Private Enterprise Does It Better
In "Myths, Lies and Downright Stupidity," I bet my readers $1,000 that they couldn't name one thing that government does better than the private sector.
I am yet to pay.
Free enterprise does everything better.
Why? Because if private companies don't do things efficiently, they lose money and die. Unlike government, they cannot compel payment through the power to tax.
Even when a private company operates a public facility under contract to government, it must perform. If it doesn't, it will be "fired" — its contract won't be renewed. Government is never fired.
Contracting out to private enterprise isn't the same thing as letting fully competitive free markets operate, but it still works better than government.
Roads are one example. Politicians call road management a "public good" that "government must control." Nonsense.
In 1995, a private road company added two lanes in the middle of California Highway 91, right where the median strip used to be. It then used "congestion pricing" to let some drivers pay to speed past rush-hour traffic. Using the principles of supply and demand, road operators charge higher tolls at times of day when demand is high. That encourages those who are most in a hurry to pay for what they need. It was the first time anywhere in the world that congestion pricing was used. Bureaucrats were skeptical. Now congestion pricing is a hot idea for both private and public road management systems.
Likewise, for years there was a gap in the ring road surrounding Paris that created huge traffic problems. Then private developers made an unsolicited proposal to build a $2 billion toll tunnel in exchange for a 70-year lease to run it. They built a double-decker tunnel that fits six lanes of traffic in the space usually required for just two. The tunnel's profit-seeking owners have an incentive to keep traffic moving. They collect tolls based on congestion pricing, and tolls are collected electronically, so cars don't have to stop. The tunnel operators clear accidents quickly. Most are detected within 10 seconds — thanks to 350 cameras inside the tunnel. The private road has cut a 45-minute trip to 10 minutes.
Indiana used to lose money on its toll road. Then Gov. Mitch Daniels leased it to private developers. Now it makes a profit. The new owners spent $40 million on electronic tolling. That's saved them 55 percent on toll collection. They saved $20 per mile by switching to a better de-icing fluid. They bought a new fleet of computerized snowplows that clear roads using less salt. Drivers win, and taxpayers win.
It also turns out that government roads often run more smoothly when drivers have more, not less, freedom.
This sounds paradoxical. Politicians often sneer at libertarians, saying, "You want to get rid of traffic lights?!" Well, yes, actually. In some cases, traffic moves better and more safely when government removes traffic lights, stop signs, even curbs.
It's Friedrich Hayek's "spontaneous" order in action: Instead of sitting at a mechanized light waiting to be told when to go, drivers meet in an intersection and negotiate their way through by making eye contact and gesturing. The secret is that drivers must pay attention to their surroundings — to pedestrians and other cars — rather than just to signs and signals. It demonstrates the "Peltzman Effect" (named after retired University of Chicago economist Sam Peltzman): People tend to behave more recklessly when their sense of safety is increased. By removing signs, lights and barriers, drivers feel less safe, so they drive more carefully. They pay more attention.
In Drachten, Holland, lights and signs were removed from an intersection handling about 30,000 cars a day. Average waiting times dropped from 50 seconds to less than 30 seconds. Accidents dropped from an average of eight per year to just one.
On Kensington High Street in London, after pedestrian railing and other traffic markers were removed, accidents dropped by 44 percent.
"What these signs are doing is treating the driver as if they were an idiot," says traffic architect Ben Hamilton-Baillie. "If you do so, drivers exhibit no intelligence."
Once again, freedom and responsibility triumph.
John Stossel is host of "Stossel" on the Fox Business Network. He's the author of "Give Me a Break" and of "Myth, Lies, and Downright Stupidity." To find out more about John Stossel, visit his site at <a href="http://www.johnstossel.com" <http://www.johnstossel.com>>johnstossel.com</a>. To read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.
COPYRIGHT 2010 BY JFS PRODUCTIONS, INC.
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24 Comments | Post Comment
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If more peopl choose freedom and responsibility then politicians would have to find real jobs. They should make a law...oops. Too late.
Comment: #1
Posted by: David Henricks
Wed Aug 4, 2010 4:27 AM
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The one thing government does better than the private sector is WASTE MONEY. Unfortunately its our money they're wasting.
One of the things I'm responsible for is teaching TQM techniques to the wing staff in my unit. We use analytical methods to try to streamline bureaucracy (decision making) forcing decisions to be made at the lowest responsible level, as well as metrics to measure how well these interventions are accomplishing their desired effect. It's based on the scientific method of hypothesizing, devising an experiment, measuring the experimental effect, then readjusting the hypothesis to fit the data.
