(Of course, the goal of government is not efficiency either)
Not necessarily true, many power generation projects are built knowing that they won’t be profitable for many decades and are happily funded by pension companies that treat them like bonds. Many government projects don’t get done because their payoffs won’t be seen within the election cycle.
But politics, (at least democracy) has the double edged sword of election cycles. This heavily incentivizes short term thinking.
Ex. Should the mayor pour millions into sewer system maintenance or millions in flashy projects and waste?
If the sewer maintainance is done right, none of the electorate notices. But the electorate will see the flashy spending and vapid superficial projects. And who cares if we defer sewer maintainance, that will only cause issues 20 years from now.
But we’ve spent 45 years hollowing out those organizations in the US.
It is run by commissioners chosen by the mayors of the cities they serve and a few are chosen by the county.
They all have graduate degrees in engineering. The employees are similarly qualified.
I suspect the reason they do such a good job is that theyre insulated from the rest of government.
Bureaucracies make change happen slowly. They preserve the status quo.
And yes, we've been busy gutting the gov't status quo for decades.
My point wasn't that all governments fail at sewer maintenance but that governments aren't automatically superior at long term planning, and in many ways have structural problems that can inhibit long term planning, whereas a private sector company may not have those same mal-incentives.
Furthermore, private companies can fail, be sold for scrap and parts to competitors, and go nonexistent whereas governments don't. If pets.com loses too much money, they can go get a little more and extend the runway, but eventually they go out of business and other companies get their market share. If my government loses too much money, greater amounts are borrowed, taxes are raised, and the money furnace continues to be fed.
Look at price/earnings ratios. They have crept up from the 80s which means investors are willing to pay more for each dollar of future earnings. Look at individual companies like Amazon that was extremely valuable while losing money for years and even now its very thin. Look at all the VC companies throwing money at companies with just an idea. How about private industry, like billions of trees being planted every year by private businesses just so they can harvest them in a few decades.
This doesn’t come anywhere near passing the sniff test.
There are plenty of companies with very bad business models that still have a decent stock price (Spotify, Uber, Lyft).
Yes I know that you can’t have a P/e without a profit.
And some of the most valuable companies are in the oil industry extracting non renewable resources.
bureaucracies that are not allowed to die do not face this evolutionary mechanism of creative destruction- this includes governments but also a lot of business edge cases like PG&E for example.
This is pretty key.
Imagine a train line that allows commuters to get to work. Trains are expensive to run, so the actual cost to get a commuter to work and back is £100. The commuters are paid (say) £150 a day, after tax. Is this train worth 2/3 of their post-tax income? Probably not, so they won't use it, and the company can't get workers if there's no other practical way to commute. Workers can take less good jobs near home, earn less, but take home more. Or even no job at all. However, a worker generates substantially more than their post-tax salary in value to the economy as a whole, so subsidy of the train fare creates value by getting them to work and generating that value, even though the train cannot actually turn a profit itself by charging the commuters out of their income.
Even if you say "well the company should just pay more if they've made that value", not all that value manifests directly on the company's bottom line, it includes downstream value, as well as intangible things like worker skills that are more of an abstract societal benefit.
In the same way, roads produce massively more value than people would be willing to pay individually: all the food deliveries in a week might be worth, at retail, about £4 billion, say. If those deliveries can't be made, what will be the cost? £4 billion? Or more because the whole country will become a much less effective economy when everyone is starving and looking for food? And the universal-delivery postal system. Healthcare, childcare, energy, etc etc.
Regardless of the specific case here, businesses do a horrible job of accounting for the externalities of their decisions. This shows up in two ways:
1. Negative externalities - there is a large cost to society of my company doing this, but I'm not the one paying the cost. As a result I can still make money off of it so I will do it. Even though it is a net negative for society. Dumping toxic pollution into a river is a great example. You need an external force (government) to step in to ensure they account for that. Either through things like laws to make it illegal (and actual enforcement of those laws).
