(By Andrew MacKie-Mason)
"Government isn't as efficient as private enterprise."
That's a common claim by people on the economic right. And it's often true: there are many times when government isn't as efficient as private enterprise.
Of course, the conversation shouldn't stop there. Efficiency isn't the only goal, nor should it be. But those justifications for inefficient government programs aren't the purpose of this post. Today, I'm trying to understand, in detail, why government isn't as efficient.
The inefficiency of government can't be explained by vague appeals to "free markets". After all, politics is a market and government is subject to many of the same forces that businesses are. So what is it? Interestingly enough, we can learn a lot about government inefficiency by looking at business inefficiency.
Namely, government often suffers from the following failings, which make markets not work very well.
- Bundling
- Sparse Choice
- Uncertain Products
Bundling
Bundling is a business tactic that companies use to decrease customer choice. It involves packaging two or more products together, and not letting customers buy them separately. It can be illegal (when used by a business with monopoly power over one product to exert market power over another product) and, when widespread, makes the market less responsive to consumer choice, and thus less efficient.
Government is an inherent bundling enterprise. A single vote is a choice of defense strategy, economic policy, fiscal policy, social policy, etc...and each category itself is a bundle of different issues, plans, and solutions. The problem is exacerbated by there not being many bundles to choose from: in most elections, the voter has two choices out of hundreds of possible combinations of policy preferences.
Sparse Choice
Even though America has a high number of elections as democracies go (people in some cities in America probably cast more votes than any other person in the world), voter choice is still sparse when compared to the wide range of government action. This problem is related to the bundling issue (we only have one vote on a combination of many issues), but it also has to do with the amount of time before elections. Consider American presidential elections: voters have to make one choice that will last for four years.
This problem may be somewhat less pronounced in parliamentary systems, which have mechanisms (votes of no confidence) to allow for elections in direct response to certain governmental actions. Still, though, such votes must generally be implemented by the legislature, and is only used in response to major events, not small ones.
The end result of sparse choice is that many factors can't really be taken into account when a voter makes their choice. To analogize, consider the purchase of a house. This is a circumstance with sparse choice: you can't afford to get a new house every time something goes wrong with your house or in the neighborhood. You're basically stuck with what you have, and only major events will cause you to make a new choice.
Uncertain Products
This problem is related to the phenomenon of false advertising in the business world. It's all a matter of customers not knowing for sure what they're going to get. Businesses have developed different ways of dealing with this problem. Warranties are one: if what you purchased doesn't live up to what you were expecting, you can often return it for a refund. Car dealers allow you to test drive automobiles before you purchase them, so that you can have a better idea of whether you'll like the car. Grocers will offer you free samples of food, and various organizations exist solely to evaluate and recommend products.
Government has helped with the problem of uncertain products in the marketplace too: labeling requirements on food ensure that customers know exactly what they're purchasing, laws punishing false advertising make it more difficult for businesses to trick customers, etc.
But it's much harder to deal with this problem when it comes to government. Part of that is because elections are structured as prospective choices: voters aren't choosing something that already exists (like a car or a gallon of milk), they're choosing a person based on what that person is going to try to do during their term.
A related problem is that no elected official has the power to accomplish much individually. Voters are generally attempting to purchase results, not attempts, but success depends on factors that they have no control over: like legislators from other districts, and even governments of other countries. And this lack of power makes it difficult to establish an equivalent regime to "false advertising" when it comes to politics: very few campaign promises are broken to the extent that it's clear they were actually broken, rather than just being outside of the official's power to achieve.
To be clear, none of these sections are meant to imply that businesses would necessarily do better at the jobs that government attempts. Many of the problems arise from the issues (or combination of issues) that government is meant to address, and that it is necessary for government to address. But understanding these problems does allow us to propose some solutions, or at least ways to minimize inefficiency.
Solutions
Nothing is going to completely solve all of these problems. But we can tailor government action in a way that makes these problems less prevalent.
