Arnold Kling

Public Transit and Public Choice

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Comment of the Week, 2003-03-1... The Deficit Argument, V...

Here is Public Choice theory boiled down to three sentences, by'Jane Galt'.


The liberal mantra is that the market fails. The free market mantra is that government fails worse. And I think the weight of empirical evidence is on our side.

For example consider urban rail transit subsidies. Rachel DiCarlo concludes,


when it comes to rail transit, it's the taxpayers who are chasing their tails. And they will continue to do so. That is, until they demand a reckoning of costs versus benefits and insist that elected officials at all levels stop making decisions that would get any CEO and his board of directors fired for incompetence.

(Here is more background on Public Choice Theory)

For Discussion. Markets provide accountablity in the private sector. What are the challenges in providing accountability in the public sector?


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CATEGORIES: Public Choice Theory



COMMENTS (20 to date)
David Thomson writes:

“What are the challenges in providing accountability in the public sector?”

There is far less accountability in the public sector. Businesses in the private sector must be able to balance their books. Sadly, the elected officials and bureaucrats are often able to indefinitely protect their favorite programs regardless of their obvious failures. This is why the government should always be the very last option to be selected only after exhausting all other possibilities.

My hometown of Houston, Texas is also building a rail system that makes no sense whatsoever. And yes, it is premised upon the outdated notion that our downtown district is the center of our economy. I have looked at the selected routes and they seem utterly senseless. Many folks agree with me. However, we have only so much time in the day to fight all this silliness. Our opponents are being paid to advance their agenda. This is why these goofy projects are so difficult to defeat. The individual taxpayer must consider the harsh fact that an individual program will only cost them about .000000001% of their total income. Where is the incentive for taking days off of work and spending enormous sums of money to fight a particular battle? One’s sense of altruistic duty to a noble cause can only go so far before you must call it quits.

I have a young friend who recently got hired as a City of Houston bureaucrat. His department has about 30 people and spends millions every years to “plan for the future.” This is all they do everyday of the working week. How in hell do you fight this sort of idiocy?

Bernard Yomtov writes:

The quote from Ms. Galt, far from being profound, is just plain silly. Liberals do not believe "the market fails." To say that they do is ludicrous.

Liberals do believe the market fails sometimes. This is hardly a radical position. It is almost universally accepted except among market-worshippers who seem unable to believe that anything that happens in unregulated markets could possibly be bad. So liberals believe it's sometimes worthwhile for the government to step in.

To maintain that "government fails" is equally ludicrous. Fails at what? At some things, certainly. Bureaucrats abuse their power, sometimes. So do businesses. To say simply, "government fails," is to take a rigid ideological position the only advantage of which is that it saves thinking.

David Thomson writes:

The central difference you are overlooking is that the private sector must successfully market its products and services---or go out of business. Government programs, however, often only have to rely upon the good graces of their political and bureaucratic protectors. The system can easily be abused by those people who have much to gain by the continuation of such programs that would be deemed failures by objective outsiders. The ordinary citizen is virtually powerless to do anything. We are forced to engage in costly altruistic behavior to fight against those who are being amply rewarded for their efforts.

Bernard Yomtov writes:

I'm not overlooking that at all.

I understand the potential for abuse of power and just plain incompetence in government.

My point is that markets are not perfect institutions that can solve all problems. Markets sometimes fail. Sometimes they need to be regulated in order to provide the benefits they can deliver. This suggests that other institutions, notably government can serve a useful purpose.

Patrick R. Sullivan writes:

Bernard, it is you who is being too rigid. No one thinks markets are perfect, but those who appreciate markets do so in light of the axiom that the perfect is the enemy of the good.

Thomas Sowell does an excellent job in "Knowledge and Decisions" of explicating the different strengths and weaknesses of different institutions. And David Thompson is noting one of them with his pointing out the incentives facing market participants tends to lead to efficient behaviors.

And there aren't just two institutions. There are plenty of non-market decision making entities that aren't government. Families and churches, say.

Bernard Yomtov writes:

Patrick,

I, in fact, "appreciate markets... in light of the axiom that the perfect is the enemy of the good."

Some things I object to are:

1. The cartoonish description of liberals as people who believe "markets fail" categorically.

2. The rigid view that government can do nothing to solve any problem.

3. The rigid view that any regulation of markets must produce a bad result.

4. The tortured logic libertarian ideologues use to "prove" that government is the source of all evil, and that Eden awaits if we just let the market work.

My opinion is that libertarians have a lot in common with Marxists, not in their beliefs, but in their psychology. They are true believers. They have bought into an ideology and shoehorn every situation into their conception of the world. Every problem is to be solved the same way. It's a classic case of "if your only tool is a hammer, you see every problem as a nail."

Jim Glass writes:

But who says those things, #1 thru #4? Real names, apart from maybe a few people on usenet.

It seems far, far, far more common that whenever a problem gains political notice people just *assume* the government should take care of it and will do a better job than markets would.

As one recent real-world example amount countless others, why was airport security in the US nationalized last year, when all the other nations that have serious experience at securing airports from serious threats, from Israel on, have been privatizing their airport security forces because of the efficiency problems that result from having government employees do that job? The assumption that "we've got a problem? gov't must handle it" even blinds us to the hard-won experience of others who have had the same problem.

As to real names, here's Coase on Samuleson:

"People like Samuelson like to set up a perfect world and say that the market does not bring us to this point and imply that the government should do something. They stop their analysis at that point.... My approach is to compare alternatives".
http://reason.com/9701/int.coase.shtml

I've never seen #1 thru #4 said by any real person -- certainly not by anybody holding a responsible postions in politics or business or anywhere. But people in responsible positions everywhere constantly act of the *assumption* of government effectiveness without, as Coase says, examining the alternatives.

