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Unread 15 Jul 2009, 12:55   #21
Tietäjä
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Re: Is Bigger Government Better

Quote:
Originally Posted by dda View Post
Even in education, students from equal backgrounds who go to privately owned schools tend to have much greater success in school and in college than those in government run schools.
Question is, if the flaws of your local educational system are because the government ran part cannot function well, or because you're just doing it awfully wrong. Finland's been consistently top ten in the World Economic Forum's competitiveness reports for a decade or moreso, and our GDP growth rates have been good. Yet we don't technically even have a privately owned school system; it's mostly public. Sure you can now argue that this is not relevant, because in your situation you can compare public and private solutions, and find that the private runs better: surely this is simply a proof of failure, not impossibility: on the grand scale, the success rates of people going to public or private schools is rather isignificant a question when we can simply look at the economy at large and measure it's success.

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Because it's not their own money they are playing with and more often then not they do not have to please anyone to get it. In the private sector people have to invest themselves and are financially accountable when they steer their organisation into the wrong direction
The client/agent problem is (as you below sort of imply) not restricted to the government sector. Arguably, the private sector is responsible for inflicting large devastation on the economy too. Because they're not accountable. Too big to fall, who owns General Motors? Who owns 60% of RBS? And who owns 40% of Lloyds? The "accountable private sector who are playing with their own money"? No. Certainly, we can put the blame on the government sector for not hitting out guns blazing on Lehman Brothers or Glittnir, since hindsight is so soothing, but I'm sure at this point someone'd cried for free markets, because, well "they're playing with their own money, and they're only accountable for it alone".

The hedge fund game, the investment banks, et cetera: the agents weren't playing with their own money, and despite the downfall of some of their corps (Lehman bla bla), the agents are going to walk out with. Money. The clients are going to walk out with. No money. Another example of how things can go dreadfully wrong on the private sector due to incentive mechanics would be Enron. Which you kind of summarize fairly well here.

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It might be a plus that the public sector isn't driven by greed, unlike the private sector, but the downside is that they aren't properly driven by anything else either.
The question is, which parts of the world we want ran inefficient yet safe, and which parts we're willing to leave for the hands of George Soros & co. (hello 1992 pound sterling). There is no quarantee that the board of directors of a stock company would actually have a priority intrest or incentive in ensuring the company is doing good economic profits. Board bonuses, stock values, and such may be more interesting to a modern PLC than actual profit: and nowhere does it state that a booming stock that profits the owners the best (ie. the stockholders) goes hand by hand with safe, solvent economic profits.

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If they want to maximize their profits they have no choise but to actually try to move their organisation forward
And this is exactly the problem: while public sector may lack the incentive to enhance infrastructure, the private may as well. Who cares about long run economics profits when you can gamble short run? Who cares about solvent loans when you know there's a lender of last resort (I'm provoking someone to tell me it's inherently wrong there's a LOLR to begin with)? Who cares about economic profits when you can go Enron or bust?

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The government is just another business. A business which wishes to grow and prosper.
I'm sure Lloyds was a ****ing bad piece of business to invest in.
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