Wednesday, August 11, 2010

Institutional Inertia

Two instances of possible institutional inertia today.  Note that I can't be sure on either instance, but I can and do speculate that bureaucracies do not respond rapidly to changing situations, which can be bad or good.

McArdle and her credit union.  
 In this case Megan McArdle and her husband are buying a house.  McArdle goes through their logic of what their maximum is, then calls their credit union, which is willing to approve a loan for twice amount they want, which shocks her.  Here I suspect the credit union never made major changes in its policies in the last decade, at least not in response to the Great Recession.  Most likely their clientele and the geographic area they serve were not subject to a big run-up, and thus the number of foreclosures was within tolerable limits for the credit union.  And even if they weren't, the bureaucratic dynamics of such an institution probably delay their response.


DC and homicides (via Yglesias). DC is on pace to have the lowest rate of homicides since the 1960's, a fact commented on by Yglesias.  What he didn't comment on is the increase in clearance rate, which is something readers of Homicide would be very conscious of.  In this case bureaucratic/political inertia means the number of homicide detectives isn't being reduced as fast as the homicides, so there's more time to pay more attention to each killing, resulting in more clearances.  Here bureaucracy in the way jurisdictions allocate funds means DC is gaining on the down dip; there's a virtuous cycle.  But when homicides increase they'll lose on the up cycle; there will be a vicious cycle.

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