Comments on: Prefer Local Government

By: Steve

Steve — Thu, 22 Oct 2009 17:53:19 +0000

I wonder if there’s a “sweet spot” for government size. One of the smallest forms of government in the USA is the Home Owner’s Association, and the sheer volume of the abuse anecdotes originating with them approaches the statistically significant.

By: Thom Blake

Thom Blake — Fri, 16 Oct 2009 15:47:51 +0000

My intuition goes the other way on that one – I would suppose that the local governments produce less waste because they can be corrupt without going through official channels: protection rackets, extortion, etc.

By: Robert Koslover

Robert Koslover — Fri, 16 Oct 2009 01:49:10 +0000

Oh, and I should also add, that even when the direct price is not obviously higher (such as to purchase a stay for a government employee at a hotel room) the Government spends considerable taxpayer money (overhead again!) on processing the paperwork to track and audit the expenses, to refund the individual making the expense, etc. So the taxpayers pay more for that hotel room (occupied by a government employee on travel) than merely the price charged by the hotel, the latter which may be quite reasonable.

By: Lord

Lord — Fri, 16 Oct 2009 01:32:58 +0000

A question is whether it increases by more than the size of contract. If the size of the contract increases by more than the price, it is a matter of efficiency of purchasing, and it could be more efficient even if the price is higher.

By: George

George — Fri, 16 Oct 2009 00:55:23 +0000

I guess there’s trade-off between predictable laws and efficient procurement. Personally, I prefer a small but centralised government. That would minimise the waste described here, but still ensure consistent and predictable rules no matter where I travel.

By: Robert Koslover

Robert Koslover — Fri, 16 Oct 2009 00:52:49 +0000

Constant, have you ever sold anything to the federal government? It's not the seller that is explicitly inefficient; it's the buyer, who imposes thick bureacratic and legal rules/hurdles upon the seller, which force the price higher so that the seller can recoup the extra costs when selling to the Government! The paperwork to sell a product to the Government is, on average, substantially more complex than to sell that same product to a commercial company, or to an ordinary person on the street.

By: Robert Koslover

Robert Koslover — Fri, 16 Oct 2009 00:43:21 +0000

A related subject is the efficiency of government-contracting. I work for a small government-contracting R&D company. In this business, it is very well-known that small companies generally have lower overhead rates than large companies. I.e., if you (a customer) want to buy, say, 100 hours of a skilled engineer from a large company like Boeing, you really will have to pay more per hour (to the company, not directly to the employee) to obtain that engineer’s labor than you would if you purchased that exact same engineer’s time from a small government contracting company (yes, which could even be paying the engineer the same salary). Overhead rates are inverse to efficiency. So, why don’t large companies have lower overhead rates, due to “economies of scale?” Well, the experimental fact is that they don’t. For whatever reason, in my business, smaller is almost always more efficient (i.e., lower overhead). And this direct experience of mine, gained over the last 22 years, is one of the reasons I prefer (and recommend to others) that any/all tasks be performed by the smallest organizations that can do them! I.e., I assert, more generally, that small organizations (of nearly any kind) are more efficient than larger ones. Please friends, leave only the larger tasks (like building a 747) to the big companies, and leave only the biggest government tasks (like running the DoD) to the Federal Government. Thanks.

By: Constant

Constant — Thu, 15 Oct 2009 23:01:03 +0000

I don’t really understand this. Price is determined by the market, not by the buyer. Suppose that the town government buys pencils from Staples, and the national government also buys pencils from Staples. How does the national government end up paying more?

If I were trying to measure government inefficiency, I don’t think I would do it by looking at the prices of goods bought, presumably on the market, presumably at market prices.

If different levels of government paid different prices for the same goods, then I’m inclined toward mikem’s hypothesis: that somebody somewhere is pocketing the difference who isn’t supposed to.

By: Paavo Ojala

Paavo Ojala — Thu, 15 Oct 2009 21:55:51 +0000

“it may just be that whoever negotiated this agreement for the government had lower incentives to bargain for the best price”

Would this apply to town governments vs. regional governments? Town politicians probably has less in the game, than regional politicians. Why would they have higher incentives than career politicians? Of course career politicians might be more corruptible. The higher costs for regional government can’t be the fault of bureaucrats if semiautonomous bodies (run by bureaucrats) have lower costs.

Maybe it is just that town politicians feel more emotional responsibility to do their best for their neighbours. Regional, national, or federal politicians don’t really have to bear the emotional responsibility, only the political responsibility.

By: A dude

A dude — Thu, 15 Oct 2009 21:18:20 +0000

Last time I looked at my US tax return, about 1/4 of $$ went to the state (CA, not the most efficient, ahem) and 3/4 to the Federal. When I thought about public services I get for that, all of them were state or local (roads, police, etc). Couldn’t identify a single benefit that I derive from the Federal gov’t.

In that context, I guess I am not very price-sensitive when it comes to Federal spending, as it doesn’t chenge the value I get (zero)