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The Fables and Foibles of Federal Capital Budgeting

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  • Cameron Gordon

Abstract

This article critically evaluates the notions behind proposals to institute capital budgeting at the federal level. Four critical assumptions are found to be behind the contention that capital budgeting will improve federal investment policies: (1) an agreed‐upon and accepted definition of a capital budget exists; (2) a capital budget “adds value” by improving the quality of information; (3) better information leads to better decisions; (4) better decisions lead to better actions. Each of these assumptions is evaluated using examples drawn from various levels of government and from the private sector. The general finding is that if these assumptions hold, then it is reasonable to expect that capital budgeting will lead to better programmatic decisions. Unfortunately, one or more of these assumptions usually does not hold and for this reason the case for federal capital budgeting is not very strong

Suggested Citation

  • Cameron Gordon, 1998. "The Fables and Foibles of Federal Capital Budgeting," Public Budgeting & Finance, Wiley Blackwell, vol. 18(3), pages 54-71, September.
    • Handle: RePEc:bla:pbudge:v:18:y:1998:i:3:p:54-71
    DOI: 10.1046/j.0275-1100.1998.01142.x
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