November 29, 2012

Things We Read Today (37), Thursday

Justin Katz

Changing unions' privatization strategy; the government spending ratchet; the government spending racket; and the trap of dependency.

Continue reading on the Ocean State Current...

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Perhaps I differ from some here because I don't see privatization as an inherently positive development. Public versus private isn't the distinction I worry about as much as decentralized market competition, which leads to better services at lower costs, versus progressive central economic planning, which leads to poorer services at higher costs. When we focus on privatization of public services, progressives are quick to point to inefficiencies in technically private industries such as banking and health care - not coincidentally the two most heavily regulated and anti-competitive industries in the U.S. - or crony capitalist fiascos such as 38 Studios. Trained economists will recognize that these are not market failures at all, but they nontheless give statists a foothold to take potshots at business in aggregate and rationalize further government intrusion.

The fundamental problem with a powerful public sector that awards funds to private businesses or heavily regulates them, besides being ripe for corruption, is that it turns what should be a non-zero-sum sector of the economy in which competition would increase aggregate wealth into a zero-sum power grab in which competition actually destroys wealth by lobbying for a fixed government prize at the expense of other firms. As long as government is top-down planning sectors of the economy, restricting competition, and politicizing services that should be non-political, the benefits of privatization will be limited, if any.

Posted by: Dan at November 29, 2012 10:16 PM
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