2. Positive externalities - there are larger benefits to society of performing the action, but the company itself doesn't get that value as a result they don't do the action. Subsidizing things like the US interstate project is a great example of this. Again markets fail to capture this so don't do it. Or if they do it's in a way that's a net negative for society and becomes a defacto tax on all economic activity making other useful businesses unprofitable. Again an example would be if all interstates were privatized and drivers were charged maximal rates. It would drastically reduce economic activity.
There are absolutely situations where markets are not the right solution to the situation and government intervention is, and they usually fall in where there are significant negative or positive externalities.
Today they aren't expected to. They're expected to extract profit and then socialize any losses, externalities or otherwise.
It doesn't have to be that way.
Our economy and politics are indeed favoring short-term gains by design and that is « simply » what should be controlled to a certain extent. Not easy as this should be a global move, otherwise the long-term advocates are likely to be outperformed by their short-term competitors and not have the time to implement fully their strategies.
If businesses account for them, they stop being externalities.
There are edge cases, but in general inhibiting the ability of workers to work (e.g. by making it expensive to get there, or expensive live near enough to the work, fail to allow them to be healthy enough to do the work, make it hard to take care of children while working, restrict access to or quality of education etc) is not good for a society built on work.
This bears emphasizing.
The main benefit a company provides is the goods they produce. The money is a measure of how much people value the goods at the time, but the main benefit is in the actual goods themselves.
Eg the electric grid is more beneficial than what people pay for it. If the cost of electricity doubled everyone would still keep using a fridge. If the cost of fridges doubled everyone would still keep using a fridge.
And that's the success of modern society - all the beneficial stuff we have access to that make our lives a little bit better.
This is hopefully obvious, and yet the excess road building problem is ubiquitous in the US and costing us fortunes.[1]
So we can’t just hand-wave and suggest that all infrastructure and all subsidies always create more value than they cost, we have to be critical and especially careful not to pretend that non-financial benefits can pay for real financial costs.
Just because a government builds it does not mean it is worth it for society. And if it was worth it at time X, it does not mean it will be worth it at time X+1.
See the multitude of comments and threads about living in communities with work and play in the same community, as opposed to driving 30min each way from a suburb to a work area and back.
Pretty much all of your examples can be rewritten to reflect the above. One example would be: what if it is only marginally more expensive for the company to build the workplace nearer the workers, making the train unnecessary? If the subsidy exists they will capture the value of avoiding that cost while foisting the cost of the train subsidy on tax payers, which is a net negative.
The main reason politicians are anti-public enterprise is because they are entwined in the profits of private enterprise. "Lazy union workers" is a handy cover, though.
No, but also yes.
The grandparent commenter is correct in saying 99.99% of US rail is designed entirely around moving freight. And I’d usually agree it does it well, but the system seems to be breaking down fairly publicly of late. Regardless, it’s essentially an apples to oranges comparison vs European/Asian passenger rail - a (very poor) reverse analogy would be to fault hyper regional business airports for not facilitating giant cargo planes.
Everything else you mentioned is basically correct but a large portion of the dysfunction is due to the specific need to lay new rail to get around the freight priority system that dominates essentially all of our existing rail lines. States are trying to roll out modern dedicated passenger lines but the projects keep getting derailed (pun intended) by politicians.
The Acela dedicated passenger line in the Northeast is (possibly) the only place in the country where you can make a reasonable comparison to the rest of the world.
And having ridden both Acela Express and Eurostar in the past decade, my opinion is that Eurostar is a very clear winner but not quite as obscenely as most people would expect.
Eg: The Amtrak cars are MUCH comfier but the train runs at approximately half the speed of Eurostar (Acela is supposedly capable of 135mph but it only hit 125ish when I rode - I clocked an avg ~90mph vs avg ~180mph on Eurostar iirc). No freight priority issues, etc. Still extremely last gen feeling, but more in a “this can be fixed” way and less in the “well this is utterly hopeless” like the rest of the country.
