Wednesday, January 18, 2012

Obama, Vilsack, and Kahneman

"Loss aversion" is part of  Daniel Kahneman's thought. As he writes in Thinking: Fast and Slow, the theory is that people mostly prefer choices which minimize the risk of loss as opposed to maximizing the chance of gain. And, more interestingly, we prefer a choice which offers the chance of avoiding a loss, even though it's not rational.

On page 305 he ties that into proposed reorganizations, arguing that any reorganization will cause someone to lose something and, given human preferences for loss aversion, they'll fight a lot harder to avoid the loss than people who may stand to gain by the reorganization will fight to implement it.

We can already see this with Obama's proposal on reorganizing commerce; there's lots of resistance to including the office of the US Trade Representative in the overall reorganization.

The same sort of logic applies to the closing of USDA offices; those adversely affected by the loss will fight hard.

But that leads to a mystery: why was Congress able to reorganize USDA in 1994 by combining part of FmHA with ASCS to make FSA?  Maybe part of it was in the splitting of FmHA--those parts which became Rural Development could see themselves as gaining by the reorganization.  The old Rural Electrification Administration had long been a target for reformers, but by merging it into RD the old name and the old reputation was lost, at least among those who had only a superficial acquaintance with USDA and the lobbyists behind it could see a gain.

Meanwhile the farm loan part of FmHA might not have had the greatest reputation in the government: GAO had had the loan programs on its list to give close scrutiny to.  And I remember my boss showing me a letter someone in Congress had sent to the old FmHA, criticizing their failure to implement some legislative provision in comparison with the speed with which ASCS had implemented other provisions.  That was, of course, unfair.  FmHA was bound by different constraints than ASCS, and had a different culture.  But still the contrast might have undermined support on the Hill for maintaining it as a separate agency. 

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