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> Services can often be run more efficiently in private hands Hard disagree. Business optimized for the value it can capture in the short term. It will be more

> Services can often be run more efficiently in private hands Hard disagree. Business optimized for the value it can capture in the short term. It will be more efficient at that. Services such as electricity benefit from long-term investment, and create much hard to capture value. In theory, a government will be efficient at allocating resources for that. We HAVE to stop thinking that business is always more efficient at everything. Business is great, I've started a few and see what they've done to lift people out of poverty-- but it is built on the back of responsible government.

idrathernot 4y ago
I think that business is most often more efficient, but efficiency doesn’t need to be the goal for everything and those are the areas where government is needed. This is assuming that the people running the government aren’t just as corrupt and greedy as their corporate brethren.
- beowulfey 4y ago
  The problem is, the goal of a business is not efficiency—it is to make money. There are many ways to make money, and they don’t all come from effiency of service. (Of course, the goal of government is not efficiency either)
  - shirro 4y ago
    In a regulated industry there can be a perverse incentive for operators to be less efficient. The practice is called Gold Plating. The regulator allows the operator profits in part based on their network investment so an operator has an incentive to over invest in maintenance and upgrades and inflate the costs. That is one of the ways they can make super profits in what is supposed to be a regulated market. Consumers pay for the overspending and the profits on top for no benefit which is worse than just paying for higher profit margins.
helsinkiandrew 4y ago
> Hard disagree. Business optimized for the value it can capture in the short term. It will be more efficient at that. Not necessarily true, many power generation projects are built knowing that they won’t be profitable for many decades and are happily funded by pension companies that treat them like bonds. Many government projects don’t get done because their payoffs won’t be seen within the election cycle.
- dx034 4y ago
  Are they really? As far as I know, really big power projects (like nuclear plants) usually need government funding or guarantees to get built. Renewables get built by pension funds, but they pay off after 7-10 years in most cases.
missedthecue 4y ago
I think business is actually better at long term planning than most people give it credit for. There is a lot of discussion about "next quarter" thinking but in my experience working in bizdev, I haven't really seen that. There are always long term directional strategies in play. But politics, (at least democracy) has the double edged sword of election cycles. This heavily incentivizes short term thinking. Ex. Should the mayor pour millions into sewer system maintenance or millions in flashy projects and waste? If the sewer maintainance is done right, none of the electorate notices. But the electorate will see the flashy spending and vapid superficial projects. And who cares if we defer sewer maintainance, that will only cause issues 20 years from now.
- otikik 4y ago
  Business’ “long term” is still shorter than an election cycle, isn’t it? Long-term is 2 years, perhaps. 8 quarters!
- kasey_junk 4y ago
  The unpopular answer to this is bureaucratic organizations. The sewer management office at your local government should be staffed with people capable and incentivized to care about issues in the future. But we’ve spent 45 years hollowing out those organizations in the US.
  - pyuser583 4y ago
    My local sewage district is the best run municipal agency in the entire county. It is run by commissioners chosen by the mayors of the cities they serve and a few are chosen by the county. They all have graduate degrees in engineering. The employees are similarly qualified. I suspect the reason they do such a good job is that theyre insulated from the rest of government.
  - drewcoo 4y ago
    Bureaucracies don't restore order or put innovations in place. Bureaucracies make change happen slowly. They preserve the status quo. And yes, we've been busy gutting the gov't status quo for decades.
Oxidation 4y ago
> create much hard to capture value. This is pretty key. Imagine a train line that allows commuters to get to work. Trains are expensive to run, so the actual cost to get a commuter to work and back is £100. The commuters are paid (say) £150 a day, after tax. Is this train worth 2/3 of their post-tax income? Probably not, so they won't use it, and the company can't get workers if there's no other practical way to commute. Workers can take less good jobs near home, earn less, but take home more. Or even no job at all. However, a worker generates substantially more than their post-tax salary in value to the economy as a whole, so subsidy of the train fare creates value by getting them to work and generating that value, even though the train cannot actually turn a profit itself by charging the commuters out of their income. Even if you say "well the company should just pay more if they've made that value", not all that value manifests directly on the company's bottom line, it includes downstream value, as well as intangible things like worker skills that are more of an abstract societal benefit. In the same way, roads produce massively more value than people would be willing to pay individually: all the food deliveries in a week might be worth, at retail, about £4 billion, say. If those deliveries can't be made, what will be the cost? £4 billion? Or more because the whole country will become a much less effective economy when everyone is starving and looking for food? And the universal-delivery postal system. Healthcare, childcare, energy, etc etc.
- danuker 4y ago
  If the workers really are producing "substantially more" value for the economy, they are probably underpaid in the first place, or the specific train line/project is a bad investment (too expensive).
  - Oxidation 4y ago
    Workers always earn less than the value they make for a useful business under capitalism (and that's before taxes, which don't necessarily require or imply capitalism). There's always a point where a cost to a worker exceeds the value to that worker, but doesn't exceed the value to society of facilitating that worker's labour. There are edge cases, but in general inhibiting the ability of workers to work (e.g. by making it expensive to get there, or expensive live near enough to the work, fail to allow them to be healthy enough to do the work, make it hard to take care of children while working, restrict access to or quality of education etc) is not good for a society built on work.
TaylorAlexander 4y ago
American railroads versus most other countries’ railroads are a great counter example to the efficient private business hypothesis.
- otikik 4y ago
  And healthcare and education
- midoridensha 4y ago
  Here in Japan, all the railroads are privately-owned, including the subway systems.
  - lmm 4y ago
    Not really. Most are nominally private (although both the big Tokyo subways aren't - Toei, the clue is in the name), but have both a large proportion of their shares owned by governments (local and national), and deep ties to a large conglomerate (keiretsu) that in turn owns a lot of businesses in the relevant area and has deep ties into the political system.
