Suppose you were at the ATM, intending to withdraw cash to go grocery shopping. You have a shopping list and a general idea of how much each item will cost. You intend to withdraw enough money to ensure that you can buy all the groceries on the list, and you’ll just deposit any excess funds back in your account later. Now a particularly clever friend happens to pass by and makes the following suggestion: “withdraw money under the restriction that you cannot redeposit any unused funds; instead, you’ll lose any unspent cash. This way, you’ll buy a lot of food!” How should you respond?
That wasn’t a trick question. The analogy above should illustrate the absurdity of ResEd’s new policy that bars Row houses from refunding unspent social dues to residents. Rather, the excess money will be funneled into the Capital Reserve Fund (CRF) that future residents can only use to buy long-term equipment like furniture. The reasoning behind the policy goes something like: “there is no longer an incentive to spend less than the collected social dues, so Row houses will fully spend their budgets and enhance social life on the Row.”
Analogously, we might expect that you, the grocery shopper, will get to the grocery store and decide to buy less food so that you can return more money to your bank account. Perhaps this is true for those of you with poor short-term memory, but most normal shoppers don’t forget that they budgeted a certain quantity of groceries for a reason. Similarly, Row house staffs probably don’t experience changes of heart after planning four events and host only two in order to refund their residents; if they plan to only have two events, they’ll revise the budget downward and charge less in social dues — this is obviously more palatable to residents, since they pay less up front.
What about the case where a house puts on all planned events and still ends up with a surplus? ResEd may have intended its policy to force the house to have another social event, since there is basically no reason to relinquish those funds to a CRF that will likely only benefit future residents. Therefore, the Row will host more social events in aggregate than had already been planned. But why not simply stipulate that the houses plan more events when initially budgeting? ResEd’s solution seems like a clunky way to accomplish a relatively simple goal.
The disadvantages of the policy are clear. There is now a disincentive to include a cushion in the budget for unforeseen expenditures or uncertainty in prices. Therefore, houses are much more likely to run out of money before making it through their whole social calendar. Conversely, an end of quarter surplus would drive the staff to spend freely and inefficiently, probably on really expensive alcohol; would this really be a justified expenditure of student funds, given most students’ recent belt-tightening? Finally, this policy is normatively questionable because it amounts to a coercive money transfer from current residents to future residents. Had house staffers been involved in the policy-making process, they could have voiced these concerns; instead, ResEd moved unilaterally and without consultation. Even more inexcusable has been the administration’s unwillingness to clarify the policy upon student request.
Every possible benefit that ResEd could hope to capture with the anti-refund constraint can be accomplished in simpler ways. If emergency CRF funds are necessary, make residents pay some nominal fee each quarter to the CRF, independent of social dues. To ensure that Row social life remains vibrant, help staffs plan and budget for more events at the beginning of the quarter. There is one inane argument that this policy equalizes the disparity between social dues at large and small houses; but refunding everybody nothing is certainly worse than refunding some people something. In sum, ResEd has blindly implemented an unnecessarily counterintuitive policy that’s attendant inefficiency outweighs its non-unique benefits.