The River Runoff Phenomenon

Most citizens in advanced modern societies need and want many things, but also complain loudly and bitterly that they are surrounded by excesses, even corruption, incompetent delivery systems and abundant negligence.

Yet, if asked, those citizens, particularly if they are or will be beneficiaries, are outraged at the idea that their program(s) might not be available to them.

What are these programs? Social Security; health care, including Medicare; unemployment benefits; welfare; tax deductions for mortgage interest; agricultural subsidies; foreign aid; tax benefits for gas and oil interests — the list can go on for so long that you will get bored and stop reading. Add to this list any and all programs that you are aware of and they will almost surely qualify for the generalization above.

What can society do about this problem? Virtually all these programs were designed and directed to meet what were perceived, at the time they were implemented, to be worthy and important social needs.

The best example is Social Security, which President Franklin Roosevelt proposed in the 1930s. At the time many people became apoplectic, calling it rank socialism. Today only a very few people are left, even those who do not benefit directly, who think twice about the essentiality of the program’s existence. They need it, want it, and love to complain about its problems.

Of course, most of the problems that people love to exclaim and proclaim about are real and should be dealt with in an efficient and cost-effective way. Averting one’s eyes from people cheating the systems seems particularly wrong and unfair.

But if, for example, the legal/administrative costs of dealing with a leaky hole would be $10 million, and the amount actually being saved were only $3 million, policing, on its face, seems “penny wise and pound foolish.” Granted there are some people who might argue that to preserve the integrity of the program, it is worth that trade off to maintain the reputation of the program at large.

This is where the River Runoff phenomenon comes into play. Many years ago, a distinguished economics professor explained this thought process. He said that inefficiency, even some fraud, had to be understood and put up with, in order to enable society to address certain essential public needs.

The reasoning goes as follows:

Take any big river, say the Hudson; calculate the amount of water in the river, say one trillion gallons; and then dam the river and drain all that water out. The question is then, how much water does it take to refill the river? The answer is not one trillion gallons. The correct answer cannot be precise but would be in the range of 1.3 trillion gallons. The reason is that before the river can really begin to refill, its dry bottom has to become muddy again and all its tributaries, large and small, have to be refilled too.

The relevance to the opening proposition above is that to meet an important, even vital, public need (refill the river) one has to accept the proposition that part of the given overall cost has to be expected to exceed the amount that one needs/wants to actually reach the intended results.

That is an ugly and somewhat sad truth, but it may be something like a law of life. If we could ever come to grips with this law, we might all be happier, grumble less and get more done as well as more bang for the buck.


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