Bryan Caplan  

Why Aren't Government Employees Worse?

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I first read Murray Rothbard when I was seventeen years old, and suddenly my whole high school made sense. Lazy teachers, guys with college degrees teaching gym, required drama classes, and lies, lies, lies everywhere.  Mr. Libertarian had a compelling explanation:
On the free market, in short, the consumer is king, and any business firm that wants to make profits and avoid losses tries its best to serve the consumer as efficiently and at as low a cost as possible. In a government operation, in contrast, everything changes. Inherent in all government operation is a grave and fatal split between service and payment, between the providing of a service and the payment for receiving it. The government bureau does not get its income as does the private firm, from serving the consumer well or from consumer purchases of its products exceeding its costs of operation. No, the government bureau acquires its income from mulcting the long-suffering taxpayer. Its operations therefore become inefficient, and costs zoom, since government bureaus need not worry about losses or bankruptcy; they can make up their losses by additional extractions from the public till. Furthermore, the consumer, instead of being courted and wooed for his favor, becomes a mere annoyance to the government someone who is "wasting" the government's scarce resources.  In government operations, the consumer is treated like an unwelcome intruder, an interference in the quiet enjoyment by the bureaucrat of his steady income.
In the two decades since I read those words, I've seen them confirmed again and again.  And yet... I've also noticed counter-examples - government employees who actually try to do a good job.  Indeed, I am a counter-example.  There's no financial reason for me to prepare written lecture notes for all of my classes.  Yet prepare them I do.  What's going on?

Hypothesis #1: Government employees' financial rewards for performance are better than Rothbard described.

Evaluation:  There are clearly some grunt-level government jobs where you'll get fired if you don't perform.  A municipal garbageman who gets high instead of picking up the trash may get more chances than a privately-employed garbageman, but he's still on a pretty short leash.  But (a) most government jobs aren't like this, and (b) the grunts only need to worry about good performance if their supervisors do - and their supervisors have pretty weak incentives to do so.

Hypothesis #2: Elected politicians at the top of the pyramid send good incentives all the way down to the base because they're worried about re-election.

Evaluation: While voters could give elected officials reasons to behave in this way, they almost never do.

Hypothesis #3: Government employees self-select for dedication and/or caring.

Evaluation: I'm ideologically tempted to guffaw, but this is definitely important in some government enterprises.  Not at the Social Security Office or the DMV, that's for sure.  But I've often seen this in education.  In pleasant suburban elementary schools, for example, teachers are more likely to be hyper than lazy.  And at risk of sounding self-serving, when I put extra effort into my lectures, it's primarily because I care about economic education.

The key complication: Figuring out when this self-selection mechanism works.  In my high school, perhaps a third of the teachers took pride in their work.  The rest seemed to just be punching the clock.  Were they always that way?  Or did time just wear them down?  I still don't know.

Hypothesis #4: Government employees want to look good in front of their co-workers.

This is more of a complement for #3 than a substitute.  But again, it's plausible.  I don't want to become deadwood; but if I did, the shame I would feel before my colleagues would deter me.  Even at the Post Office, I've seen employees show off their superior postal skills in front of their co-workers.  It seemed to make them feel good about themselves.

Once again, there's a key complication: When does doing a good job lead to the admiration of your peers?  And when does it lead to derision for being a sap?  There are clearly multiple equilibria: Police departments where your peers despise you for taking bribes, and others where they despise you for not taking bribes - or worse yet, "ratting" on an officer who does.

Finally, it's worth pointing out that the goodness of dedication/caring depends on the goodness of the task being performed.  It's far better for Communist secret policemen to be lazy and corrupt than zealous and pure - and the same goes government employees who enforce U.S. immigration laws.


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COMMENTS (27 to date)
Joe Cushing writes:

I think, in a capitalist society such as ours, there are good examples of how people should work all around. It's hard for government employees to get too bad because there would be public outrage. There is also self pride. As a former government employee, I can say that there is some direction from the top to do good work. I think that the job is spelled out and there is a motivation to do it well because that is what you are supposed to do.

Of course none of these motives are as powerful as the motive of serve well or your company dies. So the service is mediocre but not terrible. I did wait an hour or more for a new drivers licence endorsement recently. If it had been 10 hours maybe I would have written a threatening letter to my state rep. Buying a fishing license takes no wait at all. That's because you can get one from a private store.