    - midoridensha 4y ago
      Yeah, the way "private"-ly owned infrastructure here is probably rather different than just selling stuff to foreign companies. I was just reading about the private toll roads in Japan, but it seems they're only operated and maintained by private companies, while the ownership is retained by corporations that are owned by the government (sort of like MTA in NYC).
- ericd 4y ago
  From what I've heard, the American freight rail system is actually excellent? It's just that passenger service isn't prioritized, so the quality isn't great?
  - TaylorAlexander 4y ago
paiute 4y ago
some things are better handled by local governments. There's nothing worse than private companies that can do things like force civil fines. Local government is more accountable to the people.
pdntspa 4y ago
Your argument assumes good faith on behalf of the buyer, and that said long-term investment is actually coming. But I can show you PGE and SDGE as examples of privatization WITHOUT any of that good-faith investment, and then when the situation went critical (massive wildfires a few years back due to bad electricity infra), electricity consumers being forced to foot the bill. Where I live, my utilities bill has quadrupled in the past three years (from ~$100 to ~$450 a month for literally identical usage, I checked my statements), rate regulation (the CPUC) is seemingly toothless, and my utilities company sends me these insultingly understated letters about how they can't control energy pricing and have to pass on rates to consumers. Except they won't tell you that they are owned by the company they buy their energy from, and that THAT company happily will set prices to whatever they want if it means sucking off their pathetic little shareholders just a little bit more. Sempra Energy has been doing gangbusters on their quarterly earnings reports!
- dgoldstein0 4y ago
  The liability problem PG&E faces is pretty damn bad - their underinvestment and faulty equipment may cause the fires, but they have little to no control over weather and climate patterns, nor the forest management practices, that have greatly amplified the consequences. Legally they are liable for all the damages, despite the factors outside their control amplifying that liability.
  - katbyte 4y ago
    If they didn’t underinvest in equipment/maintenance in the pursuit of profit they would be causing less fires and have a lower liability.
  - pdntspa 4y ago
    PG&E made their bed, now they must lie in it. We have and have had sufficiently advanced climate modeling to inform whatever decisionmaking they may have needed when they had the best opportunities to invest and maintain infrastructure. Our forest management policies have not changed in forever and California faced seemingly annual firestorms in the years leading up to PGE's disaster. People have been sounding the alarm on climate change for YEARS and YEARS. The current predicament is no excuse.
janee 4y ago
Living in a 3rd world country the experience is the polar opposite. Everything the government touches fails here and quite dramatically. You mention business efficiency being built on the back of a responsible government, but I've often heard here where I live (South Africa), if you want to know where to deploy capital look for companies doing something the gov should be doing...because it's easy to compete (port management, electricity, rail, air lines, mines, refuse management)
hbrn 4y ago
> Business optimized for the value it can capture in the short term As opposed to government? The reason every government is so bureaucratic is precisely because it's incentives are structured to optimize for the short term. At least private business pays with blood for it's mistakes. > In theory, a government will be efficient at allocating resources for that In theory dictatorship is more efficient that any other form of government. In practice, humans are more flawed than we like to admit. > We HAVE to stop thinking that business is always more efficient at everything Nobody thinks business is always more efficient. But it turns out to be way more efficient on average. > it is built on the back of responsible government The beauty of capitalism is that it allows society to thrive even when all actors are irresponsible. Which we, humans, are.
- cced 4y ago
  > At least private business pays for with blood for it's mistakes. > The beauty of capitalism is that it allows society to thrive even when all actors are irresponsible. Which we, humans, are. I think the laid off tech workers and people of Ohio might have a few things to say about that..
  - scarface74 4y ago
    You mean the tech workers who make anywhere from 4-8x the median wage in America and even 2x-3x the median wage in their local market? I’ll play the smallest fiddle for those who didn’t save during the good times. Yes, I work for $BigTech and I save a significant portion of my income.
    - cced 4y ago
      Violin or not, OP's post was regarding corporate efficiency. Reading any headline over the last few weeks will show you that corporations over-hired and are laying off workers. I guess blood is blood, regardless of who's it is. Curious how you glossed over the folks in Ohio.
      - hbrn 4y ago
Salgat 4y ago
I wonder what would happen if you could somehow decouple businesses running critical infrastructure from the stock market. For example, make it so shares must be held for at least 3 years before they are sold if you don't want to pay a massive extra tax on them, and you can't borrow/lend against these shares.
bko 4y ago
Do you see the irony arguing that businesses optimize for the short term while government is efficient at allocating for the long term while talking about a story in which the government sold the rights to long term cashflows to private hands for a short term windfall? It looks like the business optimized for the long term while government optimized for short term
sander27home 4y ago
The biggest issue is "responsible government". The closest this ever implemented in world history is Singapore with the government largely stuffed with PhDs and graduates - heck their PM can even solve sudoku in C++. In most cases, government would be closer to American form running by incompetent or less educated leaders of semi democratic with fraud and excessive spending (Sri Lanka, Japan, Germany, etc). I recalled one of German leaders even plagiarised their master/dr thesis yeara ago. In this situation, private enterprises especially lots of it competiting fiercely would be way more efficient. Chicago and Australia privatisations are really just government monopolies relegated to private monopolies. So efficiency of private enterprise will not that readily available in short-medium term. In long term, we dont know - economics theory a lot doenst match up reality. Malaysia has gone through this during their 4th PM and today result is pretty mixed with a lot of corruptions.
mr_toad 4y ago
> In theory, a government will be efficient at allocating resources for that. And in practice it’s all about ass covering and getting re-elected.
ewgoforth 4y ago
I generally agree with you, but it looks like there cases where governments like the City of Chicago and Australia do a terrible job of balancing short term versus long term economics.

