Explain why private industry > government

[Darth Wong]

OK, there's your challenge. No cheap-ass moron non-answers like "private industry is inherently more efficient", which is just a restatement of the conclusion and doesn't actually explain it, but an actual mechanistic explanation.

It is well-established that consumer mobility and competition will drive prices down on commoditized items, because consumers can simply switch to the cheapest vendor or not buy it at all, thus driving other vendors out of business. But what about non-commoditized items, where consumer mobility is restricted or 100% availability is expected? What is the mechanism for the private industry to outperform the government in such markets?

I would like some of the "private industry will always do better" people to explain their reasoning here.

[Lonestar]

Well, if it wasn't for the fact that we allowed our entire freakin' aerospace industry collpse into three companies, I would say competition=superior products.

[TrailerParkJawa]

I don't believe that private industry is always better in all cases. But one thing I do believe that private industry has going for it is that gov't employees tend to develop an "entitlement" attitude that goes beyond the realms of reasonableness. In a private industry setting folks like that are more likely suffer from being let go. I think this leads to a certain productivity advantage on the private side. People are less likely to slack off than might be the case in a gov't job.

[Master of Ossus]

OK, there's your challenge. No cheap-ass moron non-answers like "private industry is inherently more efficient", which is just a restatement of the conclusion and doesn't actually explain it, but an actual mechanistic explanation.

It is well-established that consumer mobility and competition will drive prices down on commoditized items, because consumers can simply switch to the cheapest vendor or not buy it at all, thus driving other vendors out of business. But what about non-commoditized items, where consumer mobility is restricted or 100% availability is expected? What is the mechanism for the private industry to outperform the government in such markets?

There are several reasons for this.

1. The government has little incentive to improve manufacturing, transportation, or design practices since they can count on someone increasing their budget if they fall short. Also, once their budgets are established, they have virtually no incentive to make such processes more efficient. Meanwhile, a company under contract DOES have an incentive, since if they cut costs by 10% they will be able to pocket the rest of the money in their contract, and help prevent competitors from jumping in and getting the government to replace the current company.
2. The government, by nature, has substantial overhead costs. Its managerial systems are bloated well beyond what a corporation would need to do the same job. Everything in the military stops with the Secretary of Defense, just as government trains, planes and automobiles stop with the Secretary of Transportation. Potentially these can even stop at the President or Congress. Meanwhile, a CEO will tend to be MUCH closer to what's actually going on, reducing expensive personnel costs in the private sector. This also helps explain why companies like IBM tend to be outperformed for short periods of time by very small competitors in niche markets before new manufacturing processes can be developed to combat the diseconomies of scale.
3. The government must retain "dead-weight" workers. By law in the US (and I doubt not elsewhere), the government can only fire a certain percentage of its workers each year. A corporation is under no such obligations. This has at least two important effects. The first is that incompetent government officials are frequently retained instead of being fired or replaced with better workers. However, perhaps the more important one is that the government has difficulty hiring people to fill small but critical jobs. If the government hires an expert in a certain type of computer program used only by a tiny division of a single department and which they anticipate will be phased out next year, they will find it difficult to terminate him later. This leads to extreme reluctance by the government to hire contractors, even if they could improve service and responsiveness over re-training a worker they already have. Meanwhile, a corporation would simply hire the guy and then fire him as soon as the program he used was no longer necessary.

There are several other reasons which inherently make the government less efficient in certain areas, but they tend to be less important. For example, the government must go to voters to have bond measures approved whereas it's relatively easy for a corporation to sell bonds or even stock to get an immediate boost in liquid capital.

I would like some of the "private industry will always do better" people to explain their reasoning here.

Private industry will not ALWAYS do better, but it has tremendous advantages over the government in providing numerous services which have only limited returns to scale.

[Master of Ossus]

I should also mention that there are actually some legal protections for government agencies which sometimes allow them to offer inferior services. For example, there are caps as to how much money you are legally able to sue a government agency for, even if you can prove damages well beyond that ceiling. A private company usually does not have such protections, and so they may be willing to increase quality beyond which a government agency would demand.