Bundling: the solution here is to provide citizens with more specific choices to make about government. Some of this can be done through polling booths (perhaps by making certain positions, like Secretary of Defense or Secretary of the Treasury directly electable), but too much reliance on voting to provide choice will just exacerbate public ignorance problems, especially if those elections are rolled into the typical 2-year or 4-year election cycle. Voters would just be making another choice with little information.
Another option is to put general issues, when possible, on referenda. Many states do this, but the federal government does not. Complex legislation should still be passed through Congress, but an increase in referenda to pass legislation of more general principles would help unbundle voter choice without requiring a burdensome amount of research. (It is much easier to decide how to vote on a referenda that asks "should we recognize same-sex relationships as marriages" than to determine how each of the candidates actually feels about that issue.)
But there are solutions to the bundling issue that don't involve voting at all. For instance, an increase in government-administrated businesses with some sort of progressive cost structure. Take Social Security. People could be allowed to buy into it throughout their lives (with lower income people paying much less for the same investment) and then payouts could be dependent on how much each individual bought in. If the program is ineffective, the added choice (and the unbundling of that choice from other voting decisions) will cause it to self-correct to become more efficient. And programs need-not be revenue neutral or charge flat rates for this to help decrease the costs of choice-bundling.
Sparse Choice: The way to solve the sparse choice problem is to increase citizen choice when it comes to government programs, without burdening the electorate beyond what it can reasonably and rationally decide. Obviously, the
One possible way to accomplish this is to institute some sort of reactive-voting mechanism, like votes of no confidence in parliamentary systems, in order to make voting decisions specific to a certain choice of government. There are various ways to implement this, but one possibility is as follows:
Allow Congress to introduce a resolution (subject to a straight up-or-down vote in both houses) on whether a certain government official (perhaps limited to the President and Cabinet) should be put up for recall. Should it pass, some sort of public election is organized to confirm the recall or keep the person in office. That election wouldn't involve other candidates: it would be a simple vote on retention or recall.
Another option would be to include a measure on the two ballots after a President is elected asking whether to retain the current administration. It would probably be subject to some sort of supermajority rule, and if recall is indicated the election could happen the following year. (I.e. recall vote passes in November 2009, new election held in November 2010). That time lapse would give the administration time to correct course on whatever prompted the recall vote, as well as preventing recalls from becoming overly common. And while this would be scheduled, rather than in response to specific events, the fact that it's done after only a year would make the results relatively obviously targeted to specific administration policies.
Another way to increase choice is to allow the purchase of government bonds to substitute, up to a certain degree, for taxes. For example, if someone's tax burden is $1,000 (selected for simplicity, not realism), we could allow them to buy up to 10% ($100) in bonds offered by specific departments or for specific programs. For instance, someone could purchase $50 in the Department of Education, $25 in the Department of Defense, and perhaps $25 specifically towards the military effort in Afghanistan. Bonds could be general or specific. After purchasing those $100 in bonds, their tax burden would only be $900. In effect, this would allow people to direct their taxes towards specific programs or parts of the government.
Bonds that are taken out of taxes probably wouldn't generate interest, but they could be sold back, with the return funds taken out of the specific program or department's budget. That value would then have to be paid on top of the rest of the general taxes in the year that the person sells the bond back. So if five years later that person's tax burden is $2,000 and they sell back their $100 in bonds, they end up paying $2,100 in taxes. This "sell back" option helps keep programs in line with the voters: if they act in unpopular ways, citizens can directly affect their budgets.
One problem, of course, is that this would give the wealthy even more control over the government than they already have. One way to counter this would be to allow everyone a fixed amount of bond-choice every year (say, for simplicity's sake $100). And if someone only has a $50 tax burden that year, they could buy the $100 in bonds and receive a $50 reimbursement from the general tax fund.
Uncertain Products: This problem seems like the toughest to solve. Government will always involve prospective choice, and that type of choice can never be certain. Some of the measures proposed above (government-run businesses, tax bonds) would allow more government action to be affected in real time by choice, and reduce the amount of prospective choice by citizens. However, beyond that there's not much to be done in this realm, at least that I can think of.
So...that's it. Think I'm crazy? Think that government has many more issues than this, or that my proposed solutions are ridiculous? Let me know!