This translates to the private sector as well and I’d re-phrase thus, “prefer a provider that does a few things well to a provider that does many things poorly.”
Coming from a corporate career it reminds me of arguments that arose when sales (I’ll call them technocrats) presented management (call them citizens in the democratic illustration) with prospects that were outside boundaries of our expertise. For example, a “great opportunity” would be pitched internally that involved running trucking companies in Asiatic countries, something we had never done. Often these opportunities were linked to something that we could do very well, such as international ocean freight management. But frequently the prize was contingent on accepting the dross and sales would fervently make their case that we should take it all on. Always we did much better, financially and operationally, when we kept to our areas of expertise. Thus, it’s easy for me to see the case for containing the scope of Federal government. Especially when I look at the boondoggles (such as Amtrak it has never been profitable), I’d love to believe that reduction of Federal programs and agencies is possible, but some champion must step forward with the will and fortitude.
OK, I'll bite: How do you explain an enterprise that loses $1B / yr (https://enotrans.org/article/amtrak-concedes-perpetual-1-billion-year-operating-losses/) is not a boondoggle? I'm thinking of boondoggle in the Merriam-Webster sense: a wasteful or impractical project or activity often involving graft "The project is a complete boondoggle—over budget, behind schedule, and unnecessary."
Actually Amtrak loses about two billion a year, about half its operating cost. NYC subway has more than a 50% subsidy and Chicago's is about 50%. You still haven't stated why this is a boondoggle. We subsidize roads too. Does that make them a boondoggle?
Well, people actually use roads. Okay, a few people travel on AmTrak but they are an almost infinitesimal proportion of long distance travelers. Subways are actually helpful--even to car and truck drivers--because they relieve what would often be unacceptable congestion.
(Whether Amtrak is a boondoggle depends entirely on your definition of boondoggle. Since I don't have a preferred definition, I don't really care.)
(Did you really think I didn't read the comment, or did you just feel it was cool to insult? If the first, you were wrong. If the second, it doesn't speak well of you.)
"We would move in the direction of having a government that does a few things well rather than many things poorly."
More realistically, a government that does a few things poorly rather than many things terribly and a plethora of things that should not be done at all.
The real problem is that government defines its own limits. The Supreme Court has shown time and again that it's more likely to take the government's side than the people's side. Bureaucracies are well-known for expanding, not shrinking, because finding actual solutions would put them out of work. Politicians are well-known for taking "if it bleeds, it leads" to an extreme in pursuit of votes. So the first step is removing them from the control levers.
The simplest solution I can imagine is to allow anyone to challenge every government law, regulation, and appeals court decision without any politicians, bureaucrats, or judges having any veto. Put 12 jurors in separate rooms with a copy of the law or regulation, a pad of paper, a pen, and possibly a normal English dictionary -- not a legal dictionary! They write down their interpretation of the law or regulation or judicial decision. Pens, not pencils, so no erasing.
When they're all done, publish and compare the opinions. If they differ too much, throw out the entire law or regulation or decision for being too unclear, confusing, or shoddy. Of course this raises the question of who compares the opinions. Start by asking the jurors themselves. If they think they agree, then the next veto step is a referendum; let voters have the final say.
No judicial reviews or appeals. They get no say in the matter. Politicians and bureaucrats have no input. They don't get to talk to the jurors, answer questions, anything.
The opinions also provide the context which governs original meaning or whatever you want to call it. Any court decision later must be in line with what those jurors agreed on. No new interpretations, no precedent can override it. If Congress or judges don't like the jury's opinion, they can repeal the law or regulation and pass a new version, which will be subject to the same jury process. Anyone who wants to challenge a court opinion as differing from the jury's opinions is free to mount the same kind of challenge.
Note that all this is a public veto only. Yes or no, that's all. No revising.
And get rid of severability. If a legislature or bureaucracy or court writes a law or regulation or decision, they did so as a whole. If courts can strike just parts, they are in effect bypassing the full process. If the original authors had wanted them to be separate, they could have written them separately.
Doing a few things well. That was the purpose of limiting govt power to those noted in the Constitution (… conservative case).
The EU is about as bad, often worse when adding nation state govt just below.
Despite treaties calling for Subsidiarity.
