The Fallacy of the $600 Hammer

Back in the 1980s, the Pentagon spent $600 on a hammer.

Or so many of us have long believed. It turns out they were just doing some creative bookmaking, as massive government entities are wont to do. The $600 hammer was actually a $15 hammer. But the Pentagon’s billing added a $420-an-item surcharge to each item—whether a hammer or an aircraft engine—to cover research and development. So the $15 hammer became a $435 hammer. Later, news stories stretched that $435 to become $600.

So the $600 hammer is a myth. But it’s a myth which is deeply embedded in the public’s consciousness as a glaring symbol of government mismanagement and waste. Only a vast federal bureaucracy, after all, would be foolish enough to spend $600 on a hammer.

Back in January of 2015, as far fewer people know, the Pentagon issued a internal study which found the agency could cut $125 billion in unneeded spending over a five-year period. That averages to about $850 for each of our nation’s 140 million taxpayers. In other words, for the money that was wasted, by their own admission, they could have bought a $600 hammer for every taxpayer in the country—and still returned $250 to every one of them.

So why do people fixate on mythical $600 hammers while ignoring reports of $125 billion in waste?

Because that is human nature. A $600 hammer is not an abstraction to us; we could imagine how outraged we would be if the hardware store tried to charge us that much. But $100 million, $10 billion, $1 trillion, $10 trillion… most of us cannot imagine these numbers in our daily lives. They have roughly the same emotional impact on us, like the difference between having 10 billion or 100 trillion galaxies. It’s a big number we don’t really understand and can’t really confront.

When applied to astronomy, that’s unimportant. But when applied to discussing budgets in a democracy, it’s very important indeed. Tell a person the Pentagon is wasting $1 billion a year, or $100 billion, and most would say “Yeah, there’s waste out there. We knew that already.”

The same phenomenon poisons our discussions about cities. And, unfortunately, it makes it very politically difficult to spend a little money on things that would be very smart to do, and makes it far too easy to spend a great deal of money on things that aren’t so smart. So we pour tens of millions of dollars of taxpayer money on fancy new buildings that many in the neighborhood don’t really want. But try to spend $50,000 for something the community really wants—maybe an event series, a new facade program, or a Main Street manager—and it’s scrutinized under a microscope.

This is the Fallacy of the $600 Hammer. It leads us to do things that are unproductive, and even counterproductive, only if they cost so much money that people can’t relate to it.  It leads us to spend tens of millions on new public spaces, while we just can’t find the $100,000 to make the underutilized one a few blocks down the street into something truly exceptional and transformational. It leads us to spend $1 billion on a convention center or a stadium, but miss out on the details that would make them into meaningful assets for the downtown. It leads us to give developers tons of money to bring in a few hundred residents to support the retail and restaurants—but not a penny to help those local businesses do more to create an active street. And it leads the public to argue as endlessly over the cost of a $30,000 bike lane in the heart of a city as of a $2 billion highway out to the countryside.

The Fallacy of the $600 Hammer will not go away. It’s too embedded in the human psyche. But we cannot let it run amuck. There may have been a time when our cities, states, and nation were so wealthy that we could afford to waste pounds on foolishness and pinch pennies on wisdom. But if there was, that day is no more. We can afford to spend money wisely, incrementally, on the things that can get us a high return on investment. But we cannot afford to operate with this kind of waste. Our choices are to either invest in our cities wisely, or abandon them when we can no longer sustain our activities. And active citizens need to demand we do the former, because the future of their places depend on it.

by Rik Adamski