idrathernot 4y ago

I think that business is most often more efficient, but efficiency doesn’t need to be the goal for everything and those are the areas where government is needed. This is assuming that the people running the government aren’t just as corrupt and greedy as their corporate brethren.

beowulfey 4y ago
The problem is, the goal of a business is not efficiency—it is to make money. There are many ways to make money, and they don’t all come from effiency of service. (Of course, the goal of government is not efficiency either)
- shirro 4y ago
  In a regulated industry there can be a perverse incentive for operators to be less efficient. The practice is called Gold Plating. The regulator allows the operator profits in part based on their network investment so an operator has an incentive to over invest in maintenance and upgrades and inflate the costs. That is one of the ways they can make super profits in what is supposed to be a regulated market. Consumers pay for the overspending and the profits on top for no benefit which is worse than just paying for higher profit margins.

helsinkiandrew 4y ago

> Hard disagree. Business optimized for the value it can capture in the short term. It will be more efficient at that. Not necessarily true, many power generation projects are built knowing that they won’t be profitable for many decades and are happily funded by pension companies that treat them like bonds. Many government projects don’t get done because their payoffs won’t be seen within the election cycle.

dx034 4y ago
Are they really? As far as I know, really big power projects (like nuclear plants) usually need government funding or guarantees to get built. Renewables get built by pension funds, but they pay off after 7-10 years in most cases.

missedthecue 4y ago

I think business is actually better at long term planning than most people give it credit for. There is a lot of discussion about "next quarter" thinking but in my experience working in bizdev, I haven't really seen that. There are always long term directional strategies in play. But politics, (at least democracy) has the double edged sword of election cycles. This heavily incentivizes short term thinking. Ex. Should the mayor pour millions into sewer system maintenance or millions in flashy projects and waste? If the sewer maintainance is done right, none of the electorate notices. But the electorate will see the flashy spending and vapid superficial projects. And who cares if we defer sewer maintainance, that will only cause issues 20 years from now.

