I
know a lot of people who have wandered back and forth between private
sector jobs and government jobs. They all say the same thing -
government functions are incredibly inefficient, unproductive, and slow
to change.
This
isn't a new problem or a uniquely American problem. You don't have to
go far to encounter frustration with the workings of government.
But why is this so? Why can't government be as efficient as the private sector?
To understand the answer, you have to turn the question around: why is the private sector more efficient than government?
First
and foremost, the private sector is driven by competition. Companies
must forever pend off competitors who are determined to take business
away. No business can stand still in the private sector: there is a
constant drive to improve products and services, reduce prices, and
improve relationships with customers. These activities all demand ever
increasing efficiency. The companies that are not efficient enough and
not competitive enough simply disappear because their customers
disappear.
Second, there is the question of economic
calculation. This was a great insight of economist Ludwig von Mises.
Companies must perform many economic calculations about every aspect of
their business. Yet all these calculations are based on one central
notion: profitability. A company must not only be profitable, it must
be
sufficiently profitable to continue it's existence. All economic calculation is based on this central concern for profitability.
Now,
let us reconsider government. Government has little competition.
Governments are usually not profitable, hence cannot fully utilize
economic calculations. Governments have weak incentives to improve and
lack many economic structures that allow improvement.
This is inherent in the nature of government.
It
gets worse when you understand the nature of government employment.
Some government units hire on the basis of patronage. There is less
incentive to get better at your job when you're the President's cousin.
More enlightened units of government replace patronage with a system of
rules. But, here too, there is less incentive to get better at your job
than there is to
follow the rules.
But the world changes quickly while rules may not, so rules can quickly
become obsolete. Nevertheless, there is a strong incentive to follow
the rules, however misguided, and weaker incentives to do anything
else. As a result, employees are less empowered.
To summarize, governmental functions suffer from
- Less incentive (little or no competition)
- Less ability to perform economic calculation
- Workers who are less empowered (in the best case) or less motivated (in the worst case).
This
is not to say that government should not attempt to do anything. Most
people believe that government should perform certain functions. The
message here is twofold:
- We should have more realistic expectations of what government is capable of
- We should seriously consider non-governmental alternatives where appropriate
