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Very Hot Topic (More than 25 Replies) Private enterprise is more efficient than Government enterprise? (Read 6292 times)
stevea
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Re: Private enterprise is more efficient than Government enterprise?
Reply #30 - Jul 28th, 2015 at 7:40am
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Vexer wrote on Jun 27th, 2015 at 4:35am:
This seems to be a given fact, in the minds of our average Libertarian that Private everything is better than Public anything. [...]

But what if this was wrong?
[...sniping removed...]
Is there any objective way to show that Private Enterprise is in any way better, or more Efficient that Public (Government) Enterprise?



Yes, there is good objective evidence and theory, but understanding it requires at least a modest understanding of economics that is beyond the casual thinker and defies many pre-conceived notions.  There isn't space on this forum to teach economic, so I'll apologize for the links,

Let me get exceptions out of the way. It is well known in theory & practice that there are limited arenas where free market capitalism doesn't produce efficient outcomes.   Monopolies, public goods, negative externalities.  Some market-failures listed are based on conditions (like lack of property right) that are anti-libertarian.   
https://en.wikipedia.org/wiki/Market_failure
Note that "market failure" has no relation to "market crash".

Price-signalling.
https://en.wikipedia.org/wiki/Price_signal
Competitive free-market prices inform both buyers and sellers about supply and demand, and incentivize both to make efficient choices.   This is an F'ing brilliant outcome - totally distributed, and perfectly proportional and directs everyone toward more efficiency choices, no coercion involved.   This is and should be a celebrated thing.

The big ones,
https://en.wikipedia.org/wiki/Economic_efficiency
https://en.wikipedia.org/wiki/Productive_efficiency
We never get perfect efficiency, but the free-market pricing mechanism incentives this perfect efficiency.  That was a thesis of one of the Nobel Econ awards a few decades ago.

-----

Let's consider examples where government is involved in markets that could potentially be private.  Also let's exclude the common complaint about government corruption & crony-ism.

Some prime examples come from Communist governments. USSR & China tried in different ways to manage markets.  The soviet russian system produced rolling shortages of consumer goods as well as industrial goods.  At one time the soviets had comittees setting prices on 12000 goods.  China tried a more modest plan of setting prices for about a dozen (IIRC) basic commodities like pork and rice, but they recognized failure more quickly.

Why doesn't this work ?    Unlike a free market - the price doesn't represent a signal about supply and demand, and to make matters worse, in a communist system, there isn't any rational monetary price for production(supply).   So if creating a ton of wheat is consuming more resources - they might weakly try to include this in consumer price, and they should rationally re-arrange their resources to farm more efficiently or to assign more land to wheat and less to something else but how much ?  Also no one market manager understands demand - they set the price.   Why would a soviet wheat market manager use his power to demand more land, better tractors & harvesters from the production "czars" that manage those ?  Why would these other "czars" respond by making better or more tools ?   Without personal profit there is no personal motivation.  This is common and well understood feature of every bureaucracy.   Compare the license bureau vs a BurgerKing.

====

Consider US&modern examples.   Depending on where you live you might get stuck in traffic jams frequently or never.  If you see few jams it means you have paid for an oversupply of roads.  If you see jams often it means there is an under-supply of road capacity.  But this difference is never monetized, and no one can make a profit by addressing this market need = it means real systemic inefficiency.   Now if roads were operated an a competitive excludable good (toll roads) for profit things would be different.  You might have to pay a premium price at rush-hour which should decongest.  The toll road company would understand the supply/demand relation by pricing, and they, or their competition, would be motivated to add extra roads or lanes where it makes good financial sense only.  No one would build pointless highways nor fail to address over-crowded highways.

---

Then we have real data on the financial multiplier of government vs private spending.   The multiplier is effectively a measure of how much productivity (this goes back to efficiency definition above) results from a unit of spending.  Business is naturally inclined to maximize production per dollar, not government.
http://gregmankiw.blogspot.com/2009/01/obamas-multipliers.html
http://crei.cat/activities/crei_seminar/06-07/romer.pdf

Quote:
tax changes have very large effects on output. Our baseline specification suggests that an exogenous tax increase of one percent of GDP lowers real GDP by roughly three percent.


Every dollar the government taxes&spends lowers gdp by $3 as compared to leaving it n private hands.   That does not mean there is a negative return on gov't spending, it means the return is a LOT less than private spending.