It’s also a big part of the Specialization half of the S&T paradigm which is more true and relevant for economic agents than Keynesian or most macro economics. Too bad there aren’t any students making it a school, tho more Austrian school folk might still try. (Bryan Caplan wrote a fine paper on ‘Why I am not an Austrian (economist)’ years ago).
Of course, bureaucrats love everything being paid for by the Fed, since they can, and do, print Free Money, allowing orgs to pay high salaries to bureaucrats who don’t solve the problems. We wait for that post, too.
This govt overreach is part of Anarcho-tyranny, where Dems don’t have all the resources needed to punish all lawbreakers, so they selectively choose which laws to selectively enforce.
Like killing a cute pet squirrel (Peanut) after a SWAT home invasion raid, because the permit had expired and renewal had not yet been decided.
I don't think so. Between the public that wants less social welfare programs and the public that wants a smaller military I'd say it's completely foreign to a very small minority even if few fully embrace it.
"We should prefer a government that does a few things well to a government that does many things poorly."
Yes. Sure. Why wouldn't we want that? But is that an option? If the government only did a few things, would it do them well? Social Security is a relatively simple program compared to Medicare, Obamacare, CDC, FEMA, and most everything else. It is extremely large and gets a lot of attention. Do you really think government would do it better if government did less other things?
We also have to ask if doing it poorly is truly worse than not at all. I'm sure that's true in some cases but in a lot more I'm rather skeptical. How much does the military waste? We can argue about various wars and police actions but what about basic capability and readiness? DoD has the most employees. Do we get rid of it because govt wasted too much money doing it?
"The clear lesson from the private sector is that as a firm adds business lines its efficiency degrades. That is why we end up with millions of separate businesses, not a few giant conglomerates."
No matter what the similarities, government is not a business. No doubt there are bits and pieces that are horribly bad and many more of debatable merits but even if we got rid of these, government would still be a behemoth, barely smaller that before. We aren't going to get rid of Social Security, DoD, CDC, or FEMA. At the top level we can argue against federal involvement in housing, education, and maybe a few other things but again, it will still be huge and diverse. It as no option to doing MANY different things. It can't concentrate on one area of expertise.
I’d add that the failure of past efforts cause congress to try to specify more things. Those specifications add more complexity and the authors don’t really understand the trade offs. I haven’t looked into the EV charger issue but I’d guarantee there is some elaborate set of requirements that all need to be further specified before release. Each of those requirements might sound good in isolation but no one ever tells the subcommittee staffer that that’ll add 18 months to the process before money gets released.
I very much suspect that most of those requirements weren't part of a law passed by Congress. They were regulations promulgated by the various agencies involved with authorizing and installing the chargers.
I'd bet most or all of those regulations came from Congress but I'd agree few if any congressmen and their staffers understood how existing regulation would gum up their new program.
Arnold - Great post, but there’s nothing to disagree with?! Oh wait. You forgot to mention the “positive” again. Our big octopussy government isn’t as clumsy, cruel and crowding as the Soviet bear government. No Gulag here. Our grocery stores are a caveman’s wet dream. And we still have our guns, weed and religion. What more do we need? Yes, let’s cut back more. How about we turn over the least important parts of our national security apparatus to the private sector starting with one of your favorites: fighting pirates. See? You’re not will to give up your pet programs. If you want more limited government, each of us will have to give up something. For you this means giving up your government boats and advocating for Space X and other entrepreneurial equivalents. There! Now we have something to disagree about.
Hmmm. The government is not a Conglomerate. It is a Leviathan.
Conglomerates have waxed and waned in fashion. They were very popular in the 80s. Then there was the discourse around "Core Competences". The experiences of the current tech giants are mixed:
- Amazon is at least 2 businesses joined together (retail, AWS, and maybe TV)
- Apple is a high end consumer good company seeking to move into services
- Microsoft is a business technology octopus (it will offer anything that its customer base of late majority IT managers will buy).
- Alphabet is a conglomerate with 2 massively profitable media businesses at its core (Search and YouTube)
- Meta would love to be a conglomerate but its recent efforts have been lacking.
The complexity of the modern US society and economy means that the Leviathan cannot help but also be complex. And the US govt is more limited that its competitors. The Chinese and European states are far more interventionist that the US.
The problem that the US has is that one political party does not have a coherent vision of government beyond a means of pursing its enemies. A government that does not believe in the validity of its own existence is a self-fulfilling prophecy.
