Understanding political risk in investment planning

In 1982, the Congress authorized $11 billion to modernize the nation's air traffic control system—one of the largest infrastructure investments since the building of the interstate highway system. Although this investment appears to offer a large and robust return, the economic results depend strongly on productivity gains through system consolidation. It is uncertain what balance the Congress will strike between the long-term, widely shared benefits of greater productivity and the immediate job losses from system consolidation. This risk can be included in the calculus of expected return through Monte Carlo analysis. When this is done, the expected return drops very close to the 10% hurdle rate that the government often uses for such projects. This method of integrating political risk can be applied to any investment, public or private, for which political action joins the customary economic and technical uncertainties in affecting the outcome.     

Incremental Thinking: "Toward a Theory of Budgeting"

Editor's Note: V.O. Key's article bemoaning "The Lack of a Budgetary Theory" was reprinted in the previous issue of Public Budgeting & Finance. The problems identified by Key are normative; they go to the basic values arid purposes of society and, hence, cannot be resolved by budgetary solutions alone. But a dozen years after Key wrote, Verne Lewis sought to anchor a theory of budgeting in marginal analysis, His article, printed here by permission of the American Society for Public Administration, first appeared in the Public Administration Review in 1952, Rather than seeking a full-blown political philosophy. Lewis thought that budgetary choice could be rationalized at the margins, by comparing the marginal costs and benefits of competing claims on public resources, While his hopes for a theory of budgeting have not been fulfilled, Lewis laid the groundwork for forms of marginal analysis introduced by PPB and ZBB in later decades. Indeed, there is a remarkable affinity between the budgetary structure proposed by Lewis and the one used by zero-base budgeting in the 1970s.     

The desirability of goal conflict within the criminal justice system

A pervasive interest in the creation of a monolithic system for the administration of justice which is characterized by the lack of fragmentation and goal conflict is found throughout the criminal justice literature. This paper questions the basis and desirability of such a proposal. It is argued that criminal justice exists in a sociopolitical environment in which diverse groups exercise influence in accordance with their own interests. For this reason, it is highly unlikely that a single set of values could be identified upon which to base a monolithic system. It is further argued that goal conflict within criminal justice is desirable in that different interests can be reflected, there is a basis for system adaptation and change, and the system can better promote the smooth processing of offenders.