Thursday, 28 August 2014

Economic myths: the fungibility of funding.

Everyone who has not just returned from holiday in the Takla Makan desert must be aware of the Ice-bucket Challenge. As a fund raiser, it's been a brilliant success, but it is not without its critics. Scott Gilmore doesn't think much of it, but his piece is a classic example of the fungible funding error. Put simply it goes like this, "If they didn't spend all that money on X, we could have more money spent on Y". It is particularly prevalant in criticism of Government spending policy.

In this case, Mr Gilmore makes the erroneous assumption that the money given to the ALS charity was already earmarked and ring-fenced for donation to charity, when in reality it was neither of these things and the vast majority appears to have been given by people who would not normally consider giving to charity, and, even if they did, it appears to be additional giving, not taken out of an existing pot marked "For Charity".

In most cases it's usually a newspaper like the Daily Mail saying that x no of nurses could have been employed for the money flushed down the drain in the latest government cock-up, conveniently overlooking the simple fact that, if the Treasury wanted to spend more money on employing nurses, it would already have done so. In fact, so ingrained has this error become, that NHS nurses are now the basic unit of government spending by which everything else is measured, which Mark has pointed out before. The irony is that NHS nurses only make up about two or three per cent of total government spending, but just as schools'n'hospitals are always pushed to the front when cuts to public spending are being mooted, nurses similarly have pole position as alternative expenditure when waste is being discussed.


A K Haart said...

As far as I can see a nurse is too large to be a unit of currency.

Good point though. We recently gave a chunk of money to a local charity because we know what they do and they have a big fundraising drive going on. We hadn't earmarked it.

Bayard said...

AKH, quite. If I get nominated for the ice bucket treatment, then the money I give will certainly not come out of what I normally give to charity. (So far, I've escaped, luckily. Age has its compensations.)

Anyway, what sort of mean bastard (apart from Scott Gilmore, that is) is going to stop £3 out of what they are already giving to charity?