And having worked mostly in the private sector (as well the public), I think most people would be amazed how much money can be wasted and how long bad management practices can persist in supposedly "competitive" organizations: https://tempo.substack.com/p/the-chief-ai-officer-accepts-his
It's not scope. I wouldn't put size or scope anywhere on my diagnosis top ten list of the prime sources of pathology, dysfunction, and poor performance. When things go really wrong it is usually due to those other key problems manifesting in the context of a very narrow and focused scope, not because someone seven paygrades up was too distracted by too many other distinct concerns.
The business examples of problems with scope are true enough, but lead to a false conclusion when extended to the context of government. Let me explain.
In the business case, there is a "competitive position multiplier effect." All else being equal, if your product is consistently 1% lower in value (quality and quantity for price) than your competition, then quickly enough you decline to 100% lower market share. You can be two tenths of a second slower than the guy who won gold and walk home with no medal at all.
For products that are complicated and changing fast, investing more expertise, specialization, and narrow focus pays dividends. And, in the context of intense, ruthless competition, the leadership of a conglomerate doesn't have the cognitive or organizational capacity to match that level of performance. And so, in the business context, attempts at conglomerates often fail hard for those product lines.
Now what happens is that people erroneously jump from these failings to the conclusion that the conglomerate just wasn't competent and that it's products were expensive and lousy. But that's not true. It's not that the conglomerate can't be good at what it does, it's that it can't be -world class- at doing certain things, but you -need- to be world class to -even survive- because even slightly superior competition will edge you out entirely.
Notice that the conglomerate can be 99% as good as the narrow firm, and it's product can be 99% as good a value as that of the specialist narrow firm, but in the perpetual tournament of the merciless marketplace, the failure is absolute.
But the government doesn't have to be world-class at what it does (or, what it is supposed to do, at any rate.) Being good or merely ok or even not totally FUBAR at everything all the time would be a welcome relief. My point is that conglomerate effects are only enough to account for the part of the drop from "best" to "good", but that's only a few percent of the way down the hill to the floor of FUBAR valley, where we find ourselves.
At any rate, the broad scope of government is a global phenomenon that likely can't be narrowed because the source of the scope is global, that is, modern life with all its complexities. The scope of governing is inherently correlated with the scope of life, that is, with the scope of the technological level and degree of specialization and roundabout production. But administering over that vast scope can still be done much, much better than it's being done now.
I'm inclined to agree about "limited government", but limited based on principles. For example, we don't need a federal level regulation of occupational health and safety or air/water pollution that does not cross state lines, becasue no matter how poorly one state does it, it does not impinge on other states. [We would still need an EPA to tax, (not "regulate") air and water pollution including CO2 emissions that do cross state lines.]
Federal input into S&L infrastructure investment through an Infrastructure Bank using CBA and developing best design, procurement, and cost recovery practices because we want it be countercyclical as it could not be with S&L borrowing limits.
And many things should just not be done at all, like farm crop and ethanol subsidies, Jones Act, sugar quota.
Ideally, immigration could be devolved to the state level, not that states could prevent movement but they could regulate the activities of immigrants that caused negative externalities.
OTOH, the cited failures are really not of "management;" the student loan problem was baked into the concept of removing risk from the educational institution.
CDC/FDA should operate according to CBA, but really lots of diseases spread from state to state and Federal regulation of food and drug safety seem reasonable. The problems are policy, not management.
Rein in the Fed? Remove its prudential regulation mandate, yes. And I'd like to see the labor employment mandate morphed into an all resources employment. And "stable prices does give the impression that it should target zero inflation which is not optimal, but maybe let sleeping dogs lie, there
Taxation is not a regulation but in practice it might behave in that way, especially if the tax is especially onerous.
To take an example, taxing semis much more heavily than cars captures the greater cost of damage they do to roads. If the tax were doubled or 5x it would largely eliminate and that would effectively be a regulation but technically still not be one.
This optimistic foray into the murky sea of public administration triggers memories of the vast literature stretching back many decades on the management problems of government bureaucracy.
In particular, one is reminded of Chapter 2 “Organizing Government Supply: The Role of Bureaucracy” of a collection of essays entitled The Handbook of Public Finance which might be of interest to those interested in the history of scholarship addressed to these problems. Maybe because it covers a lot of work I followed avidly during the years of my prime, I suggest that it does a fine job of exploring the many considerations that a would-be Milei might benefit from in formulating strategy.
