By Foundation for Economic Education (FEE)
There’s a right way and a wrong way to help homeless veterans.
The US Department of Veterans Affairs wasted $1.8 million in data plan costs for unused phones, according to an inspector general’s report released on Wednesday. The Veterans Health Administration had spent $7 million to purchase 10,000 phones with unlimited prepaid calling plans for homeless veterans, but 85% of the phones went unused. The report also found that $571,000 was wasted on data plans for iPads sitting in storage due to poor oversight.
“The smartphones and iPads were purchased as part of the efforts to increase homeless veterans’ access to telehealth,” the Associate Press explains. “The veterans were enrolled in a Department of Housing and Urban Development VA Supportive housing program.”
The report called for the VA to “establish a realistic goal for days in storage along with a process for closely monitoring days in storage for each data plan provider and taking corrective actions when the goal is not being met.” It also called on the VA to create a process that starts the data plan charges only after the device has been issued to a veteran.
Regrettably, government waste and mismanagement like this is nothing new. From $2 million bathrooms to $400,000 camel statues, governments have managed to throw mad amounts of money down the drain over the years. In fact, government waste is so common that Senator Rand Paul prepares an annual “Festivus” report detailing the most egregious examples of wasted resources from the year.
But while government waste is nothing new, what’s intriguing about this particular case is the reason that was given for the problem.
“The inspector general concluded that Veterans Health Administration officials…made a good faith effort to help veterans get smartphones,” the Associated Press notes. “But they found there was a ‘lack of information for officials to be able to determine the quantity needed for the targeted veteran population.’”
If this assessment sounds familiar, well, it should. As the Nobel-prize-winning economist F. A. Hayek famously asserted, the “lack of information” possessed by government bureaucrats regarding the “quantity needed” of various resources is in fact the key problem with central planning. Waste is inevitable in these systems precisely because they can never accumulate, let alone manage, the knowledge that is required for determining the best allocation of resources.
Hayek spells out the knowledge problem in his famous essay, The Use of Knowledge in Society.
“The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate “given” resources—if “given” is taken to mean given to a single mind which deliberately solves the problem set by these “data.” It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.”
The solution to this problem, says Hayek, is decentralization and market prices. With market prices, we can learn what people find valuable and direct production to those ends. But without market prices, we are “groping in the dark,” as Mises says. This is why Veterans Affairs wasted over a million dollars on these data plans. They had no way of knowing the demand for these phones, so they ended up buying way more than were needed.
Of course, none of this is to say we shouldn’t help homeless veterans. The question here is what’s the most effective way to help them. The government approach, or the market approach?
The government approach, as this story illustrates, is to assume that we know what homeless veterans need, buy a bunch of it, and then realize that we actually misjudged the need and wasted a bunch of money.
The market approach, on the other hand, begins with the assumption that we don’t know what’s best for other people or what their specific needs are. Following from that, we realize that it makes little sense to have central planners spending money on their behalf. Thus, rather than trying to guess what they need, we focus our efforts on getting out of their way. We get rid of minimum wage laws and occupational licensing requirements that might be keeping them out of jobs. We cut taxes so they can save money, and we tear down crony regulations that make everyday goods more expensive than they need to be. In other words, we let the market work.
To be sure, the market approach is radically different from what we’ve been doing. But given how things have turned out, perhaps radically different is exactly what we need.
This article was adapted from an issue of the FEE Daily email newsletter. Click here to sign up and get free-market news and analysis like this in your inbox every weekday.
Patrick Carroll has a degree in Chemical Engineering from the University of Waterloo and is an Editorial Fellow at the Foundation for Economic Education.
EDITORS NOTE: This FEE column is republished with permission. ©All rights reserved.
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