Tuesday, December 12, 2006

Privatization Fears?

Indiana's left blogosphere is suffering a heavy case of Chicken Little-ism right now over the growing number of privatization initiatives being taken by governor Mitch Daniels.

While concern over cronyism is certainly valid, and contracts should be awarded by bids only, I am pleased by the move.

The recently deceased Nobel-winning economist Milton Friedman summed up in his series and book "Free To Choose" why private enterprises are more likely to better deliver on the services than government. Check out Friedman explaining " The Four Ways To Spend Money", on this grainy clip:

The 4 Ways to Spend Money by Milton Friedman


Private employers spend their own money on their employees in the pursuit of making more money. Government employers spend someone else's money on their employees, not in the pursuit of making money. So often you hear people say, "I don't expect this government enterprise to make money". So, yeah, I figure privatization will be a blessing in cost savings- so long as there isn't cronyism, or no-bid contracts being awarded.

I question the motives of those fearing privatization. Mainly, privatizing a service performed by government doesn't eliminate that service. It merely allows for the likelihood of more efficient delivery of that service. Especially for those on the left, don't you want to see social services better delivered to the recipients? Or, is the real motivation protecting cushy government jobs?

Just asking.

4 comments:

Bob Thompson said...

I am looking forward to the day that Mitch turns around and looks at the State's retirement Fund (PERF) and realizes that privatizing this dog will benefit taxpayers (cost savings) and public employees (better investment results and options).
Open your eyes Mitch

Jeff Pruitt said...

I don't think the fear is that some will lose cushy government jobs - at least not my fear. I think my skepticism boils down to the fact that some take it as a priori that privatizing services will make them better and more efficient. I don't believe that argument and I think the governor and his supports bear the burden of proving those claims for each and every service they want to privatize.

I think the fundamental difference is that government is responsible to the people (directly) and private entities are responsible to the shareholders. What is good for the shareholders is not always inline with the common good.

For example would a 5% profit be good enough or would it be necessary to cut services in order to bring that number up to 10-15%? There is a tradeoff here and I don't believe that the efficiency of the private sector can always make up the difference.

I think this is the argument coming from the left (although I certainly am not the spokesman) and any debate from the right should start from this position and not one of "cushy government jobs"...

Mike Kole said...

Let's make no mistake here. If it were up to me, the Lottery Commission would be abolished. Gone. Not privatized. Gone. But that's the difference between a Libertarian and a Republican. A Republican (and Democrat in this case) doesn't mind using the power of the state to create monopolies in specific games of chance, and to bar by law competitive entry from a private entity. A Libertarian holds that anyone should be free to engage in either side of such enterprise- gambler or house.

But this now begins to look like a leftward talking point to the advocate of privatization: prove the value in creting efficiencies, even though we didn't suffer such burden when creating a public agency.

No empirical proofs were offered when forming the vast majority of our numerous government bureaus and agencies. The public may have clamored for them, the politicians may have stuck their fingers in the air and felt they would fly, they may have merely been pet items- all good enough to create these arms of government. But, should one come along wanting to gain an efficiency, not even eliminate, then now the time has come for a burden of proof! Well! Isn't that convenient!

I think a better argument for government as a whole is that it should have to justify its existence each and every year. Make the case that there is some essential service that the private sector cannot better provide, and then ok, carry on.

Instead, in real life, the extension of government comes to follow this axiom: If it appears a government service is not solving the problem it was meant to address, surely more money is needed. If it appears a government service is solving the problem, it should not begin to be phased out, but rather, rewarded with more money due to the obvious merits.

There's the a priori that merits skepticism and more.

Jeff Pruitt said...

Well you won't receive much debate from me on the majority of your post Mike. I am a staunch supporter of measurables as they're applied to public policy.

For example, if we create program X then what do we expect program X to accomplish - specifically. How do we plan to measure the progress of program X? How long are willing to let program X run before evaluating its effectiveness? And what do we plan on doing if program X is (or isn't) effective?

I fully believe that if we took this type of scientific approach to government then we could continuously improve our society while becoming more efficient (less taxes). Alas, most in government do not have a scientific background and probably wouldn't know where to begin to even perform such an analysis.

And I don't think this should only be applied to new government expenditures but to ALL government expenditures...