Bryan Caplan proclaims himself disappointed with his students’ answers to this exam question:
In the modern U.S., what is the most efficient way for the federal government to spend an extra billion dollars? What is the maximally utilitarian way for the federal government to spend this sum? (In both cases, assume that tax cuts are not an option). Use everything you’ve learned to craft a thoughtful answer, and be specific.
Judging by his summation of the responses he got, I would have been very disappointed too. Here’s how I would approach the question:
- Addressing the efficiency part of the question likely requires looking at the most underaddressed collective-goods problems in the U.S. today, that is, situations in which we are falling well below the Pareto frontier. Perhaps invasive species eradication?
- Addressing the utilitarian part of the question also requires making interpersonal comparisons of utility. I’m not too surprised many GMU students reject the possibility of such comparisons. Although I’m not a utilitarian, I don’t think interpersonal comparisons of utility are impossible. Perhaps funding an endowment, the annual interest from which will fund a very long-run basic income experiment in randomly selected locations?
How would you answer the question, Pileus readers?