One of the chapter authors, Thomas Borcherding (https://en.wikipedia.org/wiki/Thomas_Borcherding ) achieved a bit of fame for his “’Bureaucratic Rule of Two,’ which states that ‘Removal of an activity from the private sector to the public sector will double its unit costs of production.’” I was able to read the chapter online at:
The chapter argues in favor of understanding reform strategies in the context of: (1) the budget-maximizing/rent-seeking bureaucrat approach developed by among other Niskanen; (2) the property rights approach developed by Alchian and others; (3) Stigler’s regulatory capture model; and, (4) a synthesis of these that to mind owes a lot to regulatory transaction cost models originating in the work of Oliver Williamson. We are not the first observers to conclude that government appears to operate sub-optimally and a good deal of thought described in the chapter has gone into understanding why this happened in the first place, why it endures, and why previous efforts at reform have failed.
Since populism was alluded to in today's substack, I will also take the opportunity to draw attention to work mentioned on page 67 of the chapter by Werner Pommerhene finding that the institution of citizen referenda acts as a control on bureaucratic growth:
“If a referendum exists, bureaucracy has a weak direct (supply side) influence, because voters continually have the chance of controlling policy, and government is forced to resist bureaucracy's
monopolistic tendencies. Bureaucrats must therefore rely mainly on their role as voters (demand side influence) in order to affect policy outcome. When the institution of a referendum does not exist,
bureaucracy has a stronger direct influence on the supply side: Voters are unable to control government (except at election time), thus that government is open to bureaucracy's monopolistic pressure on the supply side.”
The establishment dogma that oversize government is a direct result of political participation by ignorant voters is thus contradicted.
And similarly, beginning on page 66 of the chapter is a discussion of work by finding that the creation of a civil service commission results in bureaucrat capture and the creation of cartels that can increase public expenditures ranging from 12% for health care and hospitals to 34% for fire protection services. (citing Borcherding, Budgets and Bureaucrats: The Sources of Government Growth (1977) available at: https://archive.org/details/budgetsbureaucra0000borc )
Thus also suggesting that perhaps there is evidence that blind faith in the competency of our technocratic betters may not be entirely well-grounded.
Since The Handbook of Public Finance came out there have of course been oceans of publications in this arena. It seems that perhaps all the work described above has come to be seen as irrelevant and that a new institutional approach emphasizing the advantages of governance under a technocratic elite endowed with high state capacity has become the new orthodoxy: https://www.ceeol.com/search/article-detail?id=1055496 It seems that our new Harris Administration will have broad establishment support in demonstrating the efficacy of this approach.
The competence of government employees is another factor to consider. Their experience, expertise, training and on the job performance are all crucial for a successful delivery of any service or project.
The linked article's recommendation is to devolve more agencies of the federal government to parts of the hinterland. While that would work well for some agencies, for others it would be somewhat incoherent just because the head count of each agency is so small and not what generates its influence. For example, there are only around 13,000 employees at the US Patent & Trademark Office (USPTO), most of whom are patent examiners. It would make sense to split the offices into a US Patent office and a US Trademark office. You could put the Patent office in Houston and the Trademark office in New York. Then for good measure, you could put the Copyright Office in Los Angeles. They are much smaller, but it really should be moved to Contentolopolis. You could continue this process for all agencies, finding the best fit for each one.
Would that really change much fundamentally? Probably not. Consider that the Defense Dept. is the largest civilian employer of bureaucrats; and they are much more distributed across the US and internationally because of the basing system. This has some impact, but not that much, although the DoD is the most diverse agency in terms of the political tendencies of its employees. The reason why D.C. pulls in people is because of the nature of the rules more than the head count size of the bureaucracy.
The real federal bureaucracy in terms of headcount and impact is the "private" sector. Even the farmer is maybe 70%+ federal bureaucrat and 30%- person who pulls sustenance from the earth. The music producer is mostly an intellectual property bureaucrat mixed with a concert planner and song promoter. The corporate executive is mostly a securities regulatory bureaucrat and partially a leader-manager. The CTO is partly an intellectual property bureaucrat, part engineer, and part leader-manager implementing the federal law of human resources, perhaps with a little panache and creativity of their own.
