What do states do better than the private sector?
Chris Dillow asks, rhetorically, of David Cameron:
Can he point to a single thing the British state does better than the private sector, where comparisons are possible?
The first example I thought of is the BBC’s news website. According to Alexa, it’s the most popular UK-based news website, and the 3rd most popular in the world.
It’s unlikely that Chris Dillow thinks the UK state is dramatically less competent than states in general, so we can generalise this question to: Is there a single thing states do better than the private sector, where comparisons are possible? He evidently believes the answer to be “no”. But look at the medium for his message: he’s using the state-developed Internet network and the state-developed World-Wide Web hypertext system.
If the private sector really does do everything better than the state, then we’d be using a privately-developed computer network and a privately-developed hypertext system; it’s not as if there haven’t been many examples of each. Something to remember when blogs like Samizdata say that states do nothing well.
Might I risk a head above the parapet and say the state does health care better, depending on how you look at it. There is no doubt that high end private care is better than your bog standard NHS, but looking at, say, the US, I say the state does a better job of providing decent, overall cover than does the private sector, since the private sector does not cover the bottom end.
PS I know nothing about state funded private health insurance a la Canada, and must admit that I would be immediately suspicious. Can anyone help me out?
I’m a bit of an amateur at this, but looked into the history of the internet for my thesis on computer mediated communication, and the impression I got leads me to think it’s a bit misleading to call the internet and the World Wide Web “state-developed.”
The development was supported by the state, but came primarily from university research labs, and while DARPANET was indeed a government programme, the spread and development and coordinarion required to turn the internet into what we know and love today required an extraordinary level of cooperation between academic, private and public bodies, especially the TCP/IP switch, enabling the compatibility that makes it a world wide network.
As with most simple statements “state-developed” can mean any number of different degrees. I think your general point is probably correct, but the internet seems a very complicated example to use in such a simple way.
Katie,
at the most fundamental, nothing is created by the state just as nothing is created by the private sector; everything is in fact created by individuals. But obviously that’s irrelevant; what’s important is the social structures that surrounded those individuals’ creative efforts. By “state-developed” I mean primarily funded by the public sector and mangaged by public-sector institutions, because that’s primarily the framework under which the tcp/ip suite of protocols and the WWW were developed.
Indeed, but it doesn’t really matter who developed something, just how it is used. You’d be hard pressed to describe the current Interweb as a state institution. And the Beeb website is a fine example of oodles of state money crowding out private sector competition, I’d say. Massive barriers to entry, and all that – who could afford to compete?
Katherine: The stats don’t support your argument – the survival rates (across the board) in the US for various forms of disease (heart, cancer, etc…) are all better than the NHS, which suggests the US system is better. I wouldn’t go so far as to call the US system ‘private’ however – it wouldn’t be my ideal model for a healthcare system, but it certainly seems to work better than our mess.
_the US system … certainly seems to work better than our mess._
At a hugely inflated cost, and with much more limited coverage, however.
I have another candidate: nuclear power.
And underwriting any large social risk, or investing in potentially large but unknown social benefits. And internalising externalities on a large scale (cf. fuel tax). And policing Tragedy of the Commons situations (e.g. fishing rights, ‘countryside’).
On top of that, anything at all that requires a civic element: private sector arrangements cannot ever achieve that. So anything from state education to the Skye road bridge. And that includes the BBC website, too.
[BTW, on the Beeb website, Andrew. I’m not sure you can call it crowding out. There is little BBC reach in the US, for example, yet nothing anywhere near as good exists there. There could be some tangential BBC effect, of course. But the oft cited anti-Americanism of the Beeb would surely leave a huge market opening for some ‘patriotic’ websites. Unless the Beeb isn’t anti-American at all.]
Phil: the point with the internet is surely that the result was hardly what was intended by the public agencies that started it all off. Yes, the public institutions created a great incubator for the technology – but it was really private purposes (university academics at first, porn and commerce later) that really created the Internet as we know and understand it now. A very positive unintended consequence, which is balanced by many negative examples.
J: yes, US healthcare costs a lot more, but the question was about standards and outcomes. The other examples – social risks, internalising externalities, etc, would be covered by Chris’s “where comparisons are possible” caveat, I’d guess. That said, if you pick up some of Coase’s essays you’ll find some good examples of non-state solutions to commons and externalities issues that evolved over time. (For example, tearing to shreds Samuelson’s “lighthouses are public goods” arguments).
“…anything at all that requires a civic element: private sector arrangements cannot ever achieve that.” Rubbish! Especially as you use education as your example – how about universities? While often now tied to the public sector, they didn’t evolve as such, and retain formal independence over here (but look at the US: are you saying Harvard or Chicago have no civic element?). Same for private schools – most of the products from which seem to be cloyingly civic in my experience. One of the failings of political discussion today is to conflate the public realm with the public sector. Its worst consequence is that it allows everybody the copout we see today with Live8 – that all we have to do is complain about government inaction, and we’re absolved of our obligations.
