Why government does things inefficiently
Let me start off by stating that I have no knock against government - I have a degree in public policy and was a hard-working employee of the City of New York for many years, so I have a lot of sympathy for institutions and the people trying to survive in them. And yet, when I think of the huge deficits we’re running and the problems this is going to create, it does give me the chills.
One reason is that government functions simply do not take into account any notions of efficiency. It isn’t that bureaucrats (well, most of them anyway) are evil, its that their structure of incentives has nothing to do with how efficient they are. Further, public policies are always trying to achieve social goals (hire the disabled! Make sure that minority vendors get to bid!) by distorting business practices. When I was basically running technology for the City’s major purchasing function, I’ll never forget the day a senior executive from the Mayor’s Private Sector Task Force came to see me. Yes, you heard it - every few years, we had these guys seconded from the private sector to tell the misbegotten public sector how to do things. Anyway, his first question had to do with the costs of the things we bought. I looked at him blankly and said I had no idea. He was dumbfounded. How could the head of technology for purchasing not have any idea how much things cost? As it turns out, for government, it doesn’t matter. What matters is whether all the process steps were properly conducted, whether the bids were awarded according to the rules, whether the backlog in requisitions was reasonable…all those things. But cost? Never even came up in our discussions. My interlocutor slunk out of my office, shaking his head, not to be seen in my quarters henceforth.
I was reminded of this incident the other day when applying to get a “certificate of residency”. Some countries, such as Spain, require you to present such a certificate to avoid backup withholding for taxes in their country. Well, the process involves downloading, completing and faxing forms, paying $35 and indicating (individually) which countries the certificate is to be from. Lo and behold, some weeks later, I received a letter from the head of the residency program in my district that I had missed an important component of the process - a letter from me indicating that I intended to be a US resident for the relevant tax year. I couldn’t help but think of the dozens of people who must be employed in this office if it has an actual “head”. I was also thinking that if I needed such a certification from Amazon, I probably could have filled everything out on the web, paid my fee with one click and been outta there in minutes.
So we have a government that seems, at all levels, in an expansionary phase. My concern is that without some incentive to operate more like Amazon and less like the Certificate of Residency Office we are simply going to be getting into ever-increasing debt, without even the fun of retail therapy to show for it.
Share this article: 
- Posted: Thursday, March 04, 2010
- Permalink
Next entry: Venture Capital’s Struggle Previous entry: The London Olympics - One for the “flops file?”
Rita,
You have captured my intellectual dilemma perfectly. I understand the economic arguments that the government must provide stimulus to keep a bad recession from turning much worse, yet I also know that expansive government is not good value for money and, moreover, only knows how to grow, not to shrink.
So I try not to think about it.
Government vs Corporate effectiveness and efficiency seems to be a core facet of political framework since corporations were created BY THE GOVERNMENT.
Corporations as quasi-non-voting-free-speech-eligible citizens have an odd place in the world and have become the darlings of efficiency since maybe the early 1980’s. A decade later we had the intensely ‘efficient’ savings and loans corporations asking for a $50 billion hand-out which was a chunk of change back then. The next decade we had Enron, Arthur Anderson efficiently creating industries that existed only on paper and in the minds of their very efficient leaders—-I don’t remember the price tag of that one, or let’s look at Telecom failures after fraud was abundant there. Of course, we have the most recent, highly efficient AIG, Bear Stearns, Merrill Lynch and others efficiently discovering they were leveraged beyond human capacity—-that they had efficiently walked a plank and would not require the government either bail them out or let them fail. It’s hard to imagine how much money has evaporated in this highly efficient manner.
In fact, we could say that Corporations have the most sophisticated, highly efficient method of evaporating wealth known to humankind.
So, any discussion of Government efficiency needs to include the blunderous acts of hundreds of corporations to burn through mountains of American Tax-Payer money—-then turn around and blame the government for saving them which is a truly remarkable act in my view.
The Government is being inefficient by BAILING out the disastrously, catastrophically EFFICIENT corporations?
It is a sad tragedy that Americans generally distrust government while having produced one of the most amazing governments in the world. It is part of our paradox as a nation and a people.
Yet, the abject worship of corporations is baffling to me and likely does little to help us right-size our government.