Steve Sailer writes:

Lots of things motivate people besides money.

We got to the Moon without paying Wall Street size bonuses.

Jayson Virissimo writes:

As someone who has been employed by the federal government, I would have to say the level of work I put into it was determined first by my conscience (I would feel guilty if I did it too inefficiently) and second by not living up to the standards set by my supervisors (I don't really know what their motivations were).

Bryan Caplan writes:

Steve Sailer writes:

Lots of things motivate people besides money.

We got to the Moon without paying Wall Street size bonuses.

And yet I've talked to NASA employees who described a culture of 3 hour lunches and near-total indolence. One kept got in trouble for asking for some work to do!
tom writes:

Bryan, when you talk about open immigration, are you talking about taking all comers, or about something more limited like auctioning off citizenship? Arnold referred to open immigration in a post earlier in the week, but he followed up by suggesting auctions.

Assuming that we do not have a choice of guest worker programs where we can have sub-citizens with no rights and no families, how would your US immigration system look? And would you expect that we would be importing a brand new underclass?

mgroves writes:

The only problem with (more) open immigration in my mind is security and fairness to legal immigrants: I have zero quarrel with the other ramifications.

Taras Smereka writes:

I am never cease to be surprised how dumb one's hypotheses can be when they are not logically derived from facts.

Really, the short answer is that some peoples' long run profit from doing the right thing outweighs the short term profit they could potentially get by abusing their monopoly and pillaging the taxpayer. Thats why we have the occasional government employee who is so confused he actually attempts to act in the public interest. EX: Ron Paul.

Arnie writes:

Why aren't gov workers more useless?

I'm guessing that there is a high turn over rate. People with great dreams are hired, work hard, and the whole operation around them is improved. Then, after a time, the internal thrill is gone, there is no external push to improve, and motherhood or sheer boredom or lower than expected wages pushes them to other work.

Sure some stay on, but even some of them occasionally do a good job for personal reasons.

This is what I've seen in my public high school over 25 years.

My wife is in a private school, and the issue there is that everyone is considered Family, so even really weak teachers skate for decades since no leader wants to be the one that breaks up the family by firing someone.

Unit writes:

A job guarantee might free up someone's psyche (some people under-perform under too much pressure). Also, some people might have a physiological need to have a steady job in which they are doing well. So I would vote for #3 with the following modification: govt employees self-select for a taste for long-term job security because having a steady job is conducive to their well-being (even if it might be paid less, possibly).

Burk writes:

Remember that not everyone in corporations faces the customer, either. Agency and supervisory problems abound in all organizations, so the opening parable of perfect customer-focus of everyone in the private sector is more fable than reality.

Constant writes:

Some points.

1) Inertia. It is hard for bureaucracies to change. Therefore it is probably hard for bureaucracies to deteriorate. They do deteriorate but it takes time. So if a bureaucracy is initially well-designed for its purported function, it may take time for the lack of environmental incentives to soften the bureaucracy into mush.

2) Competition for jobs at the lowest level combined with the low cost of giving orders. It is costly to do the hard work of benefiting the public, but it is easy to say to someone else, "you do that hard work or I will replace you". Even if there is little incentive for the supervisor to tell his employee to do the right thing, there is at the same time relatively little cost.

Here's an example. I have a dog. I feed him better than I feed myself. The reason is that I don't have to put up with the deprivation of delicious desserts that I foist upon my dog.

Similarly, this may be why people hire personal trainers and check themselves into fat farms. It is hard to motivate yourself to exercise because, frankly, it sucks. But your trainer doesn't feel your pain and so he is not tempted to say, "let's cut this short and go have some ice cream instead."

3) Careerism. People don't just do good jobs in order not to be fired, they do good jobs in order to entice potential future employers to hire them. Some of these employers may be private. Academic publication is surely in part for the sake of one's career. The more respected you are in your field, the better your career prospects.

4) Non-monetary input. Even if your salary and keeping your job does not depend on your clients, maintaining good relations with your clients makes your day at the office more pleasant. There is little incentive to be nice to DMV clients because you see them once a year, but your students come back every day and the parents of your students visit you as often as they deem necessary.

