Pajamas Media

9 Comments

Max,

Here we go again….

you seem to have a habit of coming to the exact opposite wrong answer . First with earmarks you fail to see them as an early warning of wayward government spending now you get the wrong side of why government fails.

you state:
the efficiency of contract spending depends on whether anybody is watching the store.

From this you gather that government fails because there is not enough people watching the store.

The truth is that the “store” (government) is too big and it continues to grow. Much like Wal-Mart government has gotten so big that it is hard to find anything. If we go with your suggestion and hire more employees to help run the store. The size of the store guarantees that an employee in Aisle A has no idea what is in Aisle H. It also makes one Manager unable to know what is going on in his store to any degree.

The answer is, of course, to reduce the size of the store. The store should only carry its core products and the rest of the items should be sold in other types of stores like hardware, banks, bakeries and churches.

True you do get some levels of efficiencies by a larger store and you get price reductions but you sacrifice service which is the main point of your post. Plus, government is not a for profit enterprise so it does not care about cost reductions.

To get the best service you reduce government back to a manageable beast that concentrates on its core functions.

If we followed your logic to its end conclusion government would be a socialist nightmare.

I don’t know Bill. Max may actually be on to something. With using contractors, lawmakers have found that individual contracts cost less to do something because private contractors are more efficient than government employees. However, lawmakers get caught in the efficiency paradox. So, being politicians, they can’t help themselves to want to do more because their little pet projects cost less to do. Therefore their hunger for pork just increases. In the 80’s, Reagan vetoed a bill because it had 187 earmarks. Now appropriation bills have thousands of earmarks. By forcing lawmakers to use expensive civil servants, their earmarks will be more expensive. More expensive earmarks attract more sunlight and lawmakers will be hesitant to use them.

Hi Bill. A wasteful pork project is an early warning of . . . a wasteful pork project. In fact, lawmakers like to tuck bad projects into bills with more well-founded purposes for protection.

I think the Gov could use more people, but your comment is off-center. My argument goes to whether there are sufficient public employees to organize, evaluate, and monitor contracts. If you have more contracts, you need more civil servants. The problem is not that somebody in aisle H doesn’t know what’s going on in Aisle M. It’s that there is nobody in either aisle to keep people from sticking the merchandise under their shirt.

You could play the Wal-Mart analogy different ways. If a store has fewer, less qualified workers, I get worse service if I walk in (or call).

I did not make an economies of scale argument, but there is one in the field of information processing.

mishu — The evidence on private contractors being more efficient often runs the other way. Lawmakers don’t often pay attention to efficiency — difficult to measure, in any case. They do pay attention to campaign contributions. With contracting, you still have workers with an interest, as with public employment, but you have an additional stakeholder and potential contributor — the contractor himself.

mishu,

Again the problem is not that the pet projects are too cheap. The problem is the Federal government has too much money and the power to go into debt too easily. If you cut the money coming in and you make the government live within it’s means you get better management.

Max,
Again the size is the problem. The security guards in your example are not governmental employees. The ultimate security guards are the voters. If the store is too big for the security guards to know what the employees, managers and customers are doing, that means the store is too big.

Human nature being what it is, greed, sloth and gluttony will be the rule in a big unwatched store.

I understand your point but the answer is to simply reduce the size of the store instead of expanding resources to watch them.

Liberals continue to try to fix the problems caused by their mistaken beliefs that government is a force for good in the world by increasing the size of government.

This is like chasing windmills. If you want to solve the problem you have to come to the correct conclusion that government itself is the problem not the solution. Our Founders understood this. They set up a system of LIMITED government to ensure our liberties. Federalism is the way to reduce the size of the store to managerable levels and allow the security guards to keep a better watch on it.

Important to note that government spending is the least efficient method to accomplish anything.

Category 1 spending: you spend your money on yourself. you can trade the cost with value, to reach maximum satisfaction

Category 2 spending: you spend a fixed amount of money on someone else, like a $40 present for Uncle Fred. You can try to get the best value, but the amount is fixed.

Category 3 spending: you spend someone elses money on yourself, like an expense account. You are sure to get something that satisfies, but you don’t care at all about the cost.

Category 4 spending: you spend someone elses money on someone else. You really don’t care how much it costs, and you really don’t care if value is provided.