[Alferd Packer]

I'm having a difficult time thinking of real-world examples of non-commodities, be it the late hour or my general buffoonery. Are we talking about things like healthcare and utilities, or perhaps something like the space program or military?

[Master of Ossus]

I'm having a difficult time thinking of real-world examples of non-commodities, be it the late hour or my general buffoonery. Are we talking about things like healthcare and utilities, or perhaps something like the space program or military?

Things like a monopoly (the space program would work, but more obvious examples are things like the post office or manufacturing custom parts for high-performance aircraft) or a situation in which your quantity supplied must be much higher than quantity demanded (ie. agriculture). In other words, industries in which no real competition exists at a corporate level.

BTW, non-natural monopolies tend to do worse than the government since they engage in rent-seeking behavior which can drive prices up.

[The Kernel]

1. The government has little incentive to improve manufacturing, transportation, or design practices since they can count on someone increasing their budget if they fall short. Also, once their budgets are established, they have virtually no incentive to make such processes more efficient. Meanwhile, a company under contract DOES have an incentive, since if they cut costs by 10% they will be able to pocket the rest of the money in their contract, and help prevent competitors from jumping in and getting the government to replace the current company.

Bullshit. There are plenty of examples of monopolistic companies that make little attempt to cut costs in key markets where they are already dominating. Microsoft is a horribly inefficient company as far as their OS and Office products are concerned (they spend ridiculous amounts of money on R&D for little comparitive return) and yet instead of simply cutting costs, they merely jack up the prices of their products which is much easier then reorganizing and cutting inflated budgets.

Government actually has an advantage here since they are often forced to work within a contrained budget yet meet certain expectation.

2. The government, by nature, has substantial overhead costs. Its managerial systems are bloated well beyond what a corporation would need to do the same job. Everything in the military stops with the Secretary of Defense, just as government trains, planes and automobiles stop with the Secretary of Transportation. Potentially these can even stop at the President or Congress. Meanwhile, a CEO will tend to be MUCH closer to what's actually going on, reducing expensive personnel costs in the private sector. This also helps explain why companies like IBM tend to be outperformed for short periods of time by very small competitors in niche markets before new manufacturing processes can be developed to combat the diseconomies of scale.

Please quantify the differences in efficiency between a monopoly/oligopoly and the government if you are so sure that the corporation is far more efficient.

BTW, IBM is NOT a monopoly in any huge market anymore, they are merely a very large coporation that is notorious for being hard to change due to an extremely centralized corporate structure.

3. The government must retain "dead-weight" workers. By law in the US (and I doubt not elsewhere), the government can only fire a certain percentage of its workers each year. A corporation is under no
such obligations.

You are aware of the existance of unions?

This has at least two important effects. The first is that incompetent government officials are frequently retained instead of being
fired or replaced with better workers.

Yes, the Government has a large retention rate for workers, but OTOH, large corporations have a huge retention rate for executives (or spend enormous amounts of money getting rid of them with "golden parachutes") so neither side has any real advantage here.

However, perhaps the more important one is that the government has difficulty hiring people to fill small but critical jobs. If the government hires an expert in a certain type of computer program used only by a tiny division of a single department and which they anticipate will be phased out next year, they will find it difficult to terminate him later. This leads to extreme reluctance by the government to hire contractors, even if they could improve service and responsiveness over re-training a worker they already have. Meanwhile, a corporation would simply hire the guy and then fire him as soon as the program he used was no longer necessary.

Wait, you think that the government doesn't do subcontracting?

There are several other reasons which inherently make the government less efficient in certain areas, but they tend to be less important. For example, the government must go to voters to have bond measures approved whereas it's relatively easy for a corporation to sell bonds or even stock to get an immediate boost in liquid capital.

And a corporation is answerable to its stockholders. More to the point, a government run organization is not judged solely by the bottom line so they can afford to bleed money or see flat growth without stockholders dumping them on the open market.

Private industry will not ALWAYS do better, but it has tremendous advantages over the government in providing numerous services which have only limited returns to scale.