Wouldn’t even call what you have a rail network at all, let alone a bad private rail network. Like what you have doesn’t even make sense privatized
But I can show you PGE and SDGE as examples of privatization WITHOUT any of that good-faith investment, and then when the situation went critical (massive wildfires a few years back due to bad electricity infra), electricity consumers being forced to foot the bill. Where I live, my utilities bill has quadrupled in the past three years (from ~$100 to ~$450 a month for literally identical usage, I checked my statements), rate regulation (the CPUC) is seemingly toothless, and my utilities company sends me these insultingly understated letters about how they can't control energy pricing and have to pass on rates to consumers.
Except they won't tell you that they are owned by the company they buy their energy from, and that THAT company happily will set prices to whatever they want if it means sucking off their pathetic little shareholders just a little bit more. Sempra Energy has been doing gangbusters on their quarterly earnings reports!
We have and have had sufficiently advanced climate modeling to inform whatever decisionmaking they may have needed when they had the best opportunities to invest and maintain infrastructure. Our forest management policies have not changed in forever and California faced seemingly annual firestorms in the years leading up to PGE's disaster. People have been sounding the alarm on climate change for YEARS and YEARS. The current predicament is no excuse.
You want less forest fires? Fucking remove all the overgrown underbrush and older trees that have overstayed their welcome. The Native American Indians of the area would be happy to tell you this, something that worked for millenia before westerners came along, said "MUH CUTE TREEZ", and refused to take care of the environment.
Places like Yosemite National Park even refuse to put out naturally occuring forest fires anymore, because guess what: You need periodic forest fires to avoid disasterous forest fires.
It is a vicious cycle and feedback loop. Weather patterns the previous year create a tinderbox for the next. And then we aggressively suppress the inevitable fires that spring up, leaving even MORE unchecked undergrowth and denying the forest bed the nutritional products of burned foliage, which just worsens its health and creates even BIGGER fires when they eventually roll around.
It's almost like being a public company vs being a government run entity isn't the major decider of effectiveness / optimal outcomes for end users.
Instead, it seems to be "is this company (etc) run by self-interested arseholes trying to enrich themselves at the expense of others?"
If it is, then the structure isn't going to matter. End users are going to have a bad time, regardless of the PR/bullshit said company puts out to say otherwise.
Likewise, if the company (regardless of structure) is run by clueful people dedicated to actually providing the required service, end users are going to be in a decent position.
Unless of course they get screwed over by above mentioned arsehole types. eg starved of budget if they're a gov org, have activist investors cause trouble if they're a public company
1. Don't think of themselves as self-interested arseholes.
2. They are in fact self-interested arseholes.
We have no methodology that allows us to put "good people" in power. And even if we had, power corrupts. So the best we can do is to build a system that works even when all actors are self-serving.
Doesn't seem to be working though eh?
That being said, I don't have any fantastic suggestions either. :(
Typically you just fix a bug, though of course some systems reach a point where a rewrite (either incremental or from scratch) is the only option. I see absolutely no evidence that we reached that point, all arguments are just emotional factoids. I also see no attempts for an incremental rewrite, all people want is to burn the system and hope that something good rises from the ashes.
You mention business efficiency being built on the back of a responsible government, but I've often heard here where I live (South Africa), if you want to know where to deploy capital look for companies doing something the gov should be doing...because it's easy to compete (port management, electricity, rail, air lines, mines, refuse management)
As opposed to government? The reason every government is so bureaucratic is precisely because it's incentives are structured to optimize for the short term. At least private business pays with blood for it's mistakes.
> In theory, a government will be efficient at allocating resources for that
In theory dictatorship is more efficient that any other form of government. In practice, humans are more flawed than we like to admit.
> We HAVE to stop thinking that business is always more efficient at everything
Nobody thinks business is always more efficient. But it turns out to be way more efficient on average.
> it is built on the back of responsible government
The beauty of capitalism is that it allows society to thrive even when all actors are irresponsible. Which we, humans, are.
> The beauty of capitalism is that it allows society to thrive even when all actors are irresponsible. Which we, humans, are.
I think the laid off tech workers and people of Ohio might have a few things to say about that..
I’ll play the smallest fiddle for those who didn’t save during the good times.
Yes, I work for $BigTech and I save a significant portion of my income.
Curious how you glossed over the folks in Ohio.
Government rarely has incentives to be efficient. It's mistakes are always covered by taxpayer money, effectively punishing those who are efficient.
