Bigger, stronger, more . . . national

Ezra endorses this comment by one of his readers:

Another advantage of government funding over philanthropic funding is the theoretical ability to do better macro level allocation of resources. If you have, say, 10 billion dollars in one bucket you can have a team of experts figure out the optimal allocation of those resources across a broad range of needs, whereas if that 10 billion dollars is private charitable giving the allocation will be made in chunks of hundreds, thousands, and millions of dollars by individuals who can't see the big picture. Restricted money for sexy causes is a lot easier to raise than unrestricted money for more general and less sexy purposes, and individual organizations and donors allocate funds according to their own interests. So you get things like disproportionately large amounts of money for in vitro fertilization research and disproportionately small amounts of money for free preventive medicine for the poor. Not that there's anything wrong with IVF research, but it ought to be a lower priority compared to other things. It's not the fault of the charities or the donors that this misalocation happens, but it's a problem nonetheless.

Interestingly, this is exactly the argument that was offered for why socialism would be better than capitalism. I don't find it ridiculous; indeed, in 1935, I'm sure I'd have found it incredibly compelling. It took a genius like Friedrich Hayek (and ultimately, the collapse of the Soviet Union) to show why giant national solutions rarely outperform a competitive market.

The problem, it turns out, is that the central planners with the big picture have to design one-size-fits all programs that by their nature have more error built in because they don't have good local information. Also, when the planners make mistakes, as they inevitably will, those mistakes are bigger. They are also harder to detect because again, the planners have a much poorer grade of information about what is happening on the ground than local players do. And because there's no competition, there is no one to grade your performance against, and also, much less incentive to fix mistakes--particularly since those mistakes tend to generate constituencies devoted to protecting them. (See subsidies, farm.)

I'd say in most cases, charity is best provided as far down the government food chain as possible, or privately, where both the information and the incentives are better. The Federal government is like an aircraft carrier: a huge, ponderous weapon that needs a whole lot of special conditions to operate efficiently. People who want everything Federalized do so because they want the "best" weapon trained on the problem. But biggest is not the same as best. Sometimes, an aircraft carrier is the only thing for the job. But often a tiny little cruise boat that can go farther and faster, and bug out when needed, is much better suited to the task at hand.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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