Mike specified sectors where consumers have extremely limited buying mobility (monopolies and oligopolies) and I have yet to see a compelling argument that addresses these particular sectors. I will not argue at all that the Corporation is far more efficient in areas where there is perfect to moderate competition, but in sectors with almost no competition, I have yet to see any evidence that the corporation model is inherently more efficient then the government regulated one.

[Master of Ossus]

Bullshit. There are plenty of examples of monopolistic companies that make little attempt to cut costs in key markets where they are already dominating.

Right, but that doesn't mean that there's no incentive to do so. There is still an incentive, but it's expensive for them to do any better.

Microsoft is a horribly inefficient company as far as their OS and Office products are concerned (they spend ridiculous amounts of money on R&D for little comparitive return) and yet instead of simply cutting costs, they merely jack up the prices of their products which is much easier then reorganizing and cutting inflated budgets.

Right. What does this show? Nothing. It merely highlights (yet again) the benefits of being a monopoly. Here's the thing, though: the government can't do any better than Microsoft, since the government would add yet ANOTHER layer of overage charges.

Government actually has an advantage here since they are often forced to work within a contrained budget yet meet certain expectation.

You mean like "No Child Left Behind?"

Please quantify the differences in efficiency between a monopoly/oligopoly and the government if you are so sure that the corporation is far more efficient.

You gotta be shitting me. You want me to look up an obscure piece of trivia for every company and every government? Here's a hint: if this wasn't a major factor, then the government wouldn't be getting schooled every time it sub-contracted.

BTW, IBM is NOT a monopoly in any huge market anymore, they are merely a very large coporation that is notorious for being hard to change due to an extremely centralized corporate structure.

So? They prove the point admirably, moron. Large companies have disadvantages in most industries when they go up against a smaller one. The government has a managerial structure equivalent to a huge company, and thus has huge managerial disadvantages compared to a normal-sized corporation.

You are aware of the existance of unions?

You are aware that unions usually only protect unskilled labor, that they don't protect anywhere near the entire market, and that most labor costs are incurred in management, particularly in government fields, right?

Yes, the Government has a large retention rate for workers, but OTOH, large corporations have a huge retention rate for executives (or spend enormous amounts of money getting rid of them with "golden parachutes") so neither side has any real advantage here.

Bullshit. You cannot simply point to a small advantage that the government has and then declare all things equal, retard. Only a very few CEO's are worth replacing, and the government's massive training costs every four years again seriously damages their ability to respond to a changing market. The government's structure promotes inefficiency at every turn, and contrary to your apparent belief golden parachutes do not needlessly cripple corporations. In fact, in some ways they actually improve the corporation.

Wait, you think that the government doesn't do subcontracting?

No, retard, I'm explaining WHY the government needs to subcontract at exhorbitant prices instead of simply hiring people the way a corporation would.

And a corporation is answerable to its stockholders.

Duh. That makes it much more efficient since its policies are reviewed on a quarterly basis as compared to once every couple years.

More to the point, a government run organization is not judged solely by the bottom line so they can afford to bleed money or see flat growth without stockholders dumping them on the open market.

But they can also sit on a system that, while hugely inefficient, gets the job done. Stop portraying small weaknesses in a corporate structure as if they somehow equalize the massive inefficiencies inherent within a government structure. Fact: the government does worse at certain things than a corporation or a private company. This has been OBSERVED. I'm explaining why this is.

Mike specified sectors where consumers have extremely limited buying mobility (monopolies and oligopolies) and I have yet to see a compelling argument that addresses these particular sectors. I will not argue at all that the Corporation is far more efficient in areas where there is perfect to moderate competition, but in sectors with almost no competition, I have yet to see any evidence that the corporation model is inherently more efficient then the government regulated one.

Right, since you've summarily dismissed my case without explanation. Here's the rub: a corporation has an incentive to get better once it's doing well. In the government, there is no incentive! You cannot disprove this fact by pointing to a corporation which hasn't handled this situation as well as it might have. It is a fact, its impact has been observed, and no amount of weaseling on your part can remove this.

[Patrick Degan]

Government actually has an advantage here since they are often forced to work within a contrained budget yet meet certain expectation.