B: do you mean the standards and outcomes for the [insert disputed number here] million without insurance of any kind in the US? I’d be happier to compare ours unfavourably to the (part-private and very expensive) France. But I reckon a quality comparison without considering cost is almost meaningless.
And on the last, I plain disagree. I don’t consider private educational institutions as part of the civic realm, not in a shared sense anyway. But as you know, I’m no public sector evangelist. I’d rather private solutions, direct action, where possible. But sometimes government action is the best solution: to stop, for example, free riding on poverty alleviation, clean air, etc. And, IMHO, to bear large social risks or invest in unknowable benefits – nuclear power – which would have collapsed in the UK without the government.
(Final, final point: on CD’s criteria, would cross-country comparisons count? How about Europe’s public rail networks versus ours and Amtrak? And how about a counterfactual: if we want to make sensible comparisons about standards of education, are there any private schools with an intake of inner city Hackney standards, to make a meaningful private/public comparison possible?)
B: you’re right to pull me up on “cannot ever“. Charities, after all, are private institutions, and football clubs. And so on. I was that rarest of things in the blogoverse: WRONG.
“And the Beeb website is a fine example of oodles of state money crowding out private sector competition, I’d say. ”
It’s not the money that’s “crowding out” the competition, it’s the product. I always look at that argument as part of the privatizer’s two step. Puiblic services are always worse, excpet where they’re not. And where they’re not they “crowd out” the private sector. Hmmmmm…
The internet is merely one case of co-operation between state/non-state enterprises.
To take up Jarndyce’s point about “bear large social risks or invest in unknowable benefits“, as a scientist, I was often asked how my (state-funded) research into the way genetic systems have been conserved was justifiable in terms of expense and why, quite frankly, we need to know what injecting fly DNA into frog eggs will do? Private money will, as a general rule, not pay for work like that. It was the applied research, the kind that private enterprise does so well, that took the resulting data and turned it into a test for detection of (notoriously difficult to diagnose) bowel cancer. However, without the basic (state-funded, vivisection-driven) research, there would have been nothing to do applied research on.
That said, I’m willing to wager it has far, far, more to do with competition, than whether something is state or privately funded. Scientists are notoriously competitive, even if they measure their value in terms of quality of papers published and recognition, as much as cash. NHS and education vouchers anyone?
J: healthcare another time, I think.
On the other stuff – cross-country comparisons are surely ok, although obviously there are contextual factors involved. To give one example, I seem to recall that one of the Scandinavian countries has a private fire and rescue service – but even if it is good, it can’t simply be replicated here, because of different traditions, etc.
Will pass over the wrongness in silence..!
B – just one more thing on ownership and the public realm: the qualitative difference between corporate private ownership for profit and other types of private ownership, when it comes to shared feeling. For example, the ‘dislocated’ situation Manchester United fans find themselves in couldn’t happen to Barcelona and Real Madrid that are fan-owned, or to clubs like Liverpool that are philanthropically owned (for now, anyway, by the Moores family). Ditto charities, that while more ‘private’, are non-profit. I’m not sure I can think of a for-profit or corporate concern that fits neatly into your public realm.
Beeb websites. 18 months ago they employed more people than Google. Public better than private?
Civic element? RNLI? This is better or worse than, say, the US Coastguard? Public goods? Ever read any Coase? On lighthouses? On pollution?
Tragedies of the Commons? Even Hardin, the originator, stated that there could be private as well as social solutions.
If you want to say that there is something that the State does better than the private sector why not use the example that even libertarians will agree with. Defense. You really don’t want competing private armies wandering around looking for the next pay cheque.
Agreed, but many public (i.e., government) organisations behave in ways which are hardly supportive of the civic ethos. Whether because they’re predatory (the public choice view) or just plain bureaucratic, public sector organisations aren’t adept at promoting fellow-feeling – they work through administrative rights rather than mutual responsibility.
On the other hand, although most for-profits aren’t exactly public-spirited, they do create the wealth which allows people to be so. The public realm, if it is to mean anything, should be distinct from the private realm in which market exchange takes place.
Tim – defence would also fit under the comparability caveat, surely?
Jarndyce: At a hugely inflated cost, and with much more limited coverage, however.
And yet their survivability stats for various diseases are better in aggregate than ours. Something must be working, no?
On education, my experience is that the alumni of private schools have far more civic pride than those of state schools. Years of having traditional values and ceremonies bashed into them will do that.
Jamie K: It’s not the money that’s “crowding out†the competition, it’s the product. I always look at that argument as part of the privatizer’s two step. Puiblic services are always worse, excpet where they’re not. And where they’re not they “crowd out†the private sector. Hmmmmm…
Not at all – it is the barrier to entry that crowds out competitors in this case – why recreate the Beeb website in the private sector when the costs to do so would be so high, and the likely brand loyalty of people to the Beeb would prevent you being as successful?
Blimpish,
To give one example, I seem to recall that one of the Scandinavian countries has a private fire and rescue service
Not that I know of, and I live in Sweden. However Finland had a really strong network of volonteer fire brigades in the late 19th century, even though that had a lot to do with fire brigades being one of the only means of organisation that did not bring down the wrath of their Russian overlords. So even tough they were fire brigades they also arranged dances and debate nights and such.
