Measuring outputs, not inputs
The financial services website WalletHub this week ranked New Hampshire No. 1 in the nation for return on taxpayer investment (ROI). It’s a fascinating ranking primarily because that’s how taxpayer expenditures ought to be ranked but seldom are.
State political and government rankings often tell us how much a state spends on X or how much it taxes X. Those can be useful in the way that price tags are useful. But tags tell us price, not value. (They also can convey social status, sometimes in unexpected ways.)
Value tends to be a better measure. It gets closer to telling you whether the item or service purchased is worth the price.
Sure, the truck stop has racks full of $3 action movies and $1 hot dogs. The prices are great! But the odds are pretty low that downing a couple of dollar dogs while watching “The Roller Blade Seven” adds value to your Friday night. You’d probably feel better Saturday morning if you spent a little more than $5 on dinner and a movie.
Likewise, getting Derek Jacobi to put on a one-man Hamlet production in your living room would be amazing. But the price would probably be slightly out of reach. Somewhere between these two options — and much closer to the former — is the sweet spot.
The trick is not just to pay more. It’s to find the right balance between inputs and outcomes. The WalletHub report indicates that New Hampshire does an outstanding job balancing costs and services.
Our neighbors? Not so much. Maine ranks 22nd, Massachusetts 35th, and Vermont 43rd. To put this in scientific terms: LOL, Vermont.
We would quibble with some of WalletHub’s methodology. Hospitals tend to be private-sector institutions and not greatly reflective of public spending, for example. And the research on pre-school “education” shows overwhelmingly that it doesn’t produce long-term educational advantages for students, so pre-school spending is a bad measure of ROI. But a lot of WalletHub’s measures were sensible.
Interestingly, WalletHub included school choice as a measure. States with school choice programs scored better than states without, indicating that WalletHub’s analysts see a value in giving students alternatives to traditional public schools — even when public schools are of generally high quality.
Also interesting is that WalletHub measured public school systems by quality, not by expenditures, which is more typical. New Hampshire ranked 4th nationally in its system, which looked more at outcomes than inputs. Spending was not one of the criteria.
As legislators have busied themselves raising taxes and spending this session, they’d do better for everyone — taxpayers and recipients of government services — if they updated their approach and focused on outputs, not inputs.
What really matters is return on investment. By that metric, New Hampshire does quite well — precisely because its historical frugality has forced it to focus on spending dollars more efficiently rather than just spending more dollars.
