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> It's the private sector. It does better than the government practically by definition. I know that's a commonly repeated idea, especially in this forum, but

> It's the private sector. It does better than the government practically by definition. I know that's a commonly repeated idea, especially in this forum, but I don't share that assumption and don't see evidence for it. I believe they are two different tools, each better at different tasks, with some overlap. > If this wasn't true, then the government wouldn't contract the private sector for various tasks. Three thoughts: 1) Government doesn't contract out every task; the U.S. federal government has over 1 million employees and a $2 trillion budget, so it does quite a bit in-house. 2) Government does contract out many things; when they do it right, they are contracting where it's most cost-effective without undermining justice. There is much research showing that much privatization loses money but enriches the contractor. 3) Many of the contracting decisions are due to politics: Lobbying, and who has what donor or has which jobs in their district, for example. Consider that many privatization advocates and those promoting the supremacy of the private sector are lining their pockets: They are the ones who get the lucrative contracts and the politicians who support 'privatization' get the lucrative donations. Also, as government diminishes, the wealthy and powerful grow even more powerful.

nickff 12y ago
The main difference is that private enterprises may fail if they do not deliver their product or the service to customers at a cost acceptable to the latter; government projects and departments do not have this check. This is not a guarantee that the private sector will do a good or even mediocre job, as they can make mistakes, malinvestments, get bailed out, or have rich and stupid customers. The difference is that the government agency's source of revenue is not dependent on its performance, so government agencies and projects almost never get closed down or cancelled because they did a bad job, wasted money, or were plain incompetent. It is really a question of how one views the voice vs exit question, and how good a check those are (relative to each other).[1] [1] http://en.wikipedia.org/wiki/Exit,_Voice,_and_Loyalty http://en.wikipedia.org/wiki/Exit,_Voice,_and_Loyalty
- anigbrowl 12y ago
  But governments do slash budgets or cut programs altogether. And agencies typically continue on because their existence is mandated by law and (unlike the private sector) they can't choose to just ditch those customers that cost a lot to deal with. There are big variations in administrative competence to be sure, but the logical conclusion of your argument is that if you hate the President (or rather, the administration of the federal government by a given President) then the logical thing to do is get rid of the government.
  - nickff 12y ago
    I don't understand how " the logical conclusion of your argument is that if you hate the President... then the logical thing to do is get rid of the government." The voice vs exit paradigm has been employed in some arguments for anarchism, and many arguments for limiting the scope of government, but those arguments have nothing to do with the executive, and I didn't make any such argument.
    - anigbrowl 12y ago
      I know you didn't, but where is the line between saying individual agencies are inefficient and should be shut down and the administration as a whole? There's certainly a contingent (not necessarily including you) that wants to scale the federal government back to the bare minimum sketched out in the Constitution and devolve everything except national defense and certain enumerated powers back to the States.
      - nickff 12y ago
        There is no line to draw, but there is a counter-argument. The (most effective) counter-argument is that the government agencies are capable of achieving objectives that the private organizations can or will not.
- drabiega 12y ago
  > The difference is that the government agency's source of revenue is not dependent on its performance I'm not sure even this claim is warranted, from either side. Each has mechanisms for attempting to ensure the link between funding/performance, but from my perspective it seems like those mechanisms fail as often as they work in both sectors.
  - nickff 12y ago
    The mechanism is the voice in the case of government, and the exit in the case of private corporations; opinions definitely differ on the effectiveness of either.
  - Retra 12y ago
    Where governments provide critical services, their funding should not be tied to success. That would only ensure more failure, and that's the last thing you want to do to a critical service.
- briandear 12y ago
  You just described the problem with public schools.
- lotsofmangos 12y ago
  "government agencies and projects almost never get closed down or cancelled because they did a bad job, wasted money, or were plain incompetent." In which universe? Government projects get stopped for incompetence or wasting money about as much as they do in the private sector. And it turns out that the private sector is just as capable of firehosing money at bullshit as the government is, otherwise all those repackaged loans wouldn't have screwed the economy. There is a different limit on money for governments, given they back the money, but to assume that some form of cost/benefit analysis isn't generally practiced in public enterprise is to be working from a purely faith-based model of economics.