otikik 4y ago
Business’ “long term” is still shorter than an election cycle, isn’t it? Long-term is 2 years, perhaps. 8 quarters!
kasey_junk 4y ago
The unpopular answer to this is bureaucratic organizations. The sewer management office at your local government should be staffed with people capable and incentivized to care about issues in the future. But we’ve spent 45 years hollowing out those organizations in the US.
- pyuser583 4y ago
  My local sewage district is the best run municipal agency in the entire county. It is run by commissioners chosen by the mayors of the cities they serve and a few are chosen by the county. They all have graduate degrees in engineering. The employees are similarly qualified. I suspect the reason they do such a good job is that theyre insulated from the rest of government.
- drewcoo 4y ago
  Bureaucracies don't restore order or put innovations in place. Bureaucracies make change happen slowly. They preserve the status quo. And yes, we've been busy gutting the gov't status quo for decades.

Oxidation 4y ago

> create much hard to capture value. This is pretty key. Imagine a train line that allows commuters to get to work. Trains are expensive to run, so the actual cost to get a commuter to work and back is £100. The commuters are paid (say) £150 a day, after tax. Is this train worth 2/3 of their post-tax income? Probably not, so they won't use it, and the company can't get workers if there's no other practical way to commute. Workers can take less good jobs near home, earn less, but take home more. Or even no job at all. However, a worker generates substantially more than their post-tax salary in value to the economy as a whole, so subsidy of the train fare creates value by getting them to work and generating that value, even though the train cannot actually turn a profit itself by charging the commuters out of their income. Even if you say "well the company should just pay more if they've made that value", not all that value manifests directly on the company's bottom line, it includes downstream value, as well as intangible things like worker skills that are more of an abstract societal benefit. In the same way, roads produce massively more value than people would be willing to pay individually: all the food deliveries in a week might be worth, at retail, about £4 billion, say. If those deliveries can't be made, what will be the cost? £4 billion? Or more because the whole country will become a much less effective economy when everyone is starving and looking for food? And the universal-delivery postal system. Healthcare, childcare, energy, etc etc.

danuker 4y ago
If the workers really are producing "substantially more" value for the economy, they are probably underpaid in the first place, or the specific train line/project is a bad investment (too expensive).
- Oxidation 4y ago
  Workers always earn less than the value they make for a useful business under capitalism (and that's before taxes, which don't necessarily require or imply capitalism). There's always a point where a cost to a worker exceeds the value to that worker, but doesn't exceed the value to society of facilitating that worker's labour. There are edge cases, but in general inhibiting the ability of workers to work (e.g. by making it expensive to get there, or expensive live near enough to the work, fail to allow them to be healthy enough to do the work, make it hard to take care of children while working, restrict access to or quality of education etc) is not good for a society built on work.

TaylorAlexander 4y ago

American railroads versus most other countries’ railroads are a great counter example to the efficient private business hypothesis.

otikik 4y ago
And healthcare and education
midoridensha 4y ago
Here in Japan, all the railroads are privately-owned, including the subway systems.
- lmm 4y ago
  Not really. Most are nominally private (although both the big Tokyo subways aren't - Toei, the clue is in the name), but have both a large proportion of their shares owned by governments (local and national), and deep ties to a large conglomerate (keiretsu) that in turn owns a lot of businesses in the relevant area and has deep ties into the political system.
  - midoridensha 4y ago
    Yeah, the way "private"-ly owned infrastructure here is probably rather different than just selling stuff to foreign companies. I was just reading about the private toll roads in Japan, but it seems they're only operated and maintained by private companies, while the ownership is retained by corporations that are owned by the government (sort of like MTA in NYC).
ericd 4y ago
From what I've heard, the American freight rail system is actually excellent? It's just that passenger service isn't prioritized, so the quality isn't great?
- TaylorAlexander 4y ago

paiute 4y ago

some things are better handled by local governments. There's nothing worse than private companies that can do things like force civil fines. Local government is more accountable to the people.

pdntspa 4y ago

Your argument assumes good faith on behalf of the buyer, and that said long-term investment is actually coming. But I can show you PGE and SDGE as examples of privatization WITHOUT any of that good-faith investment, and then when the situation went critical (massive wildfires a few years back due to bad electricity infra), electricity consumers being forced to foot the bill. Where I live, my utilities bill has quadrupled in the past three years (from ~$100 to ~$450 a month for literally identical usage, I checked my statements), rate regulation (the CPUC) is seemingly toothless, and my utilities company sends me these insultingly understated letters about how they can't control energy pricing and have to pass on rates to consumers. Except they won't tell you that they are owned by the company they buy their energy from, and that THAT company happily will set prices to whatever they want if it means sucking off their pathetic little shareholders just a little bit more. Sempra Energy has been doing gangbusters on their quarterly earnings reports!