Why are we always comparing real thing that has downsides with magical thing that's perfect? I don't disagree, magical thing is indeed perfect. The only issue is that it doesn't exist.
The government also covers bailouts for banks using taxpayer money, effectively punishing everyone.
> Why are we always comparing real thing that has downsides with magical thing that's perfect? I don't disagree, magical thing is indeed perfect. The only issue is that it doesn't exist.
Again, the original claims were 1) that corporations pay for their mistakes with blood and 2) that the beauty of capitalism allows for a thriving society with an entirely irresponsible set of actors.
All that's being said here is that 1) private business do not in fact pay for their mistakes in blood and 2) capitalism doesn't allow a society to thrive when all actors are irresponsible, in fact, you only need to have a select few actors to be irresponsible in order to degrade the state of society.
What's the alternative? Other than more scrutiny and harsher punishments for banks, which very few people are against.
> private business do not in fact pay for their mistakes in blood
Just because 0.1% of businesses gets bailouts, you're going to ignore 99.9%? Are you the type of person that says vaccines don't work because people still get sick?
> capitalism doesn't allow a society to thrive when all actors are irresponsible, in fact, you only need to have a select few actors to be irresponsible in order to degrade the state of society.
The "degraded state of society" is still orders of magnitude better than the alternatives I heard of. I'd say it still fits whatever the definition of thriving you can come up with.
Nothing is perfect, it's quite easy to criticize anything. But if you're criticizing without offering any alternatives, your criticism isn't worth much.
So I'll ask again, what is alternative that you're offering?
Few people are against it, yet we didn't hear about too many bankers getting sent to the locker, did we?
> Just because 0.1% of businesses gets bailouts, you're going to ignore 99.9%? Are you the type of person that says vaccines don't work because people still get sick?
Not sure where you're getting the 0.1% figure but "privatizing gains and socializing losses" is hardly a new idea.
> Nothing is perfect, it's quite easy to criticize anything. But if you're criticizing without offering any alternatives, your criticism isn't worth much.
I think we're some ways apart from being close to perfect, no one is asking for perfection just that things not be awesome for 1% of the population at the expense of the rest.
> So I'll ask again, what is alternative that you're offering?
I won't give you a primer on different economic models, at the risk of bringing too much taboo magic into the discussion, just know that not all models depend on the exploitation of workers, labour pressure via unemployment, and minimum wages that require government subsidized food stamps in order to allow workers to live while working multiple part time jobs with no benefits.
edit: In the spirit of hn guidelines and for the curious, I think some of the discussions with B. Sanders may be appealing to some.
Privatizing gains and socializing losses is what happens when governments are corrupt. That isn't a private sector problem, that is a public sector problem, if your politicians is giving away your tax money to corporations then the solution isn't to give those politicians even more money or power.
Please.
Lobbying + gerrymandering > deregulation > look ma, government inefficient let's reduce spending > reduced government capacity > look ma, government inefficient let's reduce spending > reduced government capacity > ..
Ever heard of the revolving door or regulatory capture?
Who is served by a reduction in government spending? In what world is "let's cut government spending and further provide privatized corporations with the means by which to provide the necessities of life for the population" a sound objective when the stated goal of corporations is to maximize profits and provide infinite growth?
Just this week: Eli Lilly announced [1] that it would cap insulin prices at $35. Why is that? In order to maximize profits.
California announced [2] that it would start producing it's own insulin. Tell me why, in an efficient market, the government would need to step in and start it's own production [2] or even mandate [1] price caps? What does this say about the state of competition prior? Did EL just recently find efficiencies that allows it to _still_ profitably produce and sell a vial of insulin, which costs $10 to produce, at a reduced price of $35 (from "over $300")? Of course not!
Free market at work. It only took the inefficient guberment to step in for _competition_ to materialize.
[1]: https://www.cnn.com/2023/03/01/health/eli-lilly-insulin-pric... [2]: https://www.theverge.com/2022/7/8/23200404/california-insuli...
Your lack of knowledge on the matter mixed with self-righteousness is astounding. I suggest you to research beyond newspaper headlines.