Bernard Yomtov writes:

Jim,

Who says these things? How do you interpret the quote Arnold cites so approvingly?

But if you want bigger names:

"Government is not the solution. Government is the problem." - Ronald Reagan

Jane Galt writes:

Bernard, your characterization of my position is inaccurate. I know you read the quote, so you know that I was discussing specific instances where liberals declare that there is a market failure, and that the government will therefore be able to do a better job -- not saying that liberals believe the government is better 100% of the time, which would be socialism, not liberalism. I was questioning the assumption that the fact that the market is not providing the solution we would like means that the government will be able to provide it -- not making straw man arguments. Having a long argument about something I didn't say is the height of silliness -- and you've no more grounds for your characterization of market advocates than your hypothetical idiot would have in arguing that liberals are really socialists. If we're going to waste time splitting the sound bites off of the substance of people's speeches, I don't think you'll find that, in the end, this works to the benefit of your position. I have absolutely no doubt that I can selectively quote to make anyone you approve of sound like a fascist dolt, except that doing so would be a spectacular waste of my time.

David Thomson writes:

"Government is not the solution. Government is the problem." - Ronald Reagan

Ronald Reagan is right on target to point out this out as a general rule. Please note that he never said that government has no role whatsoever to play in the economy. The rule of thumb,however, is to limit the government’s involvement as much as possible. A bureaucrat simply lacks the non negotiably necessary entrepreneurial risk taking mindset. Moreover, it is exceedingly difficult to hold bureaucrats accountable. If nothing else, it’s virtually impossible to fire them for incompetence.

Sometimes private companies also have accountability issues that are not easily resolved. For instance, I’m utterly convinced that the hoi polloi stock holder often disagrees with the mind boggling pay increases granted to top executives. However, the good old boy network holds the real power---and the individual who owns a relatively few shares is forced to engage in altruistic behavior to combat this idiocy.

Patrick R. Sullivan writes:

Bernard is, simultaneously, against; "cartoonish description", and "that Eden awaits if we just let the market work".

Again, I recommend reading "Knowledge and Decisions". 380 pages, and iirc, only one cartoon.

Bernard Yomtov writes:

Patrick,

I think the notion that southern racism was a consequence of government regulation of the economy qualifies as the kind of tortured logic I was describing.

Bernard Yomtov writes:

Jane,

Yes, of course I read your original post.

My aim here was not to make you look bad. It was to say that I did not find your closing remark particularly sensible. I might add that it was Arnold Kling, and not I, who cited it as a general proposition, not something limited to a specific context.

Possibly I misinterpreted the remark. If so, I apologize for calling it silly. Your comment here seems to say that you believe there are market failures, but they cannot always be solved by government action, and in fact government action may sometimes make things worse.

If that is an accurate summary of your position then our disagreements are limited to specific cases. If your position is that government can never solve these problems, and will always make things worse, then I would say that is the equivalent of sentences 2 and 3 in my comment above.

Nor am I trying to mischaracterize "market advocates." I am not even sure what that term means. I am trying to describe a certain state of mind which absolutely refuses to accept the possibility that the market might not produce the best possible result. Maybe that doesn’t describe your thinking. It seems to me to describe that of some posters on your site. I would call them market worshippers, not advocates.

I am myself an admirer of markets. I am a businessman, and have also had enough economics training to understand their logic. I might add that I have every reason to be grateful that the US operates a capitalist economy. However, I also understand that the market has limitations, that it does not deal well with all situations, and that it can also produce the deadweight losses some ascribe solely to government. I refuse to throw up my hands in futility when these cases arise. I would rather look for a solution, understanding that there is no guarantee one exists. To claim, categorically, that government will fail, is a counsel of despair.

I also believe, incidentally, that the best solutions are often market-like arrangements, but that these need to be instituted by government. Two examples of this are “cap-and-trade” pollution controls, and Coase’s famous lighthouse example.


By the way, I'm not sure if you were referring to my quote from Reagan when you talked about "splitting off a sound bite." In fact, the quote is well-known and has been cited with great approbation by conservatives for years. I cited it in response to Jim Glass.

Patrick R. Sullivan writes:

" I think the notion that southern racism was a consequence of government regulation of the economy qualifies as the kind of tortured logic I was describing. "

That's tortured logic allright. Any idea where I could find someone making it?

Bernard Yomtov writes:

On Jane's comments board.

Patrick R. Sullivan writes:

" On Jane's comments board."

Could you provide me with the quote, and the person who said it?

Bernard Yomtov writes:

Patrick,

Go read your own posts, and some of Ken's also.

I said what I had to say about those ideas there and will not use this space to repeat myself.

Also, I do not want to get into a discussion with someone who is unable to find evidence that the vast majority of white southerners favored segregation.

Patrick R. Sullivan writes:

Neither I nor anyone else said:

" southern racism was a consequence of government regulation of the economy ",

Which is the real reason Bernard cannot provide such a quote. Again, I invite Bernard to inform himself of the actual arguments, by reading "Knowledge and Decisions". And I fully expect he will decline to do so.

me writes:

"it took the force of government to prohibit the railroads from bowing to economic pressure and integrating the trains. Absent that government power, the crack in the dyke would have widened, and the Plessey trickle would have become a flood"

Patrick R. Sullivan writes:

Whatever "me" thinks, this:

"it took the force of government to prohibit the railroads from bowing to economic pressure and integrating the trains. Absent that government power, the crack in the dyke would have widened, and the Plessey trickle would have become a flood"

it does not say:

" southern racism was a consequence of government regulation of the economy "

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