dgoldstein0 4y ago
The liability problem PG&E faces is pretty damn bad - their underinvestment and faulty equipment may cause the fires, but they have little to no control over weather and climate patterns, nor the forest management practices, that have greatly amplified the consequences. Legally they are liable for all the damages, despite the factors outside their control amplifying that liability.
- katbyte 4y ago
  If they didn’t underinvest in equipment/maintenance in the pursuit of profit they would be causing less fires and have a lower liability.
- pdntspa 4y ago
  PG&E made their bed, now they must lie in it. We have and have had sufficiently advanced climate modeling to inform whatever decisionmaking they may have needed when they had the best opportunities to invest and maintain infrastructure. Our forest management policies have not changed in forever and California faced seemingly annual firestorms in the years leading up to PGE's disaster. People have been sounding the alarm on climate change for YEARS and YEARS. The current predicament is no excuse.

janee 4y ago

Living in a 3rd world country the experience is the polar opposite. Everything the government touches fails here and quite dramatically. You mention business efficiency being built on the back of a responsible government, but I've often heard here where I live (South Africa), if you want to know where to deploy capital look for companies doing something the gov should be doing...because it's easy to compete (port management, electricity, rail, air lines, mines, refuse management)

hbrn 4y ago

> Business optimized for the value it can capture in the short term As opposed to government? The reason every government is so bureaucratic is precisely because it's incentives are structured to optimize for the short term. At least private business pays with blood for it's mistakes. > In theory, a government will be efficient at allocating resources for that In theory dictatorship is more efficient that any other form of government. In practice, humans are more flawed than we like to admit. > We HAVE to stop thinking that business is always more efficient at everything Nobody thinks business is always more efficient. But it turns out to be way more efficient on average. > it is built on the back of responsible government The beauty of capitalism is that it allows society to thrive even when all actors are irresponsible. Which we, humans, are.

cced 4y ago
> At least private business pays for with blood for it's mistakes. > The beauty of capitalism is that it allows society to thrive even when all actors are irresponsible. Which we, humans, are. I think the laid off tech workers and people of Ohio might have a few things to say about that..
- scarface74 4y ago
  You mean the tech workers who make anywhere from 4-8x the median wage in America and even 2x-3x the median wage in their local market? I’ll play the smallest fiddle for those who didn’t save during the good times. Yes, I work for $BigTech and I save a significant portion of my income.
  - cced 4y ago
    Violin or not, OP's post was regarding corporate efficiency. Reading any headline over the last few weeks will show you that corporations over-hired and are laying off workers. I guess blood is blood, regardless of who's it is. Curious how you glossed over the folks in Ohio.
    - hbrn 4y ago

Salgat 4y ago

I wonder what would happen if you could somehow decouple businesses running critical infrastructure from the stock market. For example, make it so shares must be held for at least 3 years before they are sold if you don't want to pay a massive extra tax on them, and you can't borrow/lend against these shares.

bko 4y ago

Do you see the irony arguing that businesses optimize for the short term while government is efficient at allocating for the long term while talking about a story in which the government sold the rights to long term cashflows to private hands for a short term windfall? It looks like the business optimized for the long term while government optimized for short term

sander27home 4y ago

The biggest issue is "responsible government". The closest this ever implemented in world history is Singapore with the government largely stuffed with PhDs and graduates - heck their PM can even solve sudoku in C++. In most cases, government would be closer to American form running by incompetent or less educated leaders of semi democratic with fraud and excessive spending (Sri Lanka, Japan, Germany, etc). I recalled one of German leaders even plagiarised their master/dr thesis yeara ago. In this situation, private enterprises especially lots of it competiting fiercely would be way more efficient. Chicago and Australia privatisations are really just government monopolies relegated to private monopolies. So efficiency of private enterprise will not that readily available in short-medium term. In long term, we dont know - economics theory a lot doenst match up reality. Malaysia has gone through this during their 4th PM and today result is pretty mixed with a lot of corruptions.

mr_toad 4y ago

> In theory, a government will be efficient at allocating resources for that. And in practice it’s all about ass covering and getting re-elected.

ewgoforth 4y ago

I generally agree with you, but it looks like there cases where governments like the City of Chicago and Australia do a terrible job of balancing short term versus long term economics.