02 Dec 2013

Why They Can’t Run Government Like a Business

Economics, Krugman, Shameless Self-Promotion 18 Comments

I discuss this topic at EconLib this month, giving both the theory and many illustrations. As if to motivate my article, Paul Krugman today explains why we shouldn’t be too hard on the ObamaCare website:

Healthcare.gov is much better. It’s not running like, say, Amazon — but remember, mainly the government is trying to give you money, namely subsidized insurance, rather than to sell you something, so it doesn’t have to match commercial performance right away.

18 Responses to “Why They Can’t Run Government Like a Business”

  1. Matt M (Dude Where's My Freedom) says:

    Except for that part where Obama explicitly said “this will run as well as Amazon”…

  2. Ken B says:

    Obamacare boosters were remarking today that site is finally up to private market performance. Don’t believe them, but just the claim is remarkably ironic.

  3. Silas Barta says:

    … my head almost exploded from seeing that rationalization.

    • Ken B says:

      That’s what this famous sticker shock was all about Silas. People’s heads exploding when they saw just how much cheaper their health insurance was. Yet naysayers present this as a failure!

  4. Major_Freedom says:

    Couldn’t the government have just sent everyone checks instead? Could have avoided the whole Obamacare fiasco.

    • Ken B says:

      Ahhhh that’s the genius of Obamacre. Most of the money doesn’t come from the gov,t. It comes from other purchasers. So they’d have to send out names and amounts and let recpients mail checks amongst themselves.

      That might have worked better than the site.

      (Think about it …)

      • Gamble says:

        He said vouchers. Vouchers are always better than a bureaucracy. Both communism, vouchers are just a little less inefficient, less unfree.

        Personally I think vouchers are the only way to dissolve government.

        Everything government currently does, convert to a voucher/quasi private relationship and then one day, simply stop taxing and stop sending vouchers.

        Wala. Freedom at last…

      • Major_Freedom says:

        Well why not just send a list of names and addresses to the Obamacare signees, and have the signees go to the houses and collect the money themselves? I mean, if government is voluntary, then all the people on the list should agree.

      • Tel says:

        It comes from other purchasers…

        Without a functioning web shopper, there won’t be any purchasers.

        Even then, a lot of people will opt out and try their hand at wrangling over the fine.

        If the health insurance industry are congratulating themselves for getting onto a good wicket with Obamacare, they are in for a rude shock. I think the disruption in the industry will be massive.

  5. Transformer says:

    “mainly the government is trying to give you money”

    That’s funny. last time I checked they were TAKING lots of my money. And they do that just as inefficiently.

    • Matt M (Dude Where's My Freedom) says:

      Well if you’re not getting the money, it’s only because you’re obviously a rich, greedy, capitalist, who hasn’t been paying their fair share.

      I think this is one of the most fundamental disconnects in our society. Who the government considers “rich” always includes a huge swatch of society that would never dream of defining themselves that way.

  6. Tel says:

    Speaking of giving away money… I hear the total cost of the web development has hit $1 billion.

    I tried to explain to several Australian professional developers that the US government spent half a billion bucks on a website and they all thought I was full of shit. They simply couldn’t believe it. Now I have to tell them the costs have doubled in the last couple of months.

    These are the same guys who hammer WalMart for not paying their workers a big enough share of the profits, but what percentage of the Obamacare costs actually went to programmers? I would argue it should be around one million development cost including EVERYTHING, all testing, all design, the lot. By that estimate I would say perhaps one dollar in a thousand has gone into genuine productive effort, the rest has been pissed away in political favours.

    • Ken B says:

      I think you underestimate the costs. Theres the cost of tracking down former classmates, old girlfriends, boyfriends, checking who has incriminating emails, checking who has incriminating handwritten notes, whose son or daughter or cousin is involved, tendering false bids, rewriting requirements to exclude competing firms, the list goes on. There’s an awful lot of checking and double checking that must be done before you disperse government funds. It mounts up fast.

  7. Luke says:

    Dear Mr Murphy,

    I read (and learned from) your column on why governments aren’t run like businesses. However, on the question of fishing, you are (with respect) proved wrong by empirical evidence.

    You say a private owner would rely on prices for fish extracted rather than rules. But they don’t in the real world. In the real world, they use both.

    In the UK, the right to fish can be separated from land ownership. and most freshwater fishing in the UK *is* in the hands of private owners. There is, for practical purposes, no public freshwater fishing. Some owners allow only family/ friends to fish their water. Others charge anglers to fish it on a daily basis. Others lease or sell the right to fish the water to an individual or club. But many (most?) owners and clubs impose rules on the number of fish that can be taken or the method that can be used. That applies both to “natural” fisheries and to those that rely on stocking. The more expensive the place is to fish, the more likely it is to have rules both as to how many fish you can take (if any), and *how* you fish (eg fly fishing only, barbless hooks only, limits on hook size, even on the type of fly.)

    I am not saying there is no price mechanism – a week’s fishing at peak time on a good salmon river is over $2000. But if fishing is actually put in the hands of (presumably) profit or utility seeking individuals/corporations, you can (and do) still end up with lots of rules.

    • Matt M (Dude Where's My Freedom) says:

      Voluntary rules instituted by a private resource owner are altogether different than government rules mandating “publicly owned” resources.

      The point of Bob’s article is to emphasize that often, the government has a perverse incentive and its rules actually serve to diminish, not enhance, the economic utility of a resource. On average, private resources are used in a much more efficient way, because the resource owner has a personal stake in the resource that government bureaucrats at the BLM don’t.

      That’s not to say that every single private resource owner has perfect knowledge. Some will institute rules or policies that seem like good ideas, but end up backfiring. But odds are, they will do this much less often and be much more likely to learn from their mistakes than the government is.

      Also keep in mind, if Jim’s Fishing Hole Corporation implements some silly rules that result in the fish stock being depleted, the only person who suffers is Jim. When the government relies on silly rules to try and maintain the stock of fish in “public” rivers, and the rules fail and the rivers become depleted, the entire public suffers.

  8. Innocent says:

    So it is okay for something to not work when the government forces you to purchase something ( say subsidized insurance ) since it does not have to rely on the free market? Well if there ever was a a more duh statement from Krugman I don’t know what it could be.

    I love the phrasing, ‘trying to give you money, namely subsidized insurance’. Well heck if the Government is trying to give it away then who cares if there are a few glitches… Except, wait, if you do not ‘get’ the (not free) insurance then you are ‘fined’ – which is not a tax ( well except according to the Supreme Court it is ) so if the website is not working properly then you are ‘fined’ by the Government… So how is this a gift exactly, oh and the subsidy is not ALL of the insurance and really only covers the ADDITIONAL money that you would have spent anyway. So again how does this help.

    The only reason Krugman is defending this HORRIBLE concept is that it does something that he WANTS. Namely redistribution of wealth. Now I personally believe that the forceful taking of anyone’s wealth should not be justified simply through charity. Why can’t charities simply ‘steal’ from you? I mean it is for a good cause right? Nope only Government when a thin majority of people choose it does theft become ‘a good thing’.

    I lived in Italy for a while and was very quantified with the Mafia. I have to admit they typically were better stewards than the crooks that were elected to public office. At least the Mafia had a code of conduct.

  9. Ken B says:

    Harry Reid is doing his bit to lighten the load on the healthcare.gov site. http://www.cnn.com/2013/12/04/politics/reid-obamacare-staff/index.html

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