Insulin that's being sold today is very different from insulin that was invented a century ago. The reason it's so different is precisely because private businesses had incentives to innovate, which resulted in prolonged patient lives.
You know what slows down modern insulin from becoming cheap in the US, even after patents have expired? A government agency called FDA. By the time you can get your generic insulin to the market, it might become obsolete. Competition isn't materialized, it is artificially limited by the bureaucratic government.
(not to mention that patents themselves are also enforced by the government, but that's a much more complex topic)
In order to get cheaper insulin you need less government, not more. Evidently, that's why insulin is cheaper in India, China, or Mexico.
> Tell me why, in an efficient market, the government would need to step in and start it's own production [2] or even mandate [1] price caps?
Californian local production of insulin is an attempt, we've yet to see the results. It is quite possible that those funds would be better off spent on directly buying insulin instead of producing it.
Oh and by the way, you know how California plans to "produce" the insulin in the first years of the program? By outsourcing it to private companies. Isn't it convenient that those exist?
And, as illustrated earlier, price caps are a government "crutch" to cover a bigger government (FDA) inefficiency.
Before anyone accuses me of being a heartless business owner or executive, I’ve never in my 27 year professional career been in a position to fire anyone.
1) To entertain this point, maybe? If your optics of the situation was efficiency for the company, but why would you not look at efficiency as a whole and for whom?
As a society, don't you think we should be structuring things such that they are efficient? Is the company that doesn't end up paying for large ecological disasters "efficient" because it offloaded the cost of the cleanup onto the people/government? Sure? But I think society as a whole would benefit from adding resources to maintain infrastructure to prevent these types of ecological problems.
> Hiring and firing people who are only seen as "resources" when needed is efficient from a business point of view.
2) If the companies involved in the current layoffs are, by your definition, "efficient", what would you make of Apple [1] in this situation? Super really efficient? What's their secret sauce? Are the in/efficient because they didn't overly take advantage of the hiring craze? What are the costs associated with engineering layoffs and how are those costs manifested in society?
Line items like headcount on a spreadsheet are easy to quantify, organizational knowledge loss, loss of trust/moral, impacts of layoffs on mental/communal health, are harder to quantify.
I’m going to first answer that question by speaking about the $BigTech company I know best because I work their and my RSUs are worth half their all time highs - Amazon - and the industry I know best - cloud - because I work at AWS.
Amazon Retail thought that the Covid induced online shopping was going to be the new normal and over hired.
AWS didn’t really get hit with layoffs (https://www.datacenterdynamics.com/en/news/aws-employees-amo...). Azure also didn’t suffer layoffs (https://www.channelfutures.com/business-models/microsoft-lay...).
Google has so many useless money losing products and the attention span of a crack addled flea. No one ever accused Google of being well managed. I can’t speak about GCP.
Apple outsources most of the people who build its products. While Apple hasn’t laid off people, the contractors who create its phones who work for Apple for all intents and purposes have laid off people.
Facebook now is down to its employment level of a couple of years ago.
My moral would be fine if I was working for Facebook [1] for a couple of years at FB salaries. I would have saved more than I already do.
And many 2nd tier tech companies aren’t profitable. The easy money ran out. [1] I don’t hate myself enough to work for Facebook.
In government or union heavy industry they’d still be forced to pay them.
Let’s keep that in mind as we see Twitter still running completely fine months later after firing so many.
Not everyone has inherent value, many are being paid but not actually creating value the other side of the transaction and it’s silly to pretend that’s fine.
But it turns out to be 'thought' to be way more efficient on average. Or there's an actual number?
It looks like the business optimized for the long term while government optimized for short term
And in practice it’s all about ass covering and getting re-elected.
Hard disagree. Business optimized for the value it can capture in the short term. It will be more efficient at that.
Services such as electricity benefit from long-term investment, and create much hard to capture value. In theory, a government will be efficient at allocating resources for that.
We HAVE to stop thinking that business is always more efficient at everything. Business is great, I've started a few and see what they've done to lift people out of poverty-- but it is built on the back of responsible government.