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Monday, December 11, 2006

"Most Living Things are Microbes; Most Philosophers are Living Things; Therefore, Most Philosophers are Microbes"

In a follow-up to today's column, Paul Krugman continues his discussion of the problems with government outsourcing. This is from answers to several reader questions and comments about the column:

Selling Out, Money Talks: ..I agree that in principle outsourcing can pay. In fact, we all agree that some (many) things should be outsourced: to go to a reductio ad absurdum, nobody thinks that the ham sandwiches at the Education Department cafeteria should come from hogs raised on government-owned farms.

But the track record of privatization of traditional public services is, in fact, dismal — in two ways. Promised savings rarely materialize, and politicians nonetheless persist because they like the enhanced ability to reward their friends. ...

Often the problem is that there isn't a well-defined bottom line, or at least not one that can easily be embodied in a contract. The fall of FEMA had a lot to do with the fact that true disaster readiness requires more than just performing a set of specified tasks, it's an overall attitude that FEMA had in the Clinton years but lost once everything started being put up for bid. And don't get me started on using hired guns to provide security...

Almost all the real arguments are arguments in favor of competitive markets, not private ownership per se. Where a competitive market isn't feasible — which includes most of what the government does — there's no, zero, zip actual neoclassical argument "proving" that privatization is a good idea. Instead, it comes down to complicated issues involving principal-agent problems — and it's just as easy to use those arguments to make a case against privatization as for it.

So what sound like authoritative arguments for privatization are actually specious: most markets work well; most market participants are privately owned; therefore, privatization is good. That's equivalent to: most living things are microbes; most philosophers are living things; therefore, most philosophers are microbes. ...

    Posted by on Monday, December 11, 2006 at 09:54 PM in Economics, Policy, Politics | Permalink  TrackBack (0)  Comments (11)


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