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.
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.
The Washington Post reported that the School Nutrition Association “has done an about face” on the First Lady’s school nutrition program because children throw away too much of the healthy stuff, wasting lots of money.
I learned this three years ago when McDonald’s offered a healthier Happy Meal.
This reminded me of this.
When I saw the alert that Kathleen Sebelius is going to resign her post as Secretary of Health and Human Services, the classic Warren Buffett quote came to mind:
When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
The business of attempting to solve problems caused by government intervention with more government intervention is a business with bad economics.
When I read that headline in the Wall Street Journal, my initial thought was that perhaps ‘the U.S.’ has been a bit too preoccupied with spying on its own people.
Some economists believe increases in the minimum wage will have ‘little or no effect on employment.’
That’s possible. People who aren’t productive enough to make minimum wage will still be able to find sub-minimum wage work and those people won’t show up in unemployment statistics since they are not looking for a job.
Some sub-minimum wage jobs are legal. If you are self-employed, you don’t have to make minimum wage. A buddy of mine once owned a used car lot. While he was a staunch advocate of a minimum wage, his sales people were ‘self-employed’, so he wouldn’t have to pay them the minimum wage if they didn’t sell cars.
Also, unpaid internships and grad students often make less than minimum wage.
Some sub-minimum wage jobs aren’t legal. Many drugs are illegal, but somehow they are readily available everywhere.
So, in other words, while economists use the argument that a minimum wage hike will have ‘little or no effect on employment,’ they don’t come right out and that’s because those who ignore it already will continue to do so, as drugs will continue to be sold.