You mean like "No Child Left Behind?"

Somehow, I don't think a programme mandated by the Bush maladministration which they and their cronies in Congress refuse to adequately fund makes the best example.

[MKSheppard]

I would like some of the "private industry will always do better" people to explain their reasoning here.

Because you can fire deadweight non-hacking employees quickly and
efficiently most of the time in private industry. it is much harder to get
rid of deadweight employees in a government office.

[Darth Wong]

1. The government has little incentive to improve manufacturing, transportation, or design practices since they can count on someone increasing their budget if they fall short. Also, once their budgets are established, they have virtually no incentive to make such processes more efficient. Meanwhile, a company under contract DOES have an incentive, since if they cut costs by 10% they will be able to pocket the rest of the money in their contract, and help prevent competitors from jumping in and getting the government to replace the current company.

If the company pockets an extra 10% profit, that does not get passed onto the consumer because there is no incentive to do so in a non-commoditized market, so what difference does it make from the consumer's perspective?

2. The government, by nature, has substantial overhead costs. Its managerial systems are bloated well beyond what a corporation would need to do the same job. Everything in the military stops with the Secretary of Defense, just as government trains, planes and automobiles stop with the Secretary of Transportation. Potentially these can even stop at the President or Congress. Meanwhile, a CEO will tend to be MUCH closer to what's actually going on, reducing expensive personnel costs in the private sector. This also helps explain why companies like IBM tend to be outperformed for short periods of time by very small competitors in niche markets before new manufacturing processes can be developed to combat the diseconomies of scale.

Right, this is a logical proposition for the efficiency advantage of small non-unionized shops versus the government or crown corporations. It does not, however, apply to large unionized shops which suffer from the same kinds of problems, and which can often be even bigger than a Crown corporation.

3. The government must retain "dead-weight" workers. By law in the US (and I doubt not elsewhere), the government can only fire a certain percentage of its workers each year. A corporation is under no such obligations. This has at least two important effects. The first is that incompetent government officials are frequently retained instead of being fired or replaced with better workers. However, perhaps the more important one is that the government has difficulty hiring people to fill small but critical jobs. If the government hires an expert in a certain type of computer program used only by a tiny division of a single department and which they anticipate will be phased out next year, they will find it difficult to terminate him later. This leads to extreme reluctance by the government to hire contractors, even if they could improve service and responsiveness over re-training a worker they already have. Meanwhile, a corporation would simply hire the guy and then fire him as soon as the program he used was no longer necessary.

See previous.

There are several other reasons which inherently make the government less efficient in certain areas, but they tend to be less important. For example, the government must go to voters to have bond measures approved whereas it's relatively easy for a corporation to sell bonds or even stock to get an immediate boost in liquid capital.

I can't imagine that making much of a difference, as you say.

I would like some of the "private industry will always do better" people to explain their reasoning here.

Private industry will not ALWAYS do better, but it has tremendous advantages over the government in providing numerous services which have only limited returns to scale.

OK, let's take an example: health care. Why is it widely assumed that socialized medicine will be less efficient?

Or how about nuclear power, where one of the key parameters is not price, but safety?

[Master of Ossus]

If the company pockets an extra 10% profit, that does not get passed onto the consumer because there is no incentive to do so in a non-commoditized market, so what difference does it make from the consumer's perspective?

Little, except that the government usually restructures its contracts every so often, and whenever they do that the government can recoup some of the costs. Remember that the government actually maintains significant negotiating power in thse situations.

Right, this is a logical proposition for the efficiency advantage of small non-unionized shops versus the government or crown corporations. It does not, however, apply to large unionized shops which suffer from the same kinds of problems, and which can often be even bigger than a Crown corporation.

Correct. It's also been consistently observed.

I can't imagine that making much of a difference, as you say.

These are smaller advantages, but they are still advantages.

OK, let's take an example: health care. Why is it widely assumed that socialized medicine will be less efficient?

The problem there is that you're artificially creating a monopsony, where the only buyer is the government and the government's willing to shell out. This has the potential to increase costs, and also has the potential to lower the quality of care for people who can afford it.