Another question worth considering is what media truly glues the conglomerate together: its media-based religion, its laws, or the media of its money and credit. I believe that they are all bundled and cannot be unbundled.
To update P.J. O'Rourke, "The President, 535 Congressmen, 9 Supreme Court Justices, and 100s of thousands of bureaucrats would have to get real jobs. Our economy would be destroyed overnight."
This translates to the private sector as well and I’d re-phrase thus, “prefer a provider that does a few things well to a provider that does many things poorly.”
Coming from a corporate career it reminds me of arguments that arose when sales (I’ll call them technocrats) presented management (call them citizens in the democratic illustration) with prospects that were outside boundaries of our expertise. For example, a “great opportunity” would be pitched internally that involved running trucking companies in Asiatic countries, something we had never done. Often these opportunities were linked to something that we could do very well, such as international ocean freight management. But frequently the prize was contingent on accepting the dross and sales would fervently make their case that we should take it all on. Always we did much better, financially and operationally, when we kept to our areas of expertise. Thus, it’s easy for me to see the case for containing the scope of Federal government. Especially when I look at the boondoggles (such as Amtrak it has never been profitable), I’d love to believe that reduction of Federal programs and agencies is possible, but some champion must step forward with the will and fortitude.
Amtrak may be a boondoggle but I completely and entirely reject the idea it should be labeled as a boondoggle because it isn't profitable.
OK, I'll bite: How do you explain an enterprise that loses $1B / yr (https://enotrans.org/article/amtrak-concedes-perpetual-1-billion-year-operating-losses/) is not a boondoggle? I'm thinking of boondoggle in the Merriam-Webster sense: a wasteful or impractical project or activity often involving graft "The project is a complete boondoggle—over budget, behind schedule, and unnecessary."
What graft?
Actually Amtrak loses about two billion a year, about half its operating cost. NYC subway has more than a 50% subsidy and Chicago's is about 50%. You still haven't stated why this is a boondoggle. We subsidize roads too. Does that make them a boondoggle?
Well, people actually use roads. Okay, a few people travel on AmTrak but they are an almost infinitesimal proportion of long distance travelers. Subways are actually helpful--even to car and truck drivers--because they relieve what would often be unacceptable congestion.
(Whether Amtrak is a boondoggle depends entirely on your definition of boondoggle. Since I don't have a preferred definition, I don't really care.)
Maybe you should read the thread before you comment.
I did. What's the problem?
(Did you really think I didn't read the comment, or did you just feel it was cool to insult? If the first, you were wrong. If the second, it doesn't speak well of you.)
"We would move in the direction of having a government that does a few things well rather than many things poorly."
More realistically, a government that does a few things poorly rather than many things terribly and a plethora of things that should not be done at all.
The real problem is that government defines its own limits. The Supreme Court has shown time and again that it's more likely to take the government's side than the people's side. Bureaucracies are well-known for expanding, not shrinking, because finding actual solutions would put them out of work. Politicians are well-known for taking "if it bleeds, it leads" to an extreme in pursuit of votes. So the first step is removing them from the control levers.
The simplest solution I can imagine is to allow anyone to challenge every government law, regulation, and appeals court decision without any politicians, bureaucrats, or judges having any veto. Put 12 jurors in separate rooms with a copy of the law or regulation, a pad of paper, a pen, and possibly a normal English dictionary -- not a legal dictionary! They write down their interpretation of the law or regulation or judicial decision. Pens, not pencils, so no erasing.
When they're all done, publish and compare the opinions. If they differ too much, throw out the entire law or regulation or decision for being too unclear, confusing, or shoddy. Of course this raises the question of who compares the opinions. Start by asking the jurors themselves. If they think they agree, then the next veto step is a referendum; let voters have the final say.
No judicial reviews or appeals. They get no say in the matter. Politicians and bureaucrats have no input. They don't get to talk to the jurors, answer questions, anything.
The opinions also provide the context which governs original meaning or whatever you want to call it. Any court decision later must be in line with what those jurors agreed on. No new interpretations, no precedent can override it. If Congress or judges don't like the jury's opinion, they can repeal the law or regulation and pass a new version, which will be subject to the same jury process. Anyone who wants to challenge a court opinion as differing from the jury's opinions is free to mount the same kind of challenge.
Note that all this is a public veto only. Yes or no, that's all. No revising.