RL writes:

The question that keeps bothering me is: compared to what? "Why aren't government employees worse" depends on a standard of comparison. I was, for example, very impressed by the DMV in Wisconsin compared to the one in Arizona. But I suspect if they were both run by Kinkos or Starbucks I'd be even more impressed.

In medicine, I'm confident the quality and service is much worse at the government-run VA and Indian Hospitals.

The major counterexample I can think of is Bryan's own: Education. But perhaps the problem there is we're comparing state universities with "private" systems, like Harvard, which are in fact thoroughly insulated from the market with government grants, foundation money, etc. So perhaps BOTH the state universities and the private universities could be better and we just don't have the right competitive standard. Maybe we should compare them to programs like Phoenix University, the online for-profit university, in terms of cost, innovation, client satisfaction, etc.

darjen writes:

Sure, there are government workers who care about their job and try to be productive. I don't think Rothbard was trying to say that there aren't. Generally speaking though, they seem to be the exception rather than the rule.

Just like there are private sector employees who slack and don't to a good job. It's just harder for them to get by for long periods.

8 writes:

How about culture? Compare government workers to private sector workers in each country/region.

NM writes:

You might turn the idea underlying hypothesis 3 around in an interesting way: assuming that a significant number of government employees select government service out of some ethic of public service, then why does one also see so much slack among public servants? What wears people down? I certainly don't have an answer, but I would suggest the following hypotheses might be worth exploring:

Hyp. 1) an ethic of public service implies a non-market relation to your work. Marketising it, at least under certain situations, will erode the ethic that has sofar been the public servant's motivating drive, while generally not being able to provide a sufficiently-strong substitute motivation (e.g. because the monetary reward is not big enough, or because performance is not readily monitorable).

Ex.: apparently* an Israeli Kibbutz perceived the following problem: people showed up later for appointments with teachers, doctors etc. Not hugely late - 5-10 min. late. To incentivise people to turn up on time, a system was instituted whereby they would be fined a small amount if they showed up late. Contrary to expectation, people now began showing up hugely late (10-40 min), presumably because with the relation between them and the dr./teacher/... marketised, the ethical incentive to show up on time (not make the person wait, disrupt the schedule, etc.) had been eliminated. What had been an obligation to that individual and the wider community had been turned into a right with a specific (and cheap) monetary value. The system essential spelt to people that you could 'buy' the 'right' to show up late, whilst by showing up on time you were merely foregoing a cheap consumption-option.


--> Hyp. 2) If many public servants are to a significant extent motivated by non-monetary values (service to the community, etc.), then public acknowledgment of the value of their work is maybe an important reward for them, esp. given that their financial recompense (and the status That will buy them) tends to be only moderate. This would seem to imply that if public servants perceive themselves and their work to be little-valued by the community (e.g. being portrayed as slackers growing fat off other's taxes) they would lack a significant incentive for working well. On the contrary, given that they are perceived as pampered slackers whatever they do individually, they have an incentive To slack.


Hyp. 3) Politicisation of/meddling on part of superiors in their work. If they perceive that they have little room for agency in their work, that they are being made to jump through a wide range of hoops that have little bearing on improving the quality of their work, but just because these satisfy certain political/ideological/bureaucratic criteria of superiors, they may grow disenchanted and their work morale overall will suffer.


QUESTION FOR BRYAN: Why do you (apparently! I haven't read enough of your stuff to really say) assume that material as opposed to non-material incentives are the main drivers of human behaviour? Material rewards are obviously important in many situations, but (it would seem to me) in Many situations non-material incentives are equally important, if not more so (status/respect/being valued by others, ethical obligations, etc.)


*I have no reference for this story. It was told to me by a friend who - like me - is quite a cynic, but - unlike me - has no particular ideological axe to sharpen, so I tend to trust stories of this type when told by him. In any case, it's just an illustration.

SheetWise writes:

Why are you -- all of you -- treating this as if it was something other than a simple principal-agent problem?

JKB writes:

First off financial rewards is a red herring. When a government employee starts grousing about pay, the solution is rarely more money. To keep upping pay is a black hole as the grousing just continues for more. When starting out many government employees want to have an impact while making are reasonable and secure living. Money will not salve the reality of not being able to have an individual impact due to group averaging.