- frobozz 12y ago
  The public sector is, by definition, more efficient than the private sector. The main difference is the profit motive. When a government department does something more efficiently, it has to use that efficiency to either reduce cost or improve quality. When a private company does something more efficiently, it can take the spare money and shove it in the pockets of its shareholders. It's not a guarantee that a particular public sector project or department will be more efficient than an equivalent private sector one; the Peter Principle may well scupper any efficiency improvements.
  - nickff 12y ago
    I am sorry, but I think you live in a different world than I do. Where I live, many government offices get all-new furniture at the end of every fiscal year, because if they manage to come in under budget, their budget gets cut in the next year, so they make sure to come out over-budget. This is not the behavior of an organization trying to "reduce cost or improve quality". In addition, corporations which are closely-held have a very strong incentive to be efficient, as the officers/owners are the residual claimants. In larger, public corporations, their checks are shareholders, and their competitors, who (if more efficient) can drive a corporation bankrupt by under-pricing, or out-competing. I cannot recall the last government department driven to bankruptcy by a competitor.
    - jarek 12y ago
      What is the last large public corporation you can recall driven to bankruptcy primarily by private sector competition under-pricing or out-competing them? Let's say "large" is roughly as productive as, say, Luxembourg.
      - nickff 12y ago
        Well, large corporations that are failing usually (but not always) get purchased, and subsumed by more successful corporations, or bailed out before they go bankrupt. Some examples of this would be RCA, Lockheed, Delta Airlines, Chrysler (twice), Enron, General Motors.[1][2][3][4][5][6] I even found this convenient little slideshow.[7] Here is a challenge: find more equivalently-sized government departments shut down for their failures. Examples of such failures would be the two dozen financial market regulators (as well as Freddie Mac and Fannie Mae) who failed to anticipate or mitigate the housing problems of 2006-2007, the various police agencies which regularly shoot innocent civilians (such as the LAPD), the department of Veteran's Affairs which caused untold suffering, or the education departments which have greatly increased spending without any improvement in outcomes. Apologies for not addressing the second sentence, I wrote this reply before you had added that. [1] http://en.wikipedia.org/wiki/RCA http://en.wikipedia.org/wiki/RCA [2] http://en.wikipedia.org/wiki/Lockheed_Corporation http://en.wikipedia.org/wiki/Lockheed_Corporation [3] http://en.wikipedia.org/wiki/Delta_Air_Lines http://en.wikipedia.org/wiki/Delta_Air_Lines [4] http://en.wikipedia.org/wiki/Chrysler http://en.wikipedia.org/wiki/Chrysler [5] http://en.wikipedia.org/wiki/Enron http://en.wikipedia.org/wiki/Enron [6] http://en.wikipedia.org/wiki/General_Motors http://en.wikipedia.org/wiki/General_Motors [7] http://www.thestreet.com/gallery/tsc-bankruptcy2-decade/0/photo-closed.html http://www.thestreet.com/gallery/tsc-bankruptcy2-decade/0/ph...
- TeMPOraL 12y ago
  > The difference is that the government agency's source of revenue is not dependent on its performance, so government agencies and projects almost never get closed down or cancelled because they did a bad job, wasted money, or were plain incompetent. This cuts both ways - that's exactly why the government can and does shove money into things like infrastructure, basic research and, well, space exploration, while the private sector doesn't. There is no direct short-term profit motive for private sector in such endeavours. I emphasize "short-term", because the private sector is structured to care mostly about that. It takes a company to grow really big to invest in stuff like basic research - but at this point the internal structure of such company is more like that of a government than a free market.
  - nickff 12y ago
    I think you make the strongest case for government investment (which is) in expensive, capital-intensive, high-risk projects; this is probably the most defensible area of government spending. There are two strong counter-arguments I have heard against yours. The first is that the reason private organizations do not invest in these projects is that the government's tax structure makes such ventures unprofitable, and the government crowds-out private investment in these projects. The second argument is that the government is the only investor in these projects because they are investing large sums of money when it is unwise to do so, because the project is not yet worth doing, or it is too risky, and a private organization would have invested less initially, and followed-on as the project became more affordable.
- hackuser 12y ago
  > The main difference is that private enterprises may fail if they do not deliver their product or the service to customers at a cost acceptable to the latter; government projects and departments do not have this check. Every government executive's job (including appointees' jobs and to a degree every program), relies on a public vote every 2-6 years. Democracy isn't nearly perfect, but as we've seen, neither are the markets.
