Here is one thing government is very bad at: pricing. This is why the Pentagon pays too much for things. This is why Cash-for-Clunkers sold out instantly.

Government officials go into a market (1) often required to buy something, (2) always paying with someone else’s money, and (3) artificially constrained in how much they can shop around.

When a California court ordered the state prisons to hire more psychiatrists, the prisons starting shopping for them. The high wages drew psychiatrists away from state mental hospitals, which then had to pay more to retain talent.

The result of the bidding war: one state psychiatrist ended up pocketing $822,000 of California taxpayers’ money in a year.

Bloomberg News reporters Freeman Klopott, Rodney Yap, and Terrence Dopp tell the story of how California’s state psychiatrists became rich from:

a bidding war after a federal court forced the state to improve inmate care. The prisons raised pay to lure psychiatrists, the mental health department followed suit to keep employees, and costs soared. Last year, 16 California psychiatrists, including Safi, made more than $400,000, while only one did in the other 11 most populous states, according to data compiled by Bloomberg.

The article is the second in a series on state-level spending. Yesterday’s story more broadly discussed state employee pay.