The point being, although there is no Scandinavian country today with a private rescue and fire services (to my knowledge) there has been. And yes it took a special set of circumstances to bring it about, thus you were right in your observation.
I was trying to think out some good point about education with universities in Europe started in general by governments or the church (with the right of taxation), but thinking about if the church (and yes, historically it is the chruch in Europe) is private or public lead me astray. I am not sure on whether the original question is posed in a good way. Afterall is there any good definitions of “public” and “private” that would fit the wide range of socities being compared here? Ownership is no good definition if you do not have a good definition of what ownership means, and control is so hard to define.
Maybe we should also look at religion vs state vs private.
I mean religion gave us almost all of the world’s best buildings, music* and art.
States have given us the Palace of Westminster, the Pyramids and the Millennium Dome (hmm, well the Tour de Eiffel)
I also remind you that the french state gave away for FREE photography patents – not something you’d see a private individual do.
The problem with private is SELFISHNESS. The US health system is selfish. Great if you’re well-to-do. Private businesses are great if you’re in ownership or top-level management or ultimately you get screwed. There’s nothing wrong with capitalism except people.
*Except Beethoven
Swedish…: I was unsure earlier, but… Either way, as you say, the point was about the importance of context, and the volunteer case you mention is much better.
On your other point, the public/private split only really applies since the 19th century in any meaningful way. Before the industrial period, even most ‘private sector’ companies owed their existence to charters and the like, and the church and other estates muddies the issue somewhat. That said, universities in the US tended to be very much private institutions at the start (to my knowledge), as many remain today.
I think the point about cost on health care is well made. If we spent as much per head on health care as is done in the US, then our NHS would be vastly better. The trouble with the US private system is that the distribution of spend is obscenely uneven. And it is also more than just about money, it is about worry. I am glad that I never have to negotiate with an insurance company for treatment.
If we spent as much per head on health care as is done in the US, then our NHS would be vastly better.
Do you have any evidence for that assertion? The evidence of the recent past is that increased spending on the NHS doesn’t in fact vastly improve it.
The trouble with the US private system is that the distribution of spend is obscenely uneven.
And yet their stats for survivability for various diseases are better than ours, in aggregate, even across social classes. Why would this be so if the spend was so uneven, as you claim?
I am glad that I never have to negotiate with an insurance company for treatment.
Try negotiating with a quangocrat who thinks the drug treatment you need is too expensive to be provided for ‘free’.
Andrew: to quote myself and this is tough as I haven’t yet published this quote, but have it in a state of Boy Scout preparedness:
“The NHS shows that we can throw money at anything and it won’t get better – does the NHS have more corruption than Africa? Possibly, and that’s the trouble.”
What about water supply and sewers. Even where these things are in private ownership, the state built them. If we had waited for the private sector, we would still have the village pump and open sewers running down the middle of the street.
The private sector rarely, if ever, builds basic infrastructure such as this.
Blimpish,
thanks for the link about Denmark. You live and learn. As far as I can see from the Nordic states rescue cooperation page that info is still accurate.
Steve,
French water and sewage provision is almost all (and has always been) private sector.
and the french smell…
Tim: isn’t most of it contracted out though, rather than wholly privately-initiated?
I’d think Steve’s point is overstated, but still right. By now, we’d have got water supply and sewerage, because the relative cost is low. But at the start, it’s a commons issue – sanitation being partly a public good.
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Steve’s point is basically correct. There is a whole class of things which states provide because the incentive for private provision is too small. The classic example is a lighthouse. If a shipping company builds a lighthouse to warn their ships off dangerous rocks, the lighthouse is provided for free to everyone else (non-excludability).
Public goods says it better than I can.
Another essential role of the state is to regulate the private sector, because it won’t regulate itself.
It’s hard to argue that the state does basic, ‘blue skies’ research better than the private sector when you have companies with track records like IBM and AT&T. Then again, AT&T was a monopoly and obviously managed in such a way that the geeks could draw salaries unnoticed and do their own thing.
The state can be run with ideals other than profit; for example, Tony Blair thinks 50pc of people should have a higher education. Granted, that might be (and almost certainly is) to train the workforce and make the UK more competitive in the hi-tech sectors, but it might be because he thinks it’s a Good Thing.
Mind you, if people wanted to go to university enough, they’d surely stump up the cash? Some people simply can’t afford to. They could take out a loan, but what if they fail the course, or study something a bit useless? OK, insurance. Then the insurance company will be asking for your parents IQ scores or something to judge your premiums (a case for regulation. Should an insurance company be allowed to ask for, say, genetic tests for predisposition to disease?). The state can take a chance and spread the risk, equally. The state can ensure equality of access rights.
The long term goal of training the entire population to a higher standard is something we could all agree is a good thing, but the education of people who can’t afford it can’t be funded on a voluntary basis by those who can. So we have taxes, which are sort of semi-voluntary. You know it’s right but you hate it anyway, like tetanus shots.
I’m making a state sound a bit like a charity with involuntary contributions. Didn’t mean to come out like that.