Or how about nuclear power, where one of the key parameters is not price, but safety?

I imagine that the government's power plants would cost more to do it better, since the government would be concerned about safety and reliability whereas the market would worry about cost. There you have a trade-off where it might actually be better to turn power over to the government since cost may not be the primary concern and since the market will generally not care as much about safety.

[Solauren]

One way private industry is better then the government is that

In a private industry, you don't have to worry about pursuing something that could piss off the voters and general public, and cause politiions to go into damage control mode by firing people.

[General Zod]

the private industry doesn't have to worry about changes in management direction every 4 years. which just with that alone gives it a sizable edge.

[Master of Ossus]

Somehow, I don't think a programme mandated by the Bush maladministration which they and their cronies in Congress refuse to adequately fund makes the best example.

Why? It's a perfect example of the government working in a constrained budget to meet certain expectations.

Moreover, the "constrained budgets" are comparatively easy to approve if all you have to do is show Congress you need cash. When you have to talk someone into giving you their retirement savings, it's actually harder to get them to give funds even if you have a potential to get more money faster.

Besides, whenever the government fails with the budget they somehow manage to pay their employees, and their employees keep coming to work for some reason.

[Lonestar]

Because you can fire deadweight non-hacking employees quickly and
efficiently most of the time in private industry. it is much harder to get
rid of deadweight employees in a government office.

Aren't you in a electricians union?

[MKSheppard]

Aren't you in a electricians union?

Quit, and I never paid any dues, so there

[Darth Wong]

I've worked in private-industry union shops where we couldn't fire a deadweight employee thanks to the union, and this fucking idiot didn't even know how to read. He was hired decades ago and we were all waiting for the bastard to retire so we wouldn't have to worry about making goddamned pictograms to help him find things.

[Admiral Valdemar]

The unions are a necessary evil to industry. Without them, it'd be Industrial Revolution like working conditions for most places. But with them, well, you get examples like that German contesting his dismissal as "unfair" despite being drunk at his workplace.

[Master of Ossus]

I've worked in private-industry union shops where we couldn't fire a deadweight employee thanks to the union, and this fucking idiot didn't even know how to read. He was hired decades ago and we were all waiting for the bastard to retire so we wouldn't have to worry about making goddamned pictograms to help him find things.

There are problems that can crop up in private industry that handicap it in some ways closer to the level at which the government operates. However, on average many services can be provided for cheaper by private industry than they could be by the government.

[Master of Ossus]

The unions are a necessary evil to industry. Without them, it'd be Industrial Revolution like working conditions for most places.

I completely disagree with that. The legal system, since the 1940's, has largely taken the place of unions. As it is, the unions that are left typicaly hurt everyone in other industries, and some within the companies.

But with them, well, you get examples like that German contesting his dismissal as "unfair" despite being drunk at his workplace.

Right. Most of the unions that continue to exist have all sorts of ridiculous regulations that contributes considerably to their negative image. I do not have a high opinion at all of unions, and even though they clearly had an important role in the past I think they should be slowly phased out by government-enforced legal protections and regulations.

[Patrick Degan]

Somehow, I don't think a programme mandated by the Bush maladministration which they and their cronies in Congress refuse to adequately fund makes the best example.

Why? It's a perfect example of the government working in a constrained budget to meet certain expectations.

When the programme won't even be supported at a realistically required bugetary level due to wholly arbitrary political decisions and unrealistic tax/revenue policies where the numbers don't add up?

[Imperial Overlord]

I wouldn't want to rely too much on government protections. I live and British Columbia and our fuckwit Premier is hellbent to rape away every protection and right that workers have under the law.

[Master of Ossus]

When the programme won't even be supported at a realistically required bugetary level due to wholly arbitrary political decisions and unrealistic tax/revenue policies where the numbers don't add up?

Fair enough.

However, the government has done a poor job, historically, of cutting costs once it gets a budget. And here's the kicker: the government's methods of auditing usually involve someone asking nicely for a certain amount of money, then cutting services if they don't get everything as opposed to attempting to cut costs on other programs.