A more effective solution is to find a real way for the person to feel their contribution is seen and appreciated. Such recognition is difficult in a processing environment such as say the DMV or Social Security. I assume it is somewhat easier with teaching, to see an impact on a student, which might have motivated the career choice. That may be the difference between the suburban and inner city school. Sure the inner city teacher may reach a student occasionally but it would take a strong constitution to lose some them to violence while fighting a long term battle in an anti-learning environment.

Additionally, some leverage in the means of accomplishing the job is also important. The trend to mandate from on high kills motivation since the employee has no control over how to accomplish their job. It is hard to stay motivated when you can't change anything to achieve your goals.

I suspect an examination of those government workers who are unmotivated will find either a job in which individual impact is diluted by averaging over the group and/or a past micro-manager who denied them the leverage over their job accomplishment.

We must also consider trapping. A young employee starts, makes a decent salary, then gets a spouse and kids. A few years down the road they stall but can't leave the security of the job due to the commitments so they RIP (Retire in Place).

Milton Recht writes:

"In the two decades since I read those words, I've seen them confirmed again and again. And yet... I've also noticed counter-examples - government employees who actually try to do a good job. Indeed, I am a counter-example. There's no financial reason for me to prepare written lecture notes for all of my classes. Yet prepare them I do. What's going on?"

This is your subjective evaluation that your process, preparing written lecture notes for all classes, has more beneficial student outcomes than some alternative. Maybe each professor should prepare lecture notes once on a topic of expertise and share the notes with all other lecturers, and update the notes each year as needed. Or maybe, student outcomes, retention and learning of material, is not dependent on a professor writing lecture notes up for each class. Maybe students who learn from a class do the readings and just need the class to motivate them to do the readings.

When independent bookstores dominated the book selling landscape, their mantra was that their knowledgeable, well-read, literate staff was necessary to sell books. Amazon books does very well without a book selling, well-read staff, and most of the independents were put out of business by Amazon and impersonal bookstore national chains that employed staff unfamiliar with much of literature.

I believe in Clay Shirky's book, "Here Comes Everybody" there is a section on how scribes, who were the copiers of books, justified their need after the printing press became prevalent. It is an interesting read because it shows how an existing process can believe in false distinctions, such as scribes seeing handwritten books as a better product for reading than a printed book. They believed the reading experience was superior from scribe-produced books, and that people would prefer to read handwritten books to printed books.

In regulated industries, government functions and non-profits, there is a tendency to value process over outcomes. In private enterprise, profit (outcome) dominates process.

Let me ask you a question. If tuition, instead of paid as it is, were treated as a prepaid credit to students and classes with particular professors and time slots were auctioned with all the same graduation requirements remaining. Students could use their credits to bid for specific classes. Do you think students would bid a higher price for classes with professors who prepared lecture notes for each class over professors who did not? Do we even have any conception of what students would value highly?

Processes develop in non-private enterprise situations and a culture develops that those who follow the process are superior, but there is no objective evaluation that the process produces superior outcomes. It is equivalent to a superstition, but one that is accepted by those involved.

Would you value a surgeon with a very good bedside manner over a more qualified surgeon with a poor bedside manner? Do we know if a teacher who prepares class notes produces better-educated students than one who does not?

Michael Turner writes:

"Its operations therefore become inefficient, and costs zoom, since government bureaus need not worry about losses or bankruptcy; they can make up their losses by additional extractions from the public till."

In high school, I believed this. But in high school, I didn't pay much attention to classes where they tried to teach us how government works in actual democracies, like the democracy that funded my public high school.

When I got out of school and into the work world, I was shocked at waste, politics and idiotic makework in my government jobs. But I was also shocked at waste, politics and idiotic makework in my private sector jobs (which was by far the bulk of them). I can't remember a single job I had where I would have personally made more money if the company made more sales. So I didn't really have a direct pecuniary incentive. Most employees never do. Even sales reps, who work on commission, don't have much control over the processes that produce the products they try to sell.

Democratic oversight clearly doesn't hem in all government waste, corruption and inefficiency. But the constant fear of the whip wielded by popularly elected representatives tends to keep bureaucrats in line. (And that's a whip that they can also use on each other; and there's always the Fifth Estate.)