This is according to Christina Romer - Berkeley prof &  Obama's econ adviser early on.

====

So lack of price signalling & lack of profit motivation plus lack of competition (gov is mostly a monopoly) leads to inefficiency - DUH!
  
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genepool
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Re: Private enterprise is more efficient than Government enterprise?
Reply #31 - Aug 1st, 2015 at 1:34pm
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In my country, only one government company is allowed to distribute gas.

Then after long years, another company is allowed to distribute gas.

Result?

In the old company:
1. You got to remember which gas stations are honest which one is not.

In the new company (Shell?)
1. No problem. The Meter are all accurate.
2. You can pay with credit card.
3. When you fill your gas, (which is done by an employee), another employee would wipe your windows clean
4. You got free air refill for your tire.

All at the same price. Well, sort of. The private companies still cannot distribute subsidized gas. However, that's changing. Jokowi lowered subsidy to a mere 10 cents per liter. So around 10% of the price. Still the private companies got tons of sales because customers prefer them despite their relatively higher price.

Or what about schools?

I was forced to memorize dates and names and all bullshit.

There are education provided by private companies too.

Do any of the garbage classes taught by those private companies? None. Why? Because no customer want it. No demand no supply. When some shit head high up decides what you should learn, they will tell you to eat shit and call that necessary.

One of my ex teacher created a university. He tried to open a popular section like management and accounting.

Guess what?

The government official said that he shouldn't do that. Because there are too many like that already. What kind of idiot try to decide that something is too many already? WTF?

I met with a guy that won some medals in international physics olympiad.

They said that after their success the government take over.

Guess what happen?

Chinese like me, cannot be selected as competitors. Too many chinese won medals already. People from good schools are also prohibited to win because too many won already.

Some kids from remote regions are selected even though they score a mere 5 out of 100 because they are probably the best from their school or regions. Just like in US there are rules requiring university to admit top 10% of any high school no matter how messed up the school is.


In many places some says that they score 7 on government exam. They said they don't even take the test and got score 7. Many PEOPLE (yap democracy won't help) want government final exam to be abolished all together. That's because their kids are dumb and cannot pass the math section.

When private companies do tests for math or physics competition, they give scores right away and tell students that don't like their score to dispute it. Everything is open.

When government do tests. They hide everything. They hide the test scores. Then they just tell whether somebody pass or not.

One government official said that they don't care the kid is smart or not as long as the kid has the right attitude.

Curiously, to show how some government program works, government officials would allow so many people from their worthless pilot programs to be candidates for internationaly physics olympiad. Of course, the performance are much lower since government take over.
  
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Re: Private enterprise is more efficient than Government enterprise?
Reply #32 - Aug 19th, 2015 at 3:32am
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Dear Jeff, you wrote:

>>If you start by claiming that the governments of Mexico and Uganda protect economic liberty and property under governments of law, which is what "capitalism " is, anything else you say is going to be a flat lie.<<

I can assure you, my fellow primate, that I only lie once or twice a year, and I certainly wouldn’t waste one of those in this forum.

You want to be able to deny that massively corrupt and inefficient countries are clearly Capitalist. The No true Scotsman “argument”.

https://en.wikipedia.org/wiki/No_true_Scotsman

But, no, you don’t get to chose who is a capitalist country and who is not. They do.

>> You can't get any more objective than empirical evidence, but you have to be honest about it.

Indeed.
  
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Re: Private enterprise is more efficient than Government enterprise?
Reply #33 - Aug 19th, 2015 at 3:59am
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Esteemed “MaxHen”, you wrote:

>>free-market economies will tend to produce better outcomes (from the perspective of consumers) than other economic models because producers in a free market can only generate profits when consumers voluntarily purchase their products. Under other economic systems, producers can generate profits via government subsidies, regulatory privileges, etc, and thus have less incentive to produce goods that consumers actually desire. <<

I know that was a lot to re-show, but…

You just, ‘said stuff’.

I was going to try to reply logically, point by point, but realised that would take hours. (And, there were no actual ‘points’ in your post, which would have slowed me down even more….)

So, here is some other Stuff. I’m just saying it, like you did.

