-laden term "overspending" is inappropriate.
Regression modeling depends on making good assumptions about causal relationships, but these two economists are trying to assign value judgements to spending levels without any reference to service levels or quality. Assuming you had good demographic (or input) data, you would have to factor in desired output to make a proper prediction of the "right" level of government spending. In fact, you'd also probably have to factor in current conditions (health levels, road quality, etc) to really be able to say anything about proper spending levels.
Any schmuck can run a regression, and find correlations. Ice cream sales and drowning deaths are correlated, but there is no causal relationship.
For me, that makes their work nothing more than a gimmick to argue their predetermined beliefs. It is made all the more absurd by the point that Mr. Sheketoff makes about D.C. "overspending" by 23,800% on health. Do they really believe that D.C. should only spend $3 million on health? Less than 0.1% of what Missippi or Missouri spend? Should we really use Mississippi and Wyoming as the bar against which all other states' transportation spending is compared? Their findings don't pass the laugh test.
Jul 12, '08
Maximillian says: Ice cream sales and drowning deaths are correlated, but there is no causal relationship.
Which precisely why regression analysis should be used if one wanted to evaluate the relationship between ice cream sales and drowning. Similarly, rather than look a simple averages, regression analysis should be used to evaluate differences in spending across states.
<h2>Maximillian's ice cream example is more fully described in Cottrell & McKenzie, Health Promotion and Education, 2005, ISBN 0763725757. The relevant passage is available on Google's book search.</h2>