I once shook the hand of a man who sometimes used that hand to sign up to $1 billion in vendor requisitions for the DoD. Asked later in a meeting what his overriding concern was, he answered, "Getting called before Congress for wasting a whole bunch of money." If you asked a similarly empowered CEO of a public company the same question, you might get the answer, "Getting called on the carpet by the board of directors and being asked to resign because of massive waste or fraud I didn't detect in time."

Peter Drucker famously proposed that the term "profit motive" be outlawed, to be replaced with the a phrase like "fear-of-loss motive." Loss of money, loss of power, loss of face, loss of reputation -- so long as there is enough mandated openness and oversight, exposing people to *negative* incentives, not just positive ones, people will respond.

Neil D writes:

If you fire all the average and below average workers in the America, only about 32% of the people will actually be working assuming -3s to +1s of average are fired). And then what?

Who will buy your product? I know, you don't care because we're are all just parasites living off your hard work. But really, how many competent workers are there in a given organization?

BTW - I'm not too impressed with customer service at private companies either. The predatory nature of many of the mortgages going bust would seem to argue that fee extraction for short term gain outweighed customer service and satisfaction.

Kurbla writes:

Here is your answer:

    Rothbard: On the free market, in short, the consumer is king, and any business firm that wants to make profits and avoid losses tries its best to serve the consumer as efficiently and at as low a cost as possible. In a government operation, in contrast, everything changes. Inherent in all government operation is a grave and fatal split between service and payment, between the providing of a service and the payment for receiving it.

It is not about employees, it is about business firm. From employee's point of view, if he is selfish, there is no difference between private and public company. If he is not completely selfish, he might prefer public company, because, beside for money, he also works for a common good, and not for the capitalist's pocket.

The capitalist has incentive to please consumers, and public company need similar source of motivation. I think just one capable and intrinsically motivated manager is enough.

Dr. T writes:

I directed the clinical laboratories at a VA medical center. The majority of the VA-employed physicians provided the best care they could (which was much better than the average). Some physicians were just going through the motions and were mediocre. Only a couple were bad doctors "hiding" in a government bureaucracy. Why did most physicians work so hard? -- They believed in the mission of giving veterans the care they deserved.

However, the non-physician employees resembled those of typical government bureaus. Many were lazy, surly, ass-covering, incompetent, and (ironically) arrogant. A few truly tried to help the veterans, but they were too caught up in the thousands of rules and regulations to be effective. Add in the deleterious effects of the various unions, and the overall effectiveness of the hospital and its clinics was low. If Obama gets his way, the whole nation will get this level of health care. Joy.

Michael Turner writes:

It is sometimes claimed (mostly by those von Mises worshippers, grasping for whatever intellectual respectability they can get) that Joseph Schumpeter should be counted as an Austrian economist. Well, he was an economist. And he was Austrian. But they seem to have not noticed: in answering the question "Can socialism work?", he was dismally, reluctantly affirmative.

Being an economist, Schumpeter did assume some constraints. Small business and agriculture would be left free to set prices according to markets. He also assumed -- pivotally - that innovation would have to peter out, for socialism to be competitive with capitalism in delivering the goods. The "creative destruction" was what made capitalism relatively viable, not price competition.

Will significant innovation continue for some time? Very likely. When will it end, though? That's fundamentally unknowable. If innovation ends, we're stuck with mere price competition -- and probably a tendency toward declining investment opportunity and monopoly convergence to conserve whatever profit is left. Depending on your stance on path dependence, the locked-in end-state could even fall well short of optimal. Imagine a world of (inevitably regulated) monopolies, with almost everybody made stock owners in almost everything, in what Drucker once called "pension fund socialism". How different is this from one with direct ownership by a democratic government of all of the "commanding heights of the economy"?

In Schumpeter's sketch of an actually-working socialism, what would replace the profit motive? Why would people work hard at all? Schumpeter (IIRC) thought that recognition for accomplishment might be enough.

We should ask: how strong is the profit motive in the first place, compared to other motives? When given enough for their basic needs, capable people will work harder in response to being given responsibility and recognition, but most of all, when they are given jobs in which they can actually accomplish something. Even Solzhenitsyn's damning Gulag portrait offers us several poignant reminders that, near the edge of survival, with no certain prospect of survival, and with all work directed top-down by a cruel and arbitrary bureaucracy, people who could actually accomplish things still thirsted for meaningful work, worked hard when they got it, and found personal satisfaction in doing it.

