Thanks. This is an interesting article. I’ve already rolled my eyes a few times while reading it, though.
The perspective it has on government waste is a bit simplistic. I agree that bureaucracies are not very wasteful in general. However, what holds in general doesn’t always hold in specific cases. We should expect bureaucracies to be efficient when they are at their minimum efficient scale; this scale depends on the industry in which the bureaucracy is operating.
The minimum efficient scale of agriculture is different than the minimum efficient scale of healthcare. Thus, it makes sense why government collectivization of farming might not be a good idea, whereas government-provided healthcare might work out OK.
I thought this was probably one of their weakest points,
Conservatives are constantly saying that we would all be better off if government were run like a business. But would we? Businesses are obsessed with their bottom lines and are always looking for the cheapest way to make a product or deliver a service. But in many cases, we don’t want government services to be as cheap as possible. Often, with government, the main concern is the quality of the service, not its costs. [...] Also, do we want the cheapest possible workforce in charge of security at our airports? Again, of course not – and this point was even acknowledged by Republicans when they agreed to abandon private security companies in favor of a federalized system in the wake of the 9/11 tragedy. Private security had certainly cost less, but it is clearly better to have a federal program that spends more money on training personnel and pays higher salaries to attract employees who are more capable.
I think if one of your primary examples of a high quality service provider is the TSA, an agency that is by most accounts a complete and utter waste of time and money from top to bottom, that’s a good sign that you’re not actually measuring quality very well.
The reason why we should expect businesses to deliver higher quality services, most of the time, compared to government, has nothing to do with the inherent inefficiency or wastefulness of bureaucracies (the private sector has bureaucracies too!). The reason, rather, is that private businesses will only provide services that people want and are willing to pay for.
Yes, this does have the effect that people will want to pay the least price possible, all else being equal. And yes, it also means that irrational time-constrained consumers will tend to receive inferior products. But it also means that people will pay for quality when they think they actually need it. And the phenomenon of irrational consumption is even worse when our consumption patterns are driven by low fidelity, low feedback votes at the ballot box every few years, rather than our wallets.
The problem is not waste but incentives. The TSA was formed because politicians capitalized on the idea of “doing something” about terrorism, even though terrorism causes an insignificant number of deaths in the United States. And now that the TSA is there and established, there’s no hope that we can ever abolish it, lest we offend the sensibilities of voters who are totally ignorant of the TSA’s impotence at actually preventing terrorism.
I also find it interesting that they compare the reported rate of satisfaction between private and public services. A notable bias affecting this judgement is the fact that public services are generally provided free-of-charge at the point of service, whereas private services are not. Of course, this simply reflects the fact that the costs of public service are hidden through taxation and distributional effects. This is perhaps a good argument for redistribution, but it’s quite a weak argument for government bureaucracies.
Thanks. This is an interesting article. I’ve already rolled my eyes a few times while reading it, though.
The perspective it has on government waste is a bit simplistic. I agree that bureaucracies are not very wasteful in general. However, what holds in general doesn’t always hold in specific cases. We should expect bureaucracies to be efficient when they are at their minimum efficient scale; this scale depends on the industry in which the bureaucracy is operating.
The minimum efficient scale of agriculture is different than the minimum efficient scale of healthcare. Thus, it makes sense why government collectivization of farming might not be a good idea, whereas government-provided healthcare might work out OK.
I thought this was probably one of their weakest points,
I think if one of your primary examples of a high quality service provider is the TSA, an agency that is by most accounts a complete and utter waste of time and money from top to bottom, that’s a good sign that you’re not actually measuring quality very well.
The reason why we should expect businesses to deliver higher quality services, most of the time, compared to government, has nothing to do with the inherent inefficiency or wastefulness of bureaucracies (the private sector has bureaucracies too!). The reason, rather, is that private businesses will only provide services that people want and are willing to pay for.
Yes, this does have the effect that people will want to pay the least price possible, all else being equal. And yes, it also means that irrational time-constrained consumers will tend to receive inferior products. But it also means that people will pay for quality when they think they actually need it. And the phenomenon of irrational consumption is even worse when our consumption patterns are driven by low fidelity, low feedback votes at the ballot box every few years, rather than our wallets.
The problem is not waste but incentives. The TSA was formed because politicians capitalized on the idea of “doing something” about terrorism, even though terrorism causes an insignificant number of deaths in the United States. And now that the TSA is there and established, there’s no hope that we can ever abolish it, lest we offend the sensibilities of voters who are totally ignorant of the TSA’s impotence at actually preventing terrorism.
I also find it interesting that they compare the reported rate of satisfaction between private and public services. A notable bias affecting this judgement is the fact that public services are generally provided free-of-charge at the point of service, whereas private services are not. Of course, this simply reflects the fact that the costs of public service are hidden through taxation and distributional effects. This is perhaps a good argument for redistribution, but it’s quite a weak argument for government bureaucracies.