When I was growing up, my brother and I would occasionally play something akin to penny poker, doling out an equal amount of “chips,” in whatever form they took, and playing until someone took the whole pile.

Unfortunately, the games never lasted very long. Knowing that there was nothing at stake—not even pennies—one of us would soon bet everything on a lark and the game would be over. The risk didn’t affect us, so there was never a need to “hedge our bets.”

Not my money? Not my problem.

The City of Dallas is in the throes of learning that lesson the hard way as the Police and Fire Pension Fund approaches insolvency due to risky investments. The pensions of close to 10,000 civil servants and first responders are in jeopardy because someone else played poker with their money. City officials are now scrambling to find a plan that will put Humpty Dumpty back together again so retired fire and police workers can pay their mortgages and buy groceries.

Accusations of financial mismanagement are not new for the Dallas pension fund, but they have increased over the last five years as reports of risky investing e to light. A $200 million luxury high-rise has been beset with continual problems due to the glare it reflects onto a nearby art museum. Ultra-luxury real estate investments from Napa Valley to prise another $200 million of fund assets.

According to an article from the Dallas Morning News:

Together, these investments represent a $400 million bet by the fund on luxury residential real estate. It has been financed mostly with borrowed money. This leverage means that if it pays off, it could pay off big. But it could also lose big. The fund’s total real estate assets surpassed $1.5 billion in the middle of 2012 — an investment equivalent to about half of the fund’s net worth. The strategy is unusual. Among large public pension funds, the median real estate allocation is less than 5 percent. And these investments are more typically in properties such as office and apartment buildings, which produce steady rental e.

In poker parlance, it seems that the trustees of the Dallas pension fund went all-in with a 2-7 off-suit. They bet big, and it hasn’t paid off. But then again, why not bet big?

The pension officials had nothing to lose, proving that without personal risk, there is no personal responsibility. It’s only slightly different than my brother and me playing poker for nothing — except in this case, the chips represent the present and future well-being of thousands.

Lost amidst the hubbub is any attempt at redress of the underlying problem. While the Texas Rangers investigate criminal behavior in regard to fund management and Dallas mayor Mike Rawlings attempts to find a remedy at the expense of Dallas taxpayers, the best that pundits can offer is to encourage other pensions to “increase monitoring” so something like this doesn’t happen again.

But rather than continuing to force individuals to pay into state-controlled retirements — in which they have no say — wouldn’t the simpler solution be to simply free up individuals to invest their money as they see fit?

As proponents of free markets, we operate according to a basic understanding of human nature — namely, that people respond to incentives. parative work ethic of mission-driven salesman and the desk clerk at the DMV is not mere coincidence; the salesman has something at stake, a shared interest, that the government employee does not. The same principle applies when pare state-controlled versus privately run retirement funds.

The problem in Dallas is not quite an example of the tragedy of mons, but it is close. The shared theme is that, no matter how well intentioned, I will treat someone else’s property differently than I treat my own.

It is easy to risk that which is not ours, and the Dallas pension problems are only another example that where there is economic freedom, societies — and retirement plans — will flourish.

Photo: trestletech (CC0)