I hate top-down control exerted in soul-crushing, incompetent socialist despotisms, riven by efficiency-sapping bureaucratic infighting and often infected with cults of personality around a leader at the top. I especially hate them when they require that I, as a member of society, suffer censure or even expulsion unless I hypocritically voice support for lofty collective goals that aren't actually being reached, not least because they can't be reached. I've worked for quite a few such. They are called corporations, and it's the least incompetent of them that win, in capitalism.

Is democratic government less efficient? Yeah, probably, in many, if not most, cases. Capitalism gives people who like to get stuff done somewhat more scope and somewhat freer reign for getting that stuff done. But by how much? What are your measures? How accurate are they? And how much does that added scope for accomplishment in capitalism depend on continuing scope for innovation, in any given field?

Michael Turner writes:

"I believe in Clay Shirky's book, "Here Comes Everybody" there is a section on how scribes, who were the copiers of books, justified their need after the printing press became prevalent....They believed the reading experience was superior from scribe-produced books, and that people would prefer to read handwritten books to printed books."

A few years back, I discovered that Shirky hadn't done his homework on that one. The scholar who wrote the scribe-defense essay to which Shirky alluded had actually published it in a printed book, and had published other printed books, continued to do so, and in fact loved the whole process of putting out printed books, at a time when that was as new to him as the Internet is to us today. What he was defending was the spiritual practice of being a scribe, and he limited his advocacy to monastic contexts.

That's not to say that people don't irrationally cling to old ways. Of course they do. But sometimes they also irrationally move toward new ways that aren't as good. My hometown used to have lots of independent bookstores. Then the big chains ate their lunch. Then Amazon ate some of the big chains' lunch. And ... well, guess what? I like Amazon, but I miss those little bookstores. There is not only transaction cost, there is transaction value, and many of those small bookstores offered a lot of transaction value.

"Indeed, I am a counter-example."

I think the counter-example has less to say about the government and more to say about the individual who happens to be the counter example.

Some individuals do what is right even when nobody is looking. Some individuals duck out and take a nap as soon as nobody is looking. Do you get a bonus for writing up your notes? No. Do you know it's the right thing to do to be the best you can be? Yes. You've provided yourself your own incentive.

alex s. writes:

It isn't that government employees wake up in the morning chuckling to themselves and thinking about ways to torture the peasants. On the margin, they may make choices that benefit themselves (or their organization), but in the meantime why not do the job they were hired to do?

A think a lot of bad behavior is due more to bureaucracy than to government work: risk aversion, turf wars, favor trading, a general desire to preserve the status quo so they can move up. Add in the large numbers which make details harder to track, and the general presence of unions and guaranteed jobs, and there are plenty of places for bad workers to hide, but there are still people who want to get things done.

CVD writes:

I am a permanent government employee. I think government works can be roughly divided into two types:

1) Those who do, in fact, work hard; and

2) Those who have made it to a level at which they completely - or nearly - completely have ceased to do any work. These people are generally just left alone, but they must clock in for their 8 hour day.

At first, everyone has a motivation to work, i.e. promotion. Once you've gotten to a certain level though, your pay is basically maxed out. At this point, you have little or no short-term financial incentive to work.

However, in recent years it has become much more common for government employees to leave and work for the private sector, especially for consulting firms that work in the same field as their former agency. I write complex financial rules all day, so the jump to working with compliance, for example, is not a big one. Such a move can have big financial upside, but you have to be working consistently to make such a move.

Also, Washington works on power, not money. Generally government employees make no additional money when they move into management. Further, managing within the governmental employment rule structure is a nightmare. So why does anyone become a manager? Power. It's all about power.

I think there is something to the conscientious argument given above (who wants to spend 8 hours a day doing nothing?). But, you should also keep in mind that us Federal employees are competing for our own reward - power, the true currency in Washington.

To my mind, many professors are competing for the same thing. You all get to "shape policy" if you stay in academia. You could make more money in the private sector, but then you couldn't "shape policy."

The same is probably true for journalists, who pursue a non-lucrative career because they get to shape opinion (and therefore policy). We're all working for rewards - just not monetary rewards.

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