The problem with budgets

Isn't it strange that whenever someone draws up a budget, it's always SHORT? A friend thought that the reason this is the case, as well as the reason stuff seems to take longer to do than one estimated is:

Divide the task, let's say creating a blog and writing an article, into components:
1) create a blog (5 minutes)
2) read some articles online (15 minutes)
3) think about things to say about them (10 minutes)
4) compose a draft (15 minutes)

so you think the whole thing takes 45 minutes. Now, say it really takes this long:
1) 3 minutes [estimated 5 min]
2) 7 minutes [est. 15]
3) 20 minutes [est. 10]
4) 30 minutes [est. 15]
total: 60 minutes [est. 45]

So you were a miserable predicter. But you did overestimate as much as you underestimated, so things should wind up about even, right? Nope, because, and this is my friend's central idea, you tend to double and halve estimates. When your estimate of composing a draft is half as long as reality, you lose 15 minutes. You'd have to read articles in 0 minutes to make up for that. Thus, the things that take you twice as long to do make you overbudget because they drag you down more than the things that take you half as long to do.

So is this why the DC Stadium project is overbudget, as indicated in this article? And what do they do since they are overbudget?

1) It could be they are overbudget because they too are lousy estimators. But, in trying to sell their estimates, one could really argue that they were encouraged to underestimate rather than overestimate. Now, I don't know who does the estimating, but if it's the same people who are bidding on getting the job done, then this is definitely a conflict of interest. So, they are really starting off the process with 2 strikes against them (sorry, baseball pun...).

2) They are overbudget, so now what? This is the beautiful part of it all. They make the city pay for the overbudget part. Nice folks! I always hear from my friends who talk about how great the free-market system is, how people take risks and get wonderful things done, blah blah blah, but I see this as more of the norm. They are running low on their project, so they cut out parts they promised the city they'd do (parts that don't increase the value of their project, but rather decrease the harms to the city, like roads and metro stops). Now that the city has a team, and the deal has been cut, they can get away with this. Amazing. Free-market lesson #1:

Take risks and get other people to pay for your mistakes and costs you don't want to pay. Outsource the costs.

Ooh, this sounds like a good way to get rich! Seriously, how do they get away with this? Is the city of DC so desperate for a baseball team to take the risk, while others take the profits? They almost turned the deal down, maybe they should have. I have an idea- maybe I can build a house, but if IT goes overbudget, maybe the city can pay for my roof. Or, I can create a brand new shopping center, way off in the middle of trees, and after tearing out the trees, making the older shopping center go out of business, maybe the city will pay for all the new roads, because I've messed up all the traffic patterns and any woefully inadequate traffic/city planning. This happened, as far as I can tell, in SouthPointe Mall in Durham, NC.

Or, maybe I can copy Wal-Mart and refuse to pay health care for employees, saving lots of cash, and putting that onto the American taxpayer in the form of Medicaid. (This highlights part of the ridiculousness of employers providing health care for the nation- perhaps they should provide electricity too?) Or, maybe I can get Uncle Sam to clean up whatever environmental disasters I create because "it's too great a burden" on investors (this is seriously what the Bush administration is pushing with new nuclear reactors- you and I take the risks, both financial and health, while rich investors take the profit). And it's not limited to that scenario, by any means.

The other thing you should have learned from this, Free-market lession #2:

Once you've started, it's too late for your opposition to whatever you are doing.

So start that DC Stadium and tell people you ran out of money later, it'll be too late to oppose the team then! Or go ahead and start that war in Iraq, once no WMD are found, it'll be too late to undo the war... Heh heh heh. Or create a gi-normous debt and huge environmental, social, poverty problems- someone else will deal with our intentional "miscalculations."

These problems are of course not limited to a free-market system. But how can you get around them in our current system? With globalization and an obsession with competition (part of the free-market), the distance between consumer and producer is increased. Thus, I have no idea what the consequences are of my purchases, except that the cheaper item saves me money. And thus I act on this single consequence alone. So, whose stuff am I buying, given that it will be cheaper if a business exploits, steals, refuses to pay costs, "miscalculates" estimates, etc. Now if this person lived next door and I saw the REAL consequences of his/her business, I would not support his business to save 3 cents, or even $30. Obfuscate the costs and the consumer stays ignorant, supporting harms to himself.