Recently USD 259, the Wichita, Kansas public school district, used a study prepared by the Center for Economic Development and Business Research at Wichita State University to illustrate the success of the bond issue from 2000, and, by inference, make the case for a bond issue in 2008. There are many defects in this study, and this Voice For Liberty in Wichita article explains some: Wichita School District Economic Impact.
I wrote to Janet Harrah, the lead author of this report, with some questions. One of her responses, not to any particular question I asked but just by way of general explanation, was this: “These studies are designed to estimate the impact of expenditures for a particular activity. These studies are not designed to determine the ‘best and highest’ use of money.”
This revelation makes this study useless as a guide as to whether spending by the Wichita school district is wise. Spending by government creates economic activity. If government paid one group of workers to dig holes in the ground, and paid another group to fill in those holes, that would be government spending creating economic activity. (And governments have done pretty much just this.) The workers, whether they were creating or destroying holes, would spend their pay just like any other workers would. But these workers — after the holes are filled in — have created no economic wealth.
The fact that government spends money, therefore, does not mean it is spent wisely in ways that create wealth and makes people better off. The study the Wichita school district uses to prove its worth makes no attempt, according to its lead author, to judge the relative worth of its spending.
In fact, governments, including school districts, are poor judges of how to best spend money. Bureaucrats and politicians who spend other peoples’ money face different incentives than regular people spending their own money. Who do you think spends most wisely?
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