And get rid of severability. If a legislature or bureaucracy or court writes a law or regulation or decision, they did so as a whole. If courts can strike just parts, they are in effect bypassing the full process. If the original authors had wanted them to be separate, they could have written them separately.
Great insight!
Doing a few things well. That was the purpose of limiting govt power to those noted in the Constitution (… conservative case).
The EU is about as bad, often worse when adding nation state govt just below.
Despite treaties calling for Subsidiarity.
It’s also a big part of the Specialization half of the S&T paradigm which is more true and relevant for economic agents than Keynesian or most macro economics. Too bad there aren’t any students making it a school, tho more Austrian school folk might still try. (Bryan Caplan wrote a fine paper on ‘Why I am not an Austrian (economist)’ years ago).
Of course, bureaucrats love everything being paid for by the Fed, since they can, and do, print Free Money, allowing orgs to pay high salaries to bureaucrats who don’t solve the problems. We wait for that post, too.
This govt overreach is part of Anarcho-tyranny, where Dems don’t have all the resources needed to punish all lawbreakers, so they selectively choose which laws to selectively enforce.
Like killing a cute pet squirrel (Peanut) after a SWAT home invasion raid, because the permit had expired and renewal had not yet been decided.
Could influence the election!
Well said. Most “In My Tribe” readers already believed this; alas, this sort of thinking is foreign to most of the voting public.
I don't think so. Between the public that wants less social welfare programs and the public that wants a smaller military I'd say it's completely foreign to a very small minority even if few fully embrace it.
"We should prefer a government that does a few things well to a government that does many things poorly."
Yes. Sure. Why wouldn't we want that? But is that an option? If the government only did a few things, would it do them well? Social Security is a relatively simple program compared to Medicare, Obamacare, CDC, FEMA, and most everything else. It is extremely large and gets a lot of attention. Do you really think government would do it better if government did less other things?
We also have to ask if doing it poorly is truly worse than not at all. I'm sure that's true in some cases but in a lot more I'm rather skeptical. How much does the military waste? We can argue about various wars and police actions but what about basic capability and readiness? DoD has the most employees. Do we get rid of it because govt wasted too much money doing it?
"The clear lesson from the private sector is that as a firm adds business lines its efficiency degrades. That is why we end up with millions of separate businesses, not a few giant conglomerates."
No matter what the similarities, government is not a business. No doubt there are bits and pieces that are horribly bad and many more of debatable merits but even if we got rid of these, government would still be a behemoth, barely smaller that before. We aren't going to get rid of Social Security, DoD, CDC, or FEMA. At the top level we can argue against federal involvement in housing, education, and maybe a few other things but again, it will still be huge and diverse. It as no option to doing MANY different things. It can't concentrate on one area of expertise.
I’d add that the failure of past efforts cause congress to try to specify more things. Those specifications add more complexity and the authors don’t really understand the trade offs. I haven’t looked into the EV charger issue but I’d guarantee there is some elaborate set of requirements that all need to be further specified before release. Each of those requirements might sound good in isolation but no one ever tells the subcommittee staffer that that’ll add 18 months to the process before money gets released.
I very much suspect that most of those requirements weren't part of a law passed by Congress. They were regulations promulgated by the various agencies involved with authorizing and installing the chargers.
I'd bet most or all of those regulations came from Congress but I'd agree few if any congressmen and their staffers understood how existing regulation would gum up their new program.
I would take that bet.
Arnold - Great post, but there’s nothing to disagree with?! Oh wait. You forgot to mention the “positive” again. Our big octopussy government isn’t as clumsy, cruel and crowding as the Soviet bear government. No Gulag here. Our grocery stores are a caveman’s wet dream. And we still have our guns, weed and religion. What more do we need? Yes, let’s cut back more. How about we turn over the least important parts of our national security apparatus to the private sector starting with one of your favorites: fighting pirates. See? You’re not will to give up your pet programs. If you want more limited government, each of us will have to give up something. For you this means giving up your government boats and advocating for Space X and other entrepreneurial equivalents. There! Now we have something to disagree about.
Hmmm. The government is not a Conglomerate. It is a Leviathan.
Conglomerates have waxed and waned in fashion. They were very popular in the 80s. Then there was the discourse around "Core Competences". The experiences of the current tech giants are mixed:
- Amazon is at least 2 businesses joined together (retail, AWS, and maybe TV)
- Apple is a high end consumer good company seeking to move into services
- Microsoft is a business technology octopus (it will offer anything that its customer base of late majority IT managers will buy).