  - nickff 12y ago
    If you read the link, you will see that it makes a point similar to what you are saying (but more nuanced, and well thought-out than an HN comment). No one is arguing that perfection is achievable (or even a goal), the question is what form of feedback is most effective in providing desirable outcomes.
    - hackuser 12y ago
      > If you read the link ... You're right that I didn't; sorry. I have a hard time putting faith in the value or accuracy of Wikipedia, especially for sophisticated analysis.

nickff 12y ago

The main difference is that private enterprises may fail if they do not deliver their product or the service to customers at a cost acceptable to the latter; government projects and departments do not have this check. This is not a guarantee that the private sector will do a good or even mediocre job, as they can make mistakes, malinvestments, get bailed out, or have rich and stupid customers. The difference is that the government agency's source of revenue is not dependent on its performance, so government agencies and projects almost never get closed down or cancelled because they did a bad job, wasted money, or were plain incompetent. It is really a question of how one views the voice vs exit question, and how good a check those are (relative to each other).[1] [1] http://en.wikipedia.org/wiki/Exit,_Voice,_and_Loyalty http://en.wikipedia.org/wiki/Exit,_Voice,_and_Loyalty

anigbrowl 12y ago
But governments do slash budgets or cut programs altogether. And agencies typically continue on because their existence is mandated by law and (unlike the private sector) they can't choose to just ditch those customers that cost a lot to deal with. There are big variations in administrative competence to be sure, but the logical conclusion of your argument is that if you hate the President (or rather, the administration of the federal government by a given President) then the logical thing to do is get rid of the government.
- nickff 12y ago
  I don't understand how " the logical conclusion of your argument is that if you hate the President... then the logical thing to do is get rid of the government." The voice vs exit paradigm has been employed in some arguments for anarchism, and many arguments for limiting the scope of government, but those arguments have nothing to do with the executive, and I didn't make any such argument.
  - anigbrowl 12y ago
    I know you didn't, but where is the line between saying individual agencies are inefficient and should be shut down and the administration as a whole? There's certainly a contingent (not necessarily including you) that wants to scale the federal government back to the bare minimum sketched out in the Constitution and devolve everything except national defense and certain enumerated powers back to the States.
    - nickff 12y ago
      There is no line to draw, but there is a counter-argument. The (most effective) counter-argument is that the government agencies are capable of achieving objectives that the private organizations can or will not.
drabiega 12y ago
> The difference is that the government agency's source of revenue is not dependent on its performance I'm not sure even this claim is warranted, from either side. Each has mechanisms for attempting to ensure the link between funding/performance, but from my perspective it seems like those mechanisms fail as often as they work in both sectors.
- nickff 12y ago
  The mechanism is the voice in the case of government, and the exit in the case of private corporations; opinions definitely differ on the effectiveness of either.
- Retra 12y ago
  Where governments provide critical services, their funding should not be tied to success. That would only ensure more failure, and that's the last thing you want to do to a critical service.
briandear 12y ago
You just described the problem with public schools.
lotsofmangos 12y ago
"government agencies and projects almost never get closed down or cancelled because they did a bad job, wasted money, or were plain incompetent." In which universe? Government projects get stopped for incompetence or wasting money about as much as they do in the private sector. And it turns out that the private sector is just as capable of firehosing money at bullshit as the government is, otherwise all those repackaged loans wouldn't have screwed the economy. There is a different limit on money for governments, given they back the money, but to assume that some form of cost/benefit analysis isn't generally practiced in public enterprise is to be working from a purely faith-based model of economics.
frobozz 12y ago
The public sector is, by definition, more efficient than the private sector. The main difference is the profit motive. When a government department does something more efficiently, it has to use that efficiency to either reduce cost or improve quality. When a private company does something more efficiently, it can take the spare money and shove it in the pockets of its shareholders. It's not a guarantee that a particular public sector project or department will be more efficient than an equivalent private sector one; the Peter Principle may well scupper any efficiency improvements.
