Stirring the Pot, Chapter 4: National Public Service

So, I took the GMAT yesterday. I hadn't taken it since 1998, when it first went on the computer. I took it to keep my student Jose company- he was also taking it in the same room. He suffers from the most extreme case of test anxiety I've ever seen, and so I thought it might help him to have me nearby, as psychological support. He did end up getting his highest score ever, though it did still fall a little short of what we hoped.

The GMAT begins with a pair of essays, one of which is an "issue" essay where you give your opinion on some issue they provide. The issue I was given was: All Americans should be required to perform a period of public service." And that got me to thinking...

As it stands, I disagree with that statement. We have built this country in part on the principle that people should be, to the extent possible, allowed to make their own decisions about their lives. Forcing people to perform public service runs counter to this founding principle. So I don't think it's a good idea to actually implement, even though it is well-intentioned, and would presumably accomplish a lot of good.

But a more interesting thought experiment is to think about a more fundamental question, which is: starting from an assumption that more public service would be a good thing, is there any non-coercive way to increase the amount of public service performed in America?

To answer that question, I started by thinking about public service as a positive externality. For those of you who haven't had the pleasure of sitting through a class in economics, a positive externality occurs whenever somebody gets the benefit of a good or service without paying for it. Here's a fun and simple example: fireworks on the 4th of July.

If you think about it, all the fireworks shows on the 4th of July are put on by governments. You might wonder: "Gee, how come nobody puts on a private fireworks show and charges admission?" The answer is that no one would pay- the vast majority of people would simply watch from outside the paying area, thereby receiving all the benefit of the fireworks show without incurring any of the cost. And so, no private party has any incentive to put on a fireworks show, and absent any government action, there wouldn't be any 4th of July fireworks.

Of course, fireworks shows on the 4th are a lot of fun, and it would be nice if there were some, so the government steps in and uses tax dollars to fund the show. That spreads the cost over a nice wide population, and then everyone can come down to the river or the park or whatever and watch fireworks, ostensibly for free.

Positive externalities are like that- something good that you'd want to happen, but isn't going to unless someone, almost always a government, steps in to absorb the cost of making it happen. Put another way, in the absence of intervention, less of something good is going to happen. I'd argue public service is like that.

So, if we accept public service as a positive externality, then the question becomes: how to we remove the externality, and make more public service happen? In my little essay I kicked around a couple of ideas, one of has definitely been implemented, and the other of which has not (to the best of my knowledge).

The first idea centers around the fact that many of our most productive citizens invest heavily in higher education, and as a result of that investment leave school with a significant student loan debt. So one way to increase public service would be to compensate such folks with loan forgiveness based on hours of public service worked. There already exists a program for this specifically for med school graduates, and Americorps allows you to work full-time and earn a $4725 amount that you can use to pay for school or to pay off student loans.

The issue I have with these programs is that they require a significant time investment. What if I only want to contribute 3 hours a week to public service? There's still good work that could be done, and I bet a LOT more people would participate if they could do so at a level more like this. Compensate people hourly with funds that can only be used to pay for education or educational loan foregiveness. With hourly compensation, people who only had small amounts of time could participate, which would likely drive up significantly the number of public service hours worked.

But here's another idea, related in a certain way, but not one I've seen before (though I'm sure if I thought of it, 20 other people already have also): set up a 401(k) for every citizen (honestly, this should be done anyway), and then allow government-approved public service to be compensated at the federal minimum wage on an hourly basis, with the entire proceeds (no taxes) directed to the 401(k).

The people with the most spare time for public service tend to be younger people, since they are less likely to have families or more advanced (and therefore demanding) careers. Young people also tend not to have as much disposable income to put toward saving for retirement. We could divert the energy of youth toward public service, while at the same time building a good habit in saving, and setting them up to be better off economically late in life. There is a lot of wasted human potential that we could harness through public service, and doing so would help grow the economy, which in turn would help set up the government to be able to make the necessary payouts in the future when people were ready to draw on the 401(k)'s. And it's not as if old folks couldn't participate too; I'm just thinking younger folks are the primary target here.

If I'd worked 3 hours a week for the 4 years between college and business school at the current minimum wage of $6.55, I'd have somewhere between $4000 to $5000 dollars plus 10 years of compounding more saved for retirement, plus I'd presumably have accomplished more good in this world than I regret to admit that I have to date.

It's not the hugest difference in the world, but scaled up to a couple million people, it could be a huge force for good. That's all I'm sayin'...