Free-market economies will tend to produce worse outcomes (from the perspective of consumers) than other economic models because Capitalists in a free market can use technology to replace workers, and those jobs that are left can be replaced by Chinese workers.

This leaves a large pool of underemployed people who are willfully vilifyed by those left to carry the load. As though technology and the immorality of rich people were the fault of the poor.

I think you’re vilifying the wrong people.


http://www.merriam-webster.com/dictionary/vilify
  
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Re: Private enterprise is more efficient than Government enterprise?
Reply #34 - Aug 19th, 2015 at 4:11am
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>>Under free market you are free

No, unless you have your own private income, you are literally a slave to other men. At their bidding. Your whole life, ruled by their desires. Not yours.

(You see I am a Libertarian in the true sense).

In the USA you may get two weeks off, per year.

Donald Trump gets 52 weeks off, per year.


>> That means you are free to make really really good decisions.

“genepool”, do you not understand that for millions of Americans, this means either joining the Army or joining Burger King? Who put those people in that position? They certainly didn’t.
  
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Vexer
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Re: Private enterprise is more efficient than Government enterprise?
Reply #35 - Aug 19th, 2015 at 4:27am
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I kinda respond to posts, in-order.

I will reply to more, later. (stevea, and others ). I tend to bite off more than I can chew in one week (Or a month). Sorry about that. Thanks for the reasoned replies.
  
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Re: Private enterprise is more efficient than Government enterprise?
Reply #36 - Aug 19th, 2015 at 7:28am
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Vexer wrote on Aug 19th, 2015 at 4:11am:
>>Under free market you are freeNo, unless you have your own private income, you are literally a slave to other men. At their bidding. Your whole life, ruled by their desires. Not yours.

In our real world, getting a job gives you the ability to earn money, which you can spend any way you want. It also gives you job experience that looks good on your resume, which makes it easier to get a better/different job.
If you have good ideas, are ambitious, and manage to save some capital, you can start your own business. People will even loan you money to do this.
In a free economy, the possibilities are endless.

In a government controlled economy, the government will put you to work where they want to, and you will stay until they allow you to leave, or until you die.
  

"Free hate speech"
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Re: Private enterprise is more efficient than Government enterprise?
Reply #37 - Aug 19th, 2015 at 9:19pm
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I think in democratic countries government tend to defend mediocre deals.

Yes government may criminalize some bad deals. Or at least they claimed they tried to. Government recently cracked down on somebody that produces soaps without license. Government may argue that the soaps may be dangerous. Buying such soaps are really bad deals. So government protect customers from bad deals.

However, often it doesn't work that way.

The soap that can be produced without license may be just as good as any soaps but cheaper because they don't have to pay the exorbitant licensing fee. Government motives and result is actually to protect mediocre soap industries from competition from unlicensed soap producers. The unlicensed soap producers are actually victimless.

So deals with government are always mediocre. You are sometimes saved from really really bad deals. However, more often than not, government prohibit really really good deals claiming it to be bad.

And that's not all. Relatively good deals take over the whole market share under free market. So government approved mediocre deals become "bad" relative to that few good deals on free market.

Wallmart gives slightly better deals than normal stores. After a while, wallmart grow bigs that wallmart better deals are the new normal. So customers got better and better off under free market. Not so under government.

I think you should just compare north korea vs south korea. Indonesia vs singapore.

Countries with less trade restrictions are simply richer.
  
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genepool
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Re: Private enterprise is more efficient than Government enterprise?
Reply #38 - Aug 20th, 2015 at 1:46pm
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I am not going to advocate this. However, if you really want to redistribute wealth, just pay cash and get done with it.

This will mean that some measures must be taken to ensure that citizenship are earned productively.

For example, if some welfare parasites have 16 children, would all 16 children citizens?

Then the poor will have many choices besides joining the army or work at mc donald (working at mc donald is not bad actually. An american job is not bad at all).

Poor people can
1. Make less children. Save money.
2. Learn from khan academy.
3. Use money saved to start bizs (you don't need high IQ for this).

Yea at the end you got to be very good at something most people can't to be very rich. So what? Just keep trying.

I didn't get to where I am by being lazy. I once took 24 credits per semester. I faced many difficulties in life. I spent hours and hours tweaking my programs.

That made me think actually. Very small amount of my time are spent for productive things. I should reallocate my time more wisely. Yea, get even richer.