Government was supposedly meant to do this by following the Constitution. The house was the "knee jerk" group that proposed the intervention while the senate was to be "more deliberative" in its actions, then the president did his/her sanity check and the supreme court determined if it was constitutional. The final safety net became the press/media. When all abrogate their responsibilities, you get the current situation. Everyone's overstepped their bounds and the constitution becomes "a living document" that changes with the whims of the reader as opposed to the intent of the founders.
Of course the third estate does it better - with the exception of voting the same people into office that pick our pockets. This topic is like the topic on the right to keep and bear arms. To those with common sense, this is obvious. The part that doesn't seem obvious is why those in the private sector have let those in the public sector keep hold of the most important "so called" government responsibility - that of teaching our kids. We throw billions of dollars at teachers unions and public schools to get a mediocre product - at best, and at worst, we get the socialization of our children into good little liberal conformists.
Comment: #2
Posted by: Bob Lee
Wed Aug 4, 2010 1:43 PM
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Stossel can be right on some things, but on this he's way off. Are you honest John? I'd be happy to take you on. Stay tuned....
Comment: #3
Posted by: Brian Schremp
Wed Aug 4, 2010 2:13 PM
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There are three things that government does better than the private sector LIE, CHEAT, and STEAL. And they get away with it most of the time, but there is nothing honest that government can do better than the private sector.
Comment: #4
Posted by: Jake Martin
Wed Aug 4, 2010 6:23 PM
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Re: Brian Schremp
Yes, the best defense to empirical data is always "I'll get you someday!"
Comment: #5
Posted by: Artie
Wed Aug 4, 2010 7:28 PM
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One thing the government does better. They are better at taking your money and not giving you anything in return.
Comment: #6
Posted by: robert G
Thu Aug 5, 2010 4:22 AM
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You are wrong about allowing private enterprise to be in charge of transportation. During the forty years I worked at Caltrans I saw a lot of waste. But nothing like private enterprise. You are correct that private does many things better, but design and contract administration are not more efficient. Engineering design contracts frequently have up to 150% markups over payroll, and do not win contracts through the competitive bidding process. If we have a contractor actually doing the building work under Contract Change Order, we allow about a 30% markup over payroll, and he got the job through competitive bidding.
The work of private engineering design firms is usually full of errors which need to be found and corrected by public staff.
When Caltrans proposed having construction surveying done by private subcontractors the American General Contractors fought it tooth and nail because they didn't want to be responsible for all the errors.
Caltrans does it better because they have been in the business for nearly a century. Public employees have incentives to do it better and cheaper.
Please feel free to remit my thousand dollars.
Comment: #7
Posted by: Charles Sainte Claire
Thu Aug 5, 2010 8:24 AM
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I agree with almost all of this. The one thing I don't understand about handing the reins to private enterprise is who pays. In the case of government, taxes pay for our roads (and fire trucks and police and so forth). If private enterprise handled all our roads, who would pay and how? If the people don't like it, they won't pay and that's a great way to enforce quality of service. But what about someone who cannot afford to drive on the road who needs to use it to get to a job interview? Will people be denied fire trucks if they cannot afford them? I'm not sure I understand how "inability to pay" is built into this system. I think the reason some of these things are paid with government taxes is because they are deemed to be necessities that must exist regardless of a person's ability to pay. If this can be overcome, then I don't know if I see any argument against this proposition.
Comment: #8
Posted by: Stephen Friedman
Thu Aug 5, 2010 10:51 AM
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I am in total agreement with the idea of leaving to private industry anything and everything that the private sector proves that it can do more efficiently than the public sector. Even welfare; afterall, who took care of our neighbors in need before 1963?
But, people are still people and we are all painfully aware of the pervasiveness of greed. In the capitalist marketplace and in the public sector as well. Given this, someone has to oversee, referee if you prefer. Therefore, the only role that I believe government _could do_ more effectively if not more efficiently, is to police the marketplace. Not through tax incentives or corporate welfare (no bribes, no lobbyists, no bailouts), but through strict, honorable legislation. This would of course require that government follow the Constitution as originally intended.
Comment: #9
Posted by: Jeff McGraw
Thu Aug 5, 2010 12:17 PM
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The government sticks it to the consumer far better than any corporation could ever dream. Where's my $1k?
