Chapter 8Auditing Mental Accounting
Example 1: Wasteful Education
In 2007 I began a five‐year research project wherein I attempted to understand what is truly ailing the K–12 education system in America. Along the way I discovered a disturbing practice that is relevant to the topic of this book.
While touring an elementary school in South Florida, I passed a classroom that caught my attention. The door was open, but lights were off. I flipped them on to discover a room filled from wall‐to‐wall and floor‐to‐ceiling with nothing but desks and chairs. When I asked the principal about the display, she explained the rationale behind it. Turns out, every year the school gets a budget. Well, actually not a budget, but rather many budgets. Among them is one for teacher salaries, one for textbooks, one for maintenance, and yes, one for furniture. If the principal comes in under budget on say, school furniture one year, she can't apply the savings to something she might need more of at that moment, like maybe a new coat of paint for the gymnasium. If she doesn't spend the furniture budget that year, the money remains in the county coffers. Here is where it gets really interesting though. If she comes in under budget for furniture this year, there is a high probability they will reduce her furniture budget for next year. So, rather than risk having her budget reduced for anything in any given year, she will continue to buy furniture with her furniture budget even if it means shoving it ...