In this post on EconLog, Bryan Caplan explores why government enterprises work so well.
He makes a good point.
I think the small-government types (like myself) can overplay disasters of government involvement and we lose credibility when we do so. So, I do think its helpful to recognize when government seems to be doing, at worst, okay.
On the flip-side, I think big-government types can overplay the successes of government enterprises.
But, I think much of this is explained to the extent of what level of government we are talking about and the dynamics of that level, to what extent it is bottom-up or top-down.
I discussed this in more detail in this post back in 2013. I think government enterprises that work pretty well are more bottom-up and the ones that don’t work so well are top-down.
That post was inspired by an apples-and-oranges comparison often made by government-types. They say that fire and police departments are government, and work pretty good. Then they make the logical leap to use this to support that some Federal government enterprise will work.
The lapse in that logic is that fire and police departments, while government enterprises, operate at the local level. There are thousands of these departments, that operate rather independently of one another, across our country. This makes these enterprises operate much more like a bottom-up organization, than top-down. This allows these enterprises to benefit from the same dynamics of innovationism as businesses.
In one part of Death Valley, it has been a mystery for some time as to how heavy boulders move across the desert, leaving a trail in the desert floor behind them.
That mystery has now been solved. It turns out that thin ponds of ice water forms to allow the rocks to slide across ice when blown by the wind.
The reason I’m posting this is that I found one part of the story rather humorous. The researchers installed a weather station and put GPS equipment on rocks. They brought in their own rocks because:
(The National Park Service would not let them use native rocks, so they brought in similar rocks from an outside source.)
Yes, we wouldn’t to interfere with the native rocks! Credit to researchers for believing that similar rocks would do the trick.
David Henderson’s post on sayings from economist Dwight Lee is worth a read. This one is from the comments of that post:
You can tell for whose benefit an institution is run by looking at who gets the closest parking spaces. At universities the students get the most distant spaces, administrators and faculty the closest. At Wal-Mart, they ask the employees to park away from the entrance.
Update: Don Boudreaux also posted this at Cafe Hayek. In the comments of his post, someone points out that professors and teachers also get the good parking spots at his children’s private university and high school, implying that private doesn’t necessarily make the institution more likely to give better parking to the students.
I think it’s important to realize that the private/public distinction is not all that helpful in determining whose benefit the institution is run. Certainly, there are plenty of private institutions run for the benefit of their bureaucrats.
I think an interesting question is how and why such private institutions can get away with that?
One answer for universities may be that they aren’t really run for the benefit of the students, but rather for their parents, who don’t visit as often.
Certainly, all institutions have to try to please multiple groups of stakeholders. But, universities do seem a lot more focused on administrators and faculty than other groups. Tenure is another example.
Scott Sumner makes a good point about the economy and studies of it in this EconLog post. He writes:
I recall a story that scientists are often unable to explain the “tricks” performed by magicians. Scientists tend to be smart, but also rather linear thinkers. They are not used to their test tubes trying to deceive them. Something similar occurs in economics.
The economy operates in very subtle ways, and often when I read academic studies of issues like discrimination, the techniques seem incredibly naive to me. They might put in all the attributes of male and female labor productivity they can think of, and then simply assume than any unexplained residual must be due to “discrimination.” And they do this in cases where there is no obvious reason to assume discrimination. It would be like a scientist assuming that magicians created a white rabbit out of thin air, at the snap of their fingers, because they can’t think of any other explanation of how it got into the black hat!
They forget how easily fooled they were by the magician.
Why is this important? Sumner also makes the point that the economy works in subtle ways which are often just as misleading as the magician’s misdirect. He brings up one example, the vexing problem of why dry cleaning prices are higher for women than men. Perhaps it’s gender price discrimination.
The truth test — as Dan Hill points out in the comments to Sumner’s post — is to ask anyone who makes such a claim to put their money where their mouth is. If discrimination is the reason for the higher prices, not costs of some sort (be they direct or opportunity), wouldn’t you be able to make a lot of money by opening dry cleaners that offer a lower price for women?
I happened to come across a well-said remark from President Harry S. Truman’s radio remarks on election eve in 1948:
I hope that all of you who are entitled to vote will exercise that great privilege. When you vote, you are in control of your Government.
I just finished reading, The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor by William Easterly.
Russ Roberts interviewed Easterly in this EconTalk podcast.
I recommend reading the book and listening to the podcast.
Easterly’s key and powerful point is that the economic and political rights of humans in third world countries are often not considered by experts looking to prove out their prescribed solutions for alleviating poverty and often do so by working with the very leaders of those countries who suppress those rights.
Easterly made the excellent observation that Martin Luther King Jr. didn’t seek to alleviate poverty among African-Americans first. He understood that ensuring that they had economic and political rights came first.
The last half of the book provides a nice description of how the incentives work in a free market (or when people have economic and political rights) to be the most effective pill against poverty. Easterly, though, steers away from using terms that carry baggage in today’s political clime, like markets and capitalism, and keeps the focus on the individuals. Instead of calling it capitalism, he refers it to a people trying to solve other people’s problems.
From the Introduction of the William Easterly’s book, The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor:
The technical problems of the poor (and the absence of technical solutions for those problems) are a symptom of poverty, not a cause of poverty. This book argues that the cause of poverty is the absence of political and economic rights, the absence of a free political and economic system that would find the technical solutions to the poor’s problems. The dictator whom the experts expect will accomplish the technical fixes to the technical problems is not the solution; he is the problem.
Think of technical problems as problems like not having medicine, food or the internet and technical solutions as providing medicine, food and the internet.
I’m looking forward to reading the rest of the book. I heard about it from this EconTalk episode with William Easterly and that discussion is worth a listen.