A Budget Balancing Game

Edward Murphy

Public Economics
Collective Decision-making

Non-computerized experiment

Regular peace time budget deficits are a relatively recent phenomenon in the U.S. Crain and Muris attribute this not to an adoption of Keynesian counter-cyclical policies or any other ideological shift, but to a restructuring of the congressional budget process. They claim that the rise of the subcommittee system and limitations on the appropriations committee created a common-pool problem with the "general fund." Each subcommittee will overgraze the common fund, that is they will recommend increasing spending on projects overseen by their own committee and funded out of general revenues. At the same time they will hope that the other subcommittees will show restraint. A classroom game can easily show students both the common-pool model of budget deficits and illustrate why small items in your budget are relatively price-inelastic.