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A New UK Voice on the "Science of Choice"

by Jeff Worley

When asked where he'd like to start in a discussion of economics, David Wildasin sits back in his swivel chair on the fourth floor of the Patterson Office Tower, searches the gun-metal gray sky, and, probably without knowing it, paraphrases a line from Mick Jagger: "You can't always get what you want."

Photo of David WildasinWildasin's emendation is, "We can't have everything we want."

"Economics is all about tradeoffs, about scarcity," says Wildasin, the new chair of public finance at UK's Martin School of Public Policy and Administration. "Sometimes, economics is called the science of choice. It's also been known, more pejoratively, as 'the dismal science,' because we all have to make difficult choices in our lives; there are no free lunches out there."

"Since the Martin School's strength, historically, has been in the area of public finance, when we received the RCTF [Research Challenge Trust Fund] funding for an Endowed Chair of Public Finance, our faculty made a wish list of persons that we would target in recruiting," says Genia Toma, director of the Martin School. "David Wildasin is so well known in this area that we really didn't think we could attract him here. He clearly enhances our reputation and will be a tremendous asset not only to the graduate students but to the Commonwealth."

"The RCTF and related developments were a big factor in my coming here," says Wildasin, who was recruited from the Department of Economics at Vanderbilt University. He is especially known for his work on state and local public finance and "fiscal federalism," a subject he has studied since his graduate school days at the University of Iowa in the mid-'70s.

Wildasin explains that the question of public finance has been a concern in this country since the days of economist Adam Smith. "Over 200 years ago, Smith talked about what role the public sector should play in governing economic activity. Should we let markets rule? Should we have lots of regulations? What's the right tax policy?" He admits that one reason this topic engages him so much is that the role of government in society is a perpetually hot issue.

Education is one area, he says, where government involvement has grown dramatically. For example, 150 years ago there was very little government participation in education, but in the last 50 years there's been substantial growth in the share of local school spending that gets supported by state governments. A continuing emphasis, he says, is funding directed toward poorer school districts within states.

"It's a commonly shared value in our country that there ought to be some basic level of education all kids get exposed to," Wildasin says. "And I believe states ought to be involved to some degree in remedying disparities in educational opportunity." But, he adds, this is not a simple issue.

"If we find children in a poor school district who are not getting the quality of education they might get in a richer school district, it's easy to say you want to do something to remedy that," says Wildasin. "However, if people in a wealthier community decide they want to put extra money into the education of their children, should we prohibit them from doing so? Few people would object to parents spending their money on improving opportunities for their children, yet this inevitably creates educational disparities among children."

Education, he adds, is such a sensitive issue because a person's life prospects are so heavily influenced by his formal schooling. "It bothers us that a person's lot in life can be determined by his parents' lack of wealth. That's one of the reasons for public sector involvement in education—to level the playing field to some degree by trying to make sure students have the basic skills they need to be successful in life."

Government involvement in public education is only one area of interest for Wildasin. He is also interested in the funding of local public services and the effect this has on a community. "Whether people decide to stay in a community or leave has a lot to do with how well public services are financed; such things as health, public transportation and safety are all important.

"Economists talk about people voting with their feet. The idea of a mass exodus from an area keeps local governments from—how to say this?—making ridiculously bad policy decisions."

He adds that migration can usually be seen as dramatic only over a period of years, and that local governments in their response to citizens' needs can rarely boast of huge successes or lament significant failures. One of his former residences, though, was "scarily close" to failing, Wildasin says.

"When I lived in Washington, D.C., working with the World Bank in the Policy Research Department in 1996-1997, the city was coming close to being a significant failure. Crime in the district was up, property values were plummeting, the roads weren't being kept up, and there was a terrible problem with the city water—to the point that city health officials had to warn people about its use."

In the past decade, Wildasin has been focusing on public finance in the context of European economic integration and in developing countries where rapid reform of governmental institutions is leading to a rethinking of how governments should be financed and what their basic functions should be.