Some of the posts here, are very good. I will repost this to my friends.
  
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genepool
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Re: Private enterprise is more efficient than Government enterprise?
Reply #39 - Aug 20th, 2015 at 1:48pm
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stevea wrote on Jul 28th, 2015 at 7:40am:
Yes, there is good objective evidence and theory, but understanding it requires at least a modest understanding of economics that is beyond the casual thinker and defies many pre-conceived notions.  There isn't space on this forum to teach economic, so I'll apologize for the links,

Let me get exceptions out of the way. It is well known in theory & practice that there are limited arenas where free market capitalism doesn't produce efficient outcomes.   Monopolies, public goods, negative externalities.  Some market-failures listed are based on conditions (like lack of property right) that are anti-libertarian.   
https://en.wikipedia.org/wiki/Market_failure
Note that "market failure" has no relation to "market crash".

Price-signalling.
https://en.wikipedia.org/wiki/Price_signal
Competitive free-market prices inform both buyers and sellers about supply and demand, and incentivize both to make efficient choices.   This is an F'ing brilliant outcome - totally distributed, and perfectly proportional and directs everyone toward more efficiency choices, no coercion involved.   This is and should be a celebrated thing.

The big ones,
https://en.wikipedia.org/wiki/Economic_efficiency
https://en.wikipedia.org/wiki/Productive_efficiency
We never get perfect efficiency, but the free-market pricing mechanism incentives this perfect efficiency.  That was a thesis of one of the Nobel Econ awards a few decades ago.

-----

Let's consider examples where government is involved in markets that could potentially be private.  Also let's exclude the common complaint about government corruption & crony-ism.

Some prime examples come from Communist governments. USSR & China tried in different ways to manage markets.  The soviet russian system produced rolling shortages of consumer goods as well as industrial goods.  At one time the soviets had comittees setting prices on 12000 goods.  China tried a more modest plan of setting prices for about a dozen (IIRC) basic commodities like pork and rice, but they recognized failure more quickly.

Why doesn't this work ?    Unlike a free market - the price doesn't represent a signal about supply and demand, and to make matters worse, in a communist system, there isn't any rational monetary price for production(supply).   So if creating a ton of wheat is consuming more resources - they might weakly try to include this in consumer price, and they should rationally re-arrange their resources to farm more efficiently or to assign more land to wheat and less to something else but how much ?  Also no one market manager understands demand - they set the price.   Why would a soviet wheat market manager use his power to demand more land, better tractors & harvesters from the production "czars" that manage those ?  Why would these other "czars" respond by making better or more tools ?   Without personal profit there is no personal motivation.  This is common and well understood feature of every bureaucracy.   Compare the license bureau vs a BurgerKing.

====

Consider US&modern examples.   Depending on where you live you might get stuck in traffic jams frequently or never.  If you see few jams it means you have paid for an oversupply of roads.  If you see jams often it means there is an under-supply of road capacity.  But this difference is never monetized, and no one can make a profit by addressing this market need = it means real systemic inefficiency.   Now if roads were operated an a competitive excludable good (toll roads) for profit things would be different.  You might have to pay a premium price at rush-hour which should decongest.  The toll road company would understand the supply/demand relation by pricing, and they, or their competition, would be motivated to add extra roads or lanes where it makes good financial sense only.  No one would build pointless highways nor fail to address over-crowded highways.

---

Then we have real data on the financial multiplier of government vs private spending.   The multiplier is effectively a measure of how much productivity (this goes back to efficiency definition above) results from a unit of spending.  Business is naturally inclined to maximize production per dollar, not government.
http://gregmankiw.blogspot.com/2009/01/obamas-multipliers.html
http://crei.cat/activities/crei_seminar/06-07/romer.pdf


Every dollar the government taxes&spends lowers gdp by $3 as compared to leaving it n private hands.   That does not mean there is a negative return on gov't spending, it means the return is a LOT less than private spending.

This is according to Christina Romer - Berkeley prof &  Obama's econ adviser early on.

====

So lack of price signalling & lack of profit motivation plus lack of competition (gov is mostly a monopoly) leads to inefficiency - DUH!


Very good discussion. Thanks. I check the links. I checked many of the link my self.

In some market failure area, I am not a complete libertarian. However, what happen more often is that such failures are just there. Government doesn't fix it at all.
  
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