I’ve only met Megan McArdle once, when I had my copy of The Up Side of Down signed. But I’ve liked her work for many years, first for The Atlantic and then as a columnist for Bloomberg. I’d rate her as one of the best economics explainers out there, on the level with the Financial Times’s Tim Harford and the Washington Post’s Robert J. Samuelson.
McArdle’s work radiates calm and good sense. She is skilled at diving deep into the heart of wonky economic papers and emerging with interesting news. She is a libertarian, but not a dogmatic one.
Her book arises from her experience as someone whose bright career in the corporate world crashed after 9/11. She then spent two years semi-employed. She’s very open about her struggles to find work, and if you know anyone who is in the job market and is frustrated by all the doors that slam in their face, they will find this book valuable. However, she tells us more than we would want to know about her failed relationships, although I did enjoy learning abut an awful date during the height of her joblessness where she was forced to watch “unemployed puppets.”
In many ways, The Up Side of Down complements my book Great Philanthropic Mistakes. But while I look at foundations that struggled to implement disastrous programs, McArdle looks at corporations and government efforts that screwed up.
Of course, no one deliberately sets out to create a program that failed. But one reason disastrous programs continue for a long time is that program officers and project managers see what they want to see and are blind to potential results that could turn out badly.
Tim Harford, in a recent column, has an example when he describes a 1954 experiment conducted by a team that included the great public opinion researcher Hadley Cantril. The researchers showed college students at Dartmouth and Princeton a recording of a football match between the two schools. “Their perceptions of it varied so wildly that it is hard to believe they actually saw the same footage,” Harford writes. Princeton students, for example, saw twice as many fouls committed by Dartmouth players than Dartmouth students saw.
One reason new ideas fail is that they are based on a foundation of bad research. In 2011, the Los Angeles Unified School District (LAUSD) wanted to get students to eat healthier food in school cafeterias. They ran extensive tests of the proposed new menus in the community and got 75 percent positive responses. But they apparently didn’t actually have any students try the new menu.
So when the LAUSD chucked the pizza and chicken nuggets in favor of black bean burgers and quinoa salads, the U.S. Department of Agriculture and the Physicians Committee for Responsible Medicine gave the school system prizes. The students, however, revolted. The Los Angeles Times found that, in many schools, over 80 percent of the students, including many receiving free lunches, threw away the health food. Many students ended up eating the Flamin’ Hot Cheetos and soda they snuck into school.
However, she notes that good experiments can often lead to successful public policy reforms. One of her examples concerns welfare reform.
Remember when Ronald Reagan, as a presidential candidate, denounced a “welfare queen who supposedly mooched hundreds of thousands of dollars a year off of welfare? This person probably was an urban legend, but McArdle cites the cork of sociologist Carol B. Stack, who in the late 1960s spent years observing poor people in a midwestern city. Research she conducted for her book All Our Kin shows both the innovative strategies poor people of the 1960s used to survive and that the poor regarded the state as providing an endless source of freebies.
“Both she and her subjects regarded the American taxpayer as a sort of delightful natural resource, like wild raspberries,” McArdle writes. “It may be occasionally troublesome to harvest the fruit, but there’s no reason you shouldn’t take as much as you can get.”
Taxpayers, McArdle writes, sensed that the poor were not only getting a free lunch, but a free dinner too. So in the 1980s the Reagan Administration launched a series of experiments by the Manpower Demonstration Research Corporation, a respected government contractor. The experiments helped develop the Earned Income Tax Credit, which rewarded low-income people who successfully re-entered the labor force.
Thus before welfare reform was enacted in 1996, lots of leftists issued scary forecasts about how millions of poor people would be forced into destitution if term limits would be placed on how long recipients could get welfare checks. Sen. Edward Kennedy denounced the proposed reform as “legislated child abuse.” But the result was that the number of Americans receiving welfare fell in half—from just over 12 million in 1995 to just over 6 million in 2000, and most of the people no longer receiving welfare successfully managed to stay in the labor force.
The story of welfare reform shows that government mistakes can sometimes be corrected. Another illustrative example McArdle provides concerns probation reform in Hawaii. A probation officer, she writes, usually has 130 cases at any time, and dealing with each one for an hour a month would consume a typical workweek. Most people on probation don’t show up, giving probation officers time to fill out their forms. Eventually, however, the law catches up with those who skip out on probation, and about half return to prison, typically for five years. The result, says UCLA criminologist Mark Kleiman, is “randomized draconianism” that does little to rehabilitate criminals.
In Hawaii, Judge Steven Alm has implemented a system where those on probation are given randomized drug tests and brief jail time if they miss an appointment with a probation officer. The paperwork for probation officers was cut dramatically. The result is a program that does rehabilitate people, including getting them off drugs, and ultimately saves taxpayers money by reducing both prison sentences and the robberies and muggings committed by drug-addled probationers.
Megan McArdle has, so far, only written one book, but The Up Side of Down is a good book. I look forward to McArdle’s next book.
 What McArdle saw was Avenue Q, which is clever, raunchy, and worth seeing. If you liked Frozen, this is the musical where Frozen’s lyricist and composer got their start.