- nickff 12y ago
  I am sorry, but I think you live in a different world than I do. Where I live, many government offices get all-new furniture at the end of every fiscal year, because if they manage to come in under budget, their budget gets cut in the next year, so they make sure to come out over-budget. This is not the behavior of an organization trying to "reduce cost or improve quality". In addition, corporations which are closely-held have a very strong incentive to be efficient, as the officers/owners are the residual claimants. In larger, public corporations, their checks are shareholders, and their competitors, who (if more efficient) can drive a corporation bankrupt by under-pricing, or out-competing. I cannot recall the last government department driven to bankruptcy by a competitor.
  - jarek 12y ago
    What is the last large public corporation you can recall driven to bankruptcy primarily by private sector competition under-pricing or out-competing them? Let's say "large" is roughly as productive as, say, Luxembourg.
    - nickff 12y ago
      Well, large corporations that are failing usually (but not always) get purchased, and subsumed by more successful corporations, or bailed out before they go bankrupt. Some examples of this would be RCA, Lockheed, Delta Airlines, Chrysler (twice), Enron, General Motors.[1][2][3][4][5][6] I even found this convenient little slideshow.[7] Here is a challenge: find more equivalently-sized government departments shut down for their failures. Examples of such failures would be the two dozen financial market regulators (as well as Freddie Mac and Fannie Mae) who failed to anticipate or mitigate the housing problems of 2006-2007, the various police agencies which regularly shoot innocent civilians (such as the LAPD), the department of Veteran's Affairs which caused untold suffering, or the education departments which have greatly increased spending without any improvement in outcomes. Apologies for not addressing the second sentence, I wrote this reply before you had added that. [1] http://en.wikipedia.org/wiki/RCA http://en.wikipedia.org/wiki/RCA [2] http://en.wikipedia.org/wiki/Lockheed_Corporation http://en.wikipedia.org/wiki/Lockheed_Corporation [3] http://en.wikipedia.org/wiki/Delta_Air_Lines http://en.wikipedia.org/wiki/Delta_Air_Lines [4] http://en.wikipedia.org/wiki/Chrysler http://en.wikipedia.org/wiki/Chrysler [5] http://en.wikipedia.org/wiki/Enron http://en.wikipedia.org/wiki/Enron [6] http://en.wikipedia.org/wiki/General_Motors http://en.wikipedia.org/wiki/General_Motors [7] http://www.thestreet.com/gallery/tsc-bankruptcy2-decade/0/photo-closed.html http://www.thestreet.com/gallery/tsc-bankruptcy2-decade/0/ph...
TeMPOraL 12y ago
> The difference is that the government agency's source of revenue is not dependent on its performance, so government agencies and projects almost never get closed down or cancelled because they did a bad job, wasted money, or were plain incompetent. This cuts both ways - that's exactly why the government can and does shove money into things like infrastructure, basic research and, well, space exploration, while the private sector doesn't. There is no direct short-term profit motive for private sector in such endeavours. I emphasize "short-term", because the private sector is structured to care mostly about that. It takes a company to grow really big to invest in stuff like basic research - but at this point the internal structure of such company is more like that of a government than a free market.
- nickff 12y ago
  I think you make the strongest case for government investment (which is) in expensive, capital-intensive, high-risk projects; this is probably the most defensible area of government spending. There are two strong counter-arguments I have heard against yours. The first is that the reason private organizations do not invest in these projects is that the government's tax structure makes such ventures unprofitable, and the government crowds-out private investment in these projects. The second argument is that the government is the only investor in these projects because they are investing large sums of money when it is unwise to do so, because the project is not yet worth doing, or it is too risky, and a private organization would have invested less initially, and followed-on as the project became more affordable.
hackuser 12y ago
> The main difference is that private enterprises may fail if they do not deliver their product or the service to customers at a cost acceptable to the latter; government projects and departments do not have this check. Every government executive's job (including appointees' jobs and to a degree every program), relies on a public vote every 2-6 years. Democracy isn't nearly perfect, but as we've seen, neither are the markets.
- nickff 12y ago
  If you read the link, you will see that it makes a point similar to what you are saying (but more nuanced, and well thought-out than an HN comment). No one is arguing that perfection is achievable (or even a goal), the question is what form of feedback is most effective in providing desirable outcomes.
  - hackuser 12y ago
    > If you read the link ... You're right that I didn't; sorry. I have a hard time putting faith in the value or accuracy of Wikipedia, especially for sophisticated analysis.