Comment: #10
Posted by: Stu Evans
Thu Aug 5, 2010 3:57 PM
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There is one thing the government can do better than the private sector- wage wars. Mainly the government has access to all the good stuff that the private sector cannot afford - artillery, planes AFVs, warships, nukes, etc.
Comment: #11
Posted by: SoCalGuy
Thu Aug 5, 2010 6:53 PM
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John, please keep your money, but it is a fact that government can overtax us better than any private enterprise can. Sherman Kahan, MD Frederick, Md.
Comment: #12
Posted by: Sherman Kahan
Thu Aug 5, 2010 9:00 PM
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One thing the government does better that private industry has always tickled me.
When you are looking for a job, it is typical for each company to require you to hand-copy your resume onto their individual application forms, generally before they will even tell you anything about the job. In this day and age of computers, this is inexcusable. They turn us into a great bunch of monk-like scribes.
On the other hand, the Federal Government uses a single form, the SF-171 for applying for any job across all of its department and agencies. The data can be entered once into their system and copies generated from it.
Private industry wastes untold hours of human time and energy forcing applicants to hand-copy resumes onto their application forms.
Comment: #13
Posted by: John August
Fri Aug 6, 2010 8:23 AM
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Re: Bob Lee
Well, Rob, as far as the public schools and their teachers are concerned, let us not forget that they are not turning out a PRODUCT such as a car or refrigerator.They could all be super teachers if children were like car or refrigerator parts. Children bring to school a lot of baggage from home and teachers have to deal with THAT. Many are neglected and witness violence on a regular basis; many have no father in the home; many do not see a book until they arrive at school in kindergarten or first grade. Many parents do not value an education; some parents have a mental handicap and cannot read! Many public schools are overcrowded (35 or more students in a classroom) and yet the teachers are supposed to become involved with each one in order to "motivate." Private and charter schools can dictate or manipulate their student enrollment to match what they want, which is students who are self-motivated and ready to learn. Public schools cannot do that; they must take on what is given to them. An article I read recently lauded a successful charter school in Harlem. That school can accept students they wish to have in their school; students who do not make the grade can be asked to leave. So of course their cream of the crop are going to succeed; the school has chosen students who have the "parts" that are needed to succeed in that environment. Wake up and smell the coffee.
Comment: #14
Posted by: MG
Fri Aug 6, 2010 10:49 AM
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The only problem I have with privatizing the roadways is that all the main highways would become tool roads. Now, if that actually translated into real lower taxes, it would be a Good Thing. But it wouldn't, government will always find more things to spend money on than they have the revenue for. Offloading roadway building and maintenance (not all, just the highways, there is no profit in city streets or residential roads) will not reduce the tax burden because of WHY government spends money. The "why" is simple... to garnish votes and to reward backers.
Comment: #15
Posted by: Douglas4517
Sat Aug 7, 2010 4:47 AM
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Interesting, what happens when we run out of assets to lease or sell from government to make up budget shortfalls? Indiana privatized welfare eligibility also under Governor Daniels and this was a failure. I'll take my check.
Whether things can be privatized or not matters little, Government is largely outsourced to vendors with or without privatization. Vendors are hired with Democrats or Republicans, one just uses the word privatization. What we need are systems that run better and this takes improving systems . . . private or public. I'd like to see better designed services in government, I don't believe this takes incentive . . . it means you have to know what to do.
I believe it would be helpful to address the problem of rethinking the design and management of work. The UK is making services more available locally and having success using systems thinking to improve these local services. It would be interesting to see the US take this approach.
Comment: #16
Posted by: Tripp Babbitt
Sat Aug 7, 2010 1:57 PM
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Re: SoCalGuy Couldn't agree more to what you said but can they WIN a war?
Comment: #17
Posted by: Adriane Myers
Sun Aug 8, 2010 1:06 PM
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A couple of suggestions of where government does it better. This is not about being perfect, but about being more efficient:
The National Transportation Safety Board. There is essentially no profit motive for a private company to objectively and fully investigate their own plane crash, faulty automobile, etc. for instance. Even with an outside private investigative body, we need only recall the problems with bond rating agencies placing future business above rigorous financial analysis. There seems to be an inference about if, say an airline, is unsafe - too many crashes - people won't fly that airline anymore and it will go out of business. If this includes passenger deaths then the argument seem disingenuous. On the other hand, with good market principles, the government attempts to keep as many taxpayers alive to keep tax revenues up.
