Arnold Kling  

Reforming Government as an Institution

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William Galston discusses institutional reforms to make government work more effectively.


the time is ripe to push for new fiscal institutions to engage in a long-overdue rethinking of the rules shaping fiscal decisionmaking, to consolidate certain related government functions within unified bureaucratic structures and undo earlier consolidations that have failed, and to adopt measures aimed at depolarizing American politics, including reforms to the judicial confirmation process and to the congressional redistricting system.

Some of his proposals are similar to ones that I have argued for. See Checks, Balances, and Audits, Why We Need Principles-Based Regulation, and The Case for an Executive Reorganization.

If I think of myself as a customer, I am probably more dissatisfied with the performance of my local, state, and national government than I am with 90 percent of the businesses with which I deal. Why is that?

Fundamentally, I think that the answer lies in the nature of competition. Businesses compete for consumers on the basis of results. Governments are monopolies, and political competition is only loosely related to results. Voice is much less effective than exit.

To improve their performance, corporations often take steps that involve subtraction. They exit some businesses. They forego some markets in order to focus on others. They shut down ineffective divisions, fire ineffective managers, and lay off unneeded workers. Government almost never subtracts.

I am afraid that most people hold childish views of the determinants of organizational performance. They see it as a matter of will, or what I call "sufficient moral authority." When the electric utility Pepco does not deliver the service they expect, they think in terms of moral outrage rather than economics.

Sadly, some of the most well-educated people in the world are also the most childish. I give Galston credit for trying to start an adult conversation.


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COMMENTS (6 to date)
Thomas DeMeo writes:

The competition angle is obvious, but let's also realize that governments have to deal with democracy as a top level decision mechanism. This makes it inherently more difficult for a government to develop concise plans and execute them.

John David Galt writes:

The most important reform needed is more of a semantic than an institutional one: let's recast the word "government" as meaning the business of providing people with safety and dispute resolution services.

By redefining our terms this way, we can move forward with constructive efforts to open as much of that business to competition as safely possible without it sounding like we're crazy anarchists.

SheetWise writes:

If I think of myself as a customer, I am probably more dissatisfied with the performance of my local, state, and national government than I am with 90 percent of the businesses with which I deal. Why is that?

I'm wondering why it's only 90% -- and I'm guessing it's because sometimes a cost/benefit analysis is too convoluted and opaque to even attempt. The only logical reason I can see for the use of government to supply most services is to shift the cost -- so there are always a lot of opportunities to be disappointed if you're a tax target.

liberty writes:

Fundamentally, I think that the answer lies in the nature of competition. Businesses compete for consumers on the basis of results. Governments are monopolies, and political competition is only loosely related to results. Voice is much less effective than exit.

I think this is absolutely true in a large country, and in a country with poor resources for voice. However, it may be a lot less true
(a) in a country with decentralization of much decision-making to a local level (so that each vote counts much more), and where voice is enhanced by the media and culture of the country, and (b) in situations where there is little to no competition with markets (such as with "natural monopolies").

I do not disagree greatly with your article on Pepco, however there are examples of public utilities and other public companies that provide good services, and examples of "privatized" ones, which were privatized purportedly in order to introduce competition, which ended up worse than their public counterpart. Why is this? I think for the reasons outlined above, at least in part.


SheetWise writes:

liberty --

"... there are examples of public utilities and other public companies that provide good services, and examples of "privatized" ones, which were privatized purportedly in order to introduce competition, which ended up worse than their public counterpart."

It's not clear what "good" and "worse" mean -- or if your examples include an objective cost analysis. Can you provide any of your examples?

liberty writes:

SheetWise -

I'll have to dig around to find cost/benefit analysis, but I am in particular thinking of the UK, where water prices have soared since "privatization", which failed to introduce competition but did privatize profit, and of some cases in the US where similar things have happened.

I think its pretty clear what good/better/worse/bad are in these sort of cases - are consumers better off, in their own subjective terms? Are costs increasing relative to service/quality or decreasing? In any given case it is difficult because there is no ceterus paribus, no way to compare scientifically because conditions cannot be controlled, but we can have a rough idea of whether privatization seemed to be a success or failure, and whether a public company seems to do a good or bad job serving customers at a reasonable price.

I'd say, as another example, that although the London tube is expensive it does an excellent job. Trains come every 3 minutes on most lines (only the oldest two lines have regular issues), every day except Sunday when track works are done and except 12:30-5am when they are shut. Times are displayed in real time, showing any delays (which are rare) in most stations. And, as for cost, weekly passes and zones reduce cost for many/most daily work commuters, and the cost is offset for many through their work, and seniors ride free. All of this was decided by a national debate and the people are fairly happy with the service. Most importantly: privatizing it would not be likely to improve the service/cost.

(The British Rail trains are not quite the same as the tube, but one issue during various points when there were multiple private owners was that you could not transfer between the differently owned lines - the train lines are still suffering from this historical anomaly...)

If I have the time I will look up some academic research.

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