Thursday, August 28, 2014

Bryan Caplan — Why Do Government Enterprises Work So Well?

Even the best government enterprises are slow to cut costs. They're bad at innovation. And they're almost uniformly terrible at putting aside Social Desirability Bias to answer every enterprise's most fundamental question: Is this worth doing at all? Yet the anomaly remains: Simple economics implies that government enterprises should be far worse than they really are.
Unfortunately, I doubt the economics profession will ever take this anomaly seriously. Left-leaning economists don't want to grant the obvious case against government enterprise - and market-leaning economists would rather reiterate the obvious case against government enterprise than calmly test it against the facts.
Why Do Government Enterprises Work So Well?
Bryan Caplan | Professor of Economics at George Mason University, research fellow at the Mercatus Center, adjunct scholar at the Cato Institute


Ryan Harris said...

Tom, Off topic, but Canada is moving troops to front lines of the European-Russian war

Clonal said...

It is obvious that Caplan has never worked in a large private corporation. Whatever he said about government organizations can be said about large corporations.

Bureaucracies all operate the same way. Any company larger than 20 employees starts taking on the characteristics of a bureaucracy.

Unknown said...

"Simple economics implies that government enterprises should be far worse than they really are."

This is of course an ideological statement and not a factual statement.

Dan Lynch said...

+1 to what Clonal said about large corporations. They're about internal power struggles, internal turf wars, and going to meetings. It's amazing they get anything done at all.

Also, for many large corporations their customer is often ..... the government .... or possibly other large corporations. When I worked in the corporate world, I never had any contact with customers. So it's not the same as a small businessman who sells directly to live human beings.

The gist of Caplan's essay seems to be saying that some workers are motivated by something other than pay-for-performance -- like pride in workmanship, or being part of a team. This agrees with another article that Tom posted a while back that said the carrot-and-stick approach only works for simple tasks while more complicated jobs require other types of motivation like mastery of skills and the freedom to be creative.

Personally, I've never cared much about pay as long as it is fair compared to what other people are paid. I care more about creativity, mastery of skills, following a chosen career path, being treated with respect, job security, and stuff like that.

Economists get motivation all wrong because they assume workers are selfish people motivated by money. Well some workers are like that, but other workers are more complicated.

Dan Lynch said...

Slightly off topic, but a Monsanto contractor I worked for had set wages for each job type -- all millwrights got exactly the same wage, all helpers got the same wage, all laborers got the same wage, all supervisors got the same wage, and so forth. So there was no pay-for-performance and no way to make more money.

You would think that might create motivational problems, but it didn't. Welders still made the best welds they were capable of making because they took pride in their skills. If I made a crappy weld, my coworkers and supervisor would give me a hard time about it. If I made a good weld, I felt good about it.

So even at lower level jobs there is a lot of pride in workmanship and peer pressure that keeps people on their toes.

Tom Hickey said...

As far as corporate bureaucracy goes, probably no one puts his finger on it like Scott Adams, the creator of Dilbert and author of The Dilbert Principle.

NeilW said...

The public/private divide is ideological.

The actual divide is between small/young and old/large.

One of the reasons for constant 'reorganisation' in the public sector is to try and destroy the old/large organisation. It's very difficult to do.

And you have the same problem in the private sector. The old / large firms tend to persist because they have developed monopoly powers and they tend to resist new entrants.

So all that happens is the names of the current dominant big business may change over time, but overall it is always big business in charge.

The Anarchist FAQ has a good description of the process (even if their proposed solution is similarly flawed).