There is also another flaw in the "if bad, they will go out of business" argument. BoDs, CEOs, and even shareholders change over time. Therefore, the goal of shareholders to no longer be a shareholder when the chickens of bad safety or other activity come home to roost. Those people that sold Lehman before the crash may have been owners during the execution of bad business decisions, but not when the stock tanked.
As an aside, this is a limitation on Ayn Rand's philosophy of total self-interest. If someone retains there own self-interest completely above those of the corporation they work for, then there is no safety for the corporation or its owners.
The Food and Drug Administration. Compare the drug problems the FDA has caught compared to what industry has caught. (Eg. Thalidomide) Recall in the late 90's, the FDA allowed the industry to do more of their own drug review in exchange for shorter time to market. What followed was an increase in "serious problems" with drugs brought to market.
The Center for Disease Control. There is not a market model that adequately applies to their function.
National Science Foundation. This organization funds basic research. Research that only a handful of businesses will/can fund. (Bell Labs used to be such an example.) Yet the eventual payoff from much of this work even decades later (eg. the underlying technology for gene cloning, etc) has been huge.
Mortgage lending. (Yes, although this is likely more a case of who was less inefficient.) While Freddie and Fannie were likely the initial impetus to the problems of subprime loans, the financial market took it, expanded upon it, took it to places of exquisite inefficiency and ended up creating a bomb that went off throughout the economy. Institutions went out of business. Cities, individuals, etc lost tons of money, while the industry created hot-potato financial instruments whose only goal was to make sure one did not end up holding them when they blew up. The economy tanked. Compared to the sins of Fannie and Freddie, the market sins of investment industry were monstrous.
The Department of Agriculture. Check out the value of the return on investment in increased food yields, lower food prices, etc. over the years, even with some of the obvious inefficiencies that are part of the program.
Glenn Beck aside, the military.
Sincerely,
Mike Zarowitz
PS - According to market theory, perhaps the reason no one has presented you with examples of the government being better than business is because you haven't offered enough money.
Comment: #18
Posted by: Mike Zarowitz
Mon Aug 9, 2010 12:37 PM
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kij iknjionnnnnnnnnnnn
Comment: #19
Posted by: Eric Crennen
Wed Aug 11, 2010 8:08 PM
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John, I think I may have an answer to your $1,000 question. I believe the government is more effective at determining guilt. The judicial system is intended to be not-for-profit for the people operating the process - at least beyond their wages. If private organizations were operating the judicial system and competing for profit, it's likely that they would be less fair than the government monopoly.
Imagine if Madoff was apprehended in a system where there are many for profit companies that want to determine his fate. And if you say, "There would still only be one judicial system." who will decide which company gets to operate the judicial system?
Why would a private, free market, competitive and for-profit judicial system be an improvement in effectiveness from the current government monopoly over the system? I am not questioning the efficiency, but the effectiveness. It seems like profit should be kept away from this process.
Eric
Comment: #20
Posted by: Eric Crennen
Wed Aug 11, 2010 9:29 PM
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What the government does better than the private sector - corruption. You can send that check any time.
Comment: #21
Posted by: Morgan V
Wed Aug 18, 2010 8:23 PM
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Re: Eric Crennen
Your argument is self-contrary. In the face of such fierce competition from other rivals, courts that are operated by the private sector simply could not afford to be unfair or in your own words "ineffective at determining guilt". When they are unfair, they could generate maybe a short-term profit, but what they lose is a reputation of being a responsible and fair enterprise, and just like mining companies that kill miners by setting up bad safety measures and chemical companies that kill local residents by releasing toxic waste into the air, they get their market share taken over by competitors and they go out of business for good. What they gain may be a short term profit, but what they lose is their reputation or a kind of intangible value that would eventually translate to a sustainable earning power. Privatizing the judicial system could also significantly bring down the related costs of legal matters due to competition. The role of the government in the judicial system should not be to grant itself a somehow sacred right to monopolize the industry, but to set up and enforce laws and regulations that can at least give people a sense of security.
Comment: #22
Posted by: steven C Shen
Sun Sep 5, 2010 6:36 PM
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The one thing, that government does better than private enterprise, is incarceration. When a prison is privately run, they have an incentive to lobby for tougher laws, and harsher sentences.
ps: I could really use that $1,000. You have my email address, just paypal it to me.
Comment: #23
Posted by: Bill G.
Sun Oct 3, 2010 10:53 AM
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There is one thing that the government can do better than the private sector; the government can wage war better.
Comment: #24
Posted by: Damon Townsend
Mon Jan 31, 2011 1:00 PM
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