What Was Ted Hearn Thinking? Not About Incentives

A funny thing happened over Labor Day weekend. Journalist Ted Hearn emailed us a thoughtful question about a piece we wrote on BEAD spending incentives. We took time to craft a serious response explaining the economics. Without waiting for our reply, Hearn published a piece declaring our theory debunked. That struck us as a little unfair, but it gives us a teachable moment about incentives: Ted’s, ours, and state broadband offices. Under the NTIA's new rules, because states are unlikely to be able to use any leftover money, they lose the incentive to find creative efficiencies that might free up funds for other broadband priorities. It's not that they'll automatically gold-plate everything. It's that they won't try as hard to find savings. Think of it this way: if your boss says “spend this entire budget or lose it,” you probably won’t hunt as aggressively for deals. You'll still follow company policy, but you probably won't spend your weekend comparison shopping. Or in the simplistic example we gave for explication, you’ll buy the Lexus instead of the Honda if you personally pay the same price regardless.

[Gregory Rosston is the Gordon Cain Senior Fellow and Steering Committee member at the Stanford Institute for Economic Policy Research (SIEPR). Scott Wallsten is President and Senior Fellow at the Technology Policy Institute and also a senior fellow at the Georgetown Center for Business and Public Policy.]