- Alphabet is a conglomerate with 2 massively profitable media businesses at its core (Search and YouTube)
- Meta would love to be a conglomerate but its recent efforts have been lacking.
The complexity of the modern US society and economy means that the Leviathan cannot help but also be complex. And the US govt is more limited that its competitors. The Chinese and European states are far more interventionist that the US.
The problem that the US has is that one political party does not have a coherent vision of government beyond a means of pursing its enemies. A government that does not believe in the validity of its own existence is a self-fulfilling prophecy.
And having worked mostly in the private sector (as well the public), I think most people would be amazed how much money can be wasted and how long bad management practices can persist in supposedly "competitive" organizations: https://tempo.substack.com/p/the-chief-ai-officer-accepts-his
It's not scope. I wouldn't put size or scope anywhere on my diagnosis top ten list of the prime sources of pathology, dysfunction, and poor performance. When things go really wrong it is usually due to those other key problems manifesting in the context of a very narrow and focused scope, not because someone seven paygrades up was too distracted by too many other distinct concerns.
The business examples of problems with scope are true enough, but lead to a false conclusion when extended to the context of government. Let me explain.
In the business case, there is a "competitive position multiplier effect." All else being equal, if your product is consistently 1% lower in value (quality and quantity for price) than your competition, then quickly enough you decline to 100% lower market share. You can be two tenths of a second slower than the guy who won gold and walk home with no medal at all.
For products that are complicated and changing fast, investing more expertise, specialization, and narrow focus pays dividends. And, in the context of intense, ruthless competition, the leadership of a conglomerate doesn't have the cognitive or organizational capacity to match that level of performance. And so, in the business context, attempts at conglomerates often fail hard for those product lines.
Now what happens is that people erroneously jump from these failings to the conclusion that the conglomerate just wasn't competent and that it's products were expensive and lousy. But that's not true. It's not that the conglomerate can't be good at what it does, it's that it can't be -world class- at doing certain things, but you -need- to be world class to -even survive- because even slightly superior competition will edge you out entirely.
Notice that the conglomerate can be 99% as good as the narrow firm, and it's product can be 99% as good a value as that of the specialist narrow firm, but in the perpetual tournament of the merciless marketplace, the failure is absolute.
But the government doesn't have to be world-class at what it does (or, what it is supposed to do, at any rate.) Being good or merely ok or even not totally FUBAR at everything all the time would be a welcome relief. My point is that conglomerate effects are only enough to account for the part of the drop from "best" to "good", but that's only a few percent of the way down the hill to the floor of FUBAR valley, where we find ourselves.
At any rate, the broad scope of government is a global phenomenon that likely can't be narrowed because the source of the scope is global, that is, modern life with all its complexities. The scope of governing is inherently correlated with the scope of life, that is, with the scope of the technological level and degree of specialization and roundabout production. But administering over that vast scope can still be done much, much better than it's being done now.
I'm inclined to agree about "limited government", but limited based on principles. For example, we don't need a federal level regulation of occupational health and safety or air/water pollution that does not cross state lines, becasue no matter how poorly one state does it, it does not impinge on other states. [We would still need an EPA to tax, (not "regulate") air and water pollution including CO2 emissions that do cross state lines.]
Federal input into S&L infrastructure investment through an Infrastructure Bank using CBA and developing best design, procurement, and cost recovery practices because we want it be countercyclical as it could not be with S&L borrowing limits.
And many things should just not be done at all, like farm crop and ethanol subsidies, Jones Act, sugar quota.
Ideally, immigration could be devolved to the state level, not that states could prevent movement but they could regulate the activities of immigrants that caused negative externalities.
OTOH, the cited failures are really not of "management;" the student loan problem was baked into the concept of removing risk from the educational institution.
CDC/FDA should operate according to CBA, but really lots of diseases spread from state to state and Federal regulation of food and drug safety seem reasonable. The problems are policy, not management.
Rein in the Fed? Remove its prudential regulation mandate, yes. And I'd like to see the labor employment mandate morphed into an all resources employment. And "stable prices does give the impression that it should target zero inflation which is not optimal, but maybe let sleeping dogs lie, there
Taxation with the intent of affecting pollution IS regulation.