All government spending is category 4 spending. Bureaucrats make rules to guide this inefficient spending.

Well there is the elementary concept of a public good that you can find in every econ 101 textbook.

The two features of such a good are “non-excludability” and “non-rivalness.” Excludability means that someone offering the good for sale is able to prevent non-purchasers from gaining access to the good. For instance, if you do a fireworks show for Lower Manhattan, you can’t stop anyone from watching. Rivalness means that when a good is sold, its usefulness is reduced as more people consume it. If you split an apple between two people, they are each reduced to half an apple. With a non-rival good, can be used by any number of people.

A good that is valued highly but susceptible to these qualities will not be sold in markets, or if sold the levels will be incommensurate with demand for the good. This is what economists call a market failure, and it opens the way for some kind of government role.

Sorry to subject you to Econ 101 flashbacks.

This is what economists call a market failure

Max, in most circumstances the market failure is due to government intervention to begin with. For instance, Healthcare. Once the government made it tax deductible for employers to offer employees healthcare coverage the market for self employed and low income employees dried up. At the same time the government made it mandatory for all hospitals to treat people regardless of the ability to pay. due to tax policy Insurance companies no longer wanted to deal with one person they wanted groups of thousands. Thus they lowered their rates for those major groups and bumped the rates for the individual. The insurance industry also increased the benefits of the policies until the price for the health care services by the consumers were reduced.for those unable to pay the rates were reduced to zero.

In effect the government by its tax policy and mandates caused the problem in healthcare to begin with. Now the liberals want to fix this market failure by yes…having more government intervention.

Insanity is by definition is doing the same thing over and over again and expecting a different result.

If the liberals really wanted to fix healthcare that would pass a law requiring all people to have healthcare, a tax deduction for such healthcare, and a law saying hospitals can refuse service for those that have no insurance. Then let the market figure out how to meet the new need (market)

This explanation of insurance company behavior doesn’t fly at all. ICs are happy to offer individual policies if there is money to be made. In fact there is because they can adjust rates to fit individual expected costs, in effect weeding out bad risks. The availability of the tax offset takes people out of the individual market, but that has no bearing on what those in the individual market have to pay (if they can). Even less sensible is the idea that the deduction forecloses coverage for low-wage workers at their employer. If anything the deduction would increase the likelihood of such coverage.

ICs are happy to offer individual policies if there is money to be made

An insurance company would rather sign up 10,000 people than 1 person. Since the time it takes to sell and manage a policy to a company and to an individual is about the same. The insurance company will given the choice always lower their price to get the group than it will to get the individual. Thus, you have one rate for company plans and a higher rate for an individual plan.

Since the tax policy also takes people out of the idividual market that market is less enticing to enter. Therefore insurance companies raise their individual rates even more to justify the increased cost of finding and retaining the individual.

Also, since the employer pays for some if not most of the cost of these policies the end-user is not motivated to contain costs.

So the liberal tax policy has provided a market failure in the individual market. Any addtional profit made by weeding out bad risks is lost by the addtional costs of marketing, sales reps.

Furthermore, the tax policy has also caused a market failure in the “group market” by taking the price portion out of the supply and demand equation for the individual.

Due to this market failure with regards to price, insurance companies have had to raise rates to cover the increase in medical prices that the added demand (caused by individuals not seeing the cost) has caused. This increase in insurance rates have priced increasing low wage employees out of the market. Reducing further the covered pool and thereby rising rates more.

This is a negative feedback cycle. The more rates raise the more people unable to afford the coverage the less people in the pool the more rates have to rise so insurance companies can turn a profit since demand from those still in the pool will continue to rise.

To fix the problem that liberal tax policy has caused you need to increase the pool and you need to reintroduce costs back to the end-user. You can do both by changing the tax code so all people can benefit from it not just select employees and by mandating that everyone must carry insurance. The government does not need to do anything except make sure the new market is policed.

For those unable to afford the insurance there are programs all ready on the books. As the market grows rates will come down enabling more people to afford the new policies. In effect you have now set up a positive feedback cycle by expanding the market.

Liberal would rather have tax-payer universal coverage which would take the cost further from the end-user increasing demand. The supply would not be able to keep up to the increased demand and since the cost will be fixed by governmental fiat the supply will not increase to match the demand.