Charles’ Murray’s Losing Ground was that most incentives in life are negative, in that if you don’t do X you will starve or freeze or whatever. Thus, you learn to be thrifty, nice, and hard working to simply get by.The most common complaint by businesses as to why they fail is that their banker stopped lending or seized their collateral; if they just had more time things would have turned around.
Promising large pensions is one of those things that keeps increasing future liabilities, and if you simply plan based on cash flow–including borrowing–you will hit your constraint with probability=1. Bankruptcy seems to be the only realistic constraint.
Here’s a now bankrupt city mayor explaining a minor lacunae in her management style:
Stockton Mayor Ann Johnston voted for these expensive measures when she served on the city council. ‘We didn’t have projections into the future what the costs might be…I learned that you don’t make decisions without looking into the future’… ‘Nobody gave thought to how it was eventually going to be paid for,’ says Mr. Deis, the city manager.