Taxation is not a regulation but in practice it might behave in that way, especially if the tax is especially onerous.
To take an example, taxing semis much more heavily than cars captures the greater cost of damage they do to roads. If the tax were doubled or 5x it would largely eliminate and that would effectively be a regulation but technically still not be one.
Light regulation is still regulation.
Nobody said anything about light regulation.
This optimistic foray into the murky sea of public administration triggers memories of the vast literature stretching back many decades on the management problems of government bureaucracy.
In particular, one is reminded of Chapter 2 “Organizing Government Supply: The Role of Bureaucracy” of a collection of essays entitled The Handbook of Public Finance which might be of interest to those interested in the history of scholarship addressed to these problems. Maybe because it covers a lot of work I followed avidly during the years of my prime, I suggest that it does a fine job of exploring the many considerations that a would-be Milei might benefit from in formulating strategy.
One of the chapter authors, Thomas Borcherding (https://en.wikipedia.org/wiki/Thomas_Borcherding ) achieved a bit of fame for his “’Bureaucratic Rule of Two,’ which states that ‘Removal of an activity from the private sector to the public sector will double its unit costs of production.’” I was able to read the chapter online at:
https://www.google.com/books/edition/Handbook_of_Public_Finance/3e_QMFY5GPkC?hl=en&gbpv=1&pg=PA91&printsec=frontcover
The chapter argues in favor of understanding reform strategies in the context of: (1) the budget-maximizing/rent-seeking bureaucrat approach developed by among other Niskanen; (2) the property rights approach developed by Alchian and others; (3) Stigler’s regulatory capture model; and, (4) a synthesis of these that to mind owes a lot to regulatory transaction cost models originating in the work of Oliver Williamson. We are not the first observers to conclude that government appears to operate sub-optimally and a good deal of thought described in the chapter has gone into understanding why this happened in the first place, why it endures, and why previous efforts at reform have failed.
Since populism was alluded to in today's substack, I will also take the opportunity to draw attention to work mentioned on page 67 of the chapter by Werner Pommerhene finding that the institution of citizen referenda acts as a control on bureaucratic growth:
“If a referendum exists, bureaucracy has a weak direct (supply side) influence, because voters continually have the chance of controlling policy, and government is forced to resist bureaucracy's
monopolistic tendencies. Bureaucrats must therefore rely mainly on their role as voters (demand side influence) in order to affect policy outcome. When the institution of a referendum does not exist,
bureaucracy has a stronger direct influence on the supply side: Voters are unable to control government (except at election time), thus that government is open to bureaucracy's monopolistic pressure on the supply side.”
(https://www.econstor.eu/bitstream/10419/68850/1/68854715X.pdf )
The establishment dogma that oversize government is a direct result of political participation by ignorant voters is thus contradicted.
And similarly, beginning on page 66 of the chapter is a discussion of work by finding that the creation of a civil service commission results in bureaucrat capture and the creation of cartels that can increase public expenditures ranging from 12% for health care and hospitals to 34% for fire protection services. (citing Borcherding, Budgets and Bureaucrats: The Sources of Government Growth (1977) available at: https://archive.org/details/budgetsbureaucra0000borc )
Thus also suggesting that perhaps there is evidence that blind faith in the competency of our technocratic betters may not be entirely well-grounded.
Since The Handbook of Public Finance came out there have of course been oceans of publications in this arena. It seems that perhaps all the work described above has come to be seen as irrelevant and that a new institutional approach emphasizing the advantages of governance under a technocratic elite endowed with high state capacity has become the new orthodoxy: https://www.ceeol.com/search/article-detail?id=1055496 It seems that our new Harris Administration will have broad establishment support in demonstrating the efficacy of this approach.
The competence of government employees is another factor to consider. Their experience, expertise, training and on the job performance are all crucial for a successful delivery of any service or project.
The linked article's recommendation is to devolve more agencies of the federal government to parts of the hinterland. While that would work well for some agencies, for others it would be somewhat incoherent just because the head count of each agency is so small and not what generates its influence. For example, there are only around 13,000 employees at the US Patent & Trademark Office (USPTO), most of whom are patent examiners. It would make sense to split the offices into a US Patent office and a US Trademark office. You could put the Patent office in Houston and the Trademark office in New York. Then for good measure, you could put the Copyright Office in Los Angeles. They are much smaller, but it really