By Stuart Butler, Brookings, July 12, 2019.
In many areas of domestic policy, effective solutions to a problem typically need the coordination of different government programs and agencies. For instance, achieving good health in a community requires not just good medical care, but also attention to transportation, housing conditions and other “social determinants” of health.
Collaboration and coordination across agencies and programs is no easy matter at any level of government. For one thing, programs typically arise in different agencies under different laws drafted by different legislative committees. Related programs often end up with different eligibility rules, data systems and reporting requirements, making coordination hard. Agency budgets and policy goals are also typically siloed, with managers focused on their own departments’ budgets and goals, not on the larger picture.
Siloed budgets and management also contributes to the "wrong pockets" problem. This problem occurs when one agency is best placed to make an investment (such as a city housing agency building safe apartment for frail seniors), but another agency – another pocket –reaps the savings from that investment (in this case the Medicare and Medicaid programs, thanks to a reduction in costly falls). The wrong pockets problem is a feature of “public goods,” where many people or agencies – referred to as “free riders” – can enjoy the benefits of someone else’s spending without contributing their own dollars. As economists point out, if an investing agency is not able to capture much of the generated savings, and yet free riders would be able to benefit, there will be suboptimal investment; in other words, less total investment than would make cost-benefit sense for the whole community.
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