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> Like much common wisdom, the idea that companies are efficient (and specifically more efficient than government) is a myth. The claim as I've understood it i

> Like much common wisdom, the idea that companies are efficient (and specifically more efficient than government) is a myth. The claim as I've understood it is more that a private company puts control over efficiency more directly into the hands of the people whose money is being wasted. A government entity is typically nominally accountable to the taxpayer, but that accountability is through so many layers of indirection that it doesn't actually do anything. A privately owned company with a small number of owners will in theory be more responsive to monetary pressures. I think where this breaks down is with ridiculously large publicly traded companies where stock price has more to do with shareholders betting on the irrational behavior of other shareholders than it does with the actual performance of the company. When the owners of the company make money when the company makes money, it will typically straighten out its inefficiencies. When the owners of the company make money by buying and selling abstract financial instruments, not so much.

cogman10 2y ago
The worst of both worlds is where the US has landed. The public private cooperation is government bureaucracy and accountability coupled with a private company that knows there's basically no penalty to overshooting a government contract "What are they going to do, leave the road unfinished?". There are natural monopolies that exist, road building, water, sewer, power. All these things shouldn't be controlled by private entities.
rainsford 2y ago
I think there's another explanation as well, and it's also the reason why "running the government like a business" makes no sense even if private industry can be more efficient. Companies are profit driven entities and at the end of the day can look at net profit and see if it's positive or negative. This doesn't guarantee efficiency, but it gives you a pretty simple success metric that you can then work to tie everything else back to. This is a major oversimplification, but government doesn't even have that basic starting framework. Government functions cost money, but generally produce no direct monetary profit that can be measured against their cost. Of course government produces other outcomes, but since those outcomes are not monetary, you run into a units problem if you compare inputs and outputs. You can say how many crimes the FBI solves per million dollars of budget, but there's no easy way to measure a "break even" point where you have a net benefit. You can measure relative efficiency (solving more crimes for a given budget), but you can't say what the right target value is. Even if you could measure government efficiency the same way, the other issue is that companies can improve their efficiency by just stopping inefficient activities to focus on the efficient ones, while government agencies generally do not have that choice. The FBI could probably increase their efficiency by ignoring hard to solve crimes and focusing exclusively on the easy to solve ones, but that's probably not the right thing to incentivize.

cogman10 2y ago

The worst of both worlds is where the US has landed. The public private cooperation is government bureaucracy and accountability coupled with a private company that knows there's basically no penalty to overshooting a government contract "What are they going to do, leave the road unfinished?". There are natural monopolies that exist, road building, water, sewer, power. All these things shouldn't be controlled by private entities.

rainsford 2y ago

I think there's another explanation as well, and it's also the reason why "running the government like a business" makes no sense even if private industry can be more efficient. Companies are profit driven entities and at the end of the day can look at net profit and see if it's positive or negative. This doesn't guarantee efficiency, but it gives you a pretty simple success metric that you can then work to tie everything else back to. This is a major oversimplification, but government doesn't even have that basic starting framework. Government functions cost money, but generally produce no direct monetary profit that can be measured against their cost. Of course government produces other outcomes, but since those outcomes are not monetary, you run into a units problem if you compare inputs and outputs. You can say how many crimes the FBI solves per million dollars of budget, but there's no easy way to measure a "break even" point where you have a net benefit. You can measure relative efficiency (solving more crimes for a given budget), but you can't say what the right target value is. Even if you could measure government efficiency the same way, the other issue is that companies can improve their efficiency by just stopping inefficient activities to focus on the efficient ones, while government agencies generally do not have that choice. The FBI could probably increase their efficiency by ignoring hard to solve crimes and focusing exclusively on the easy to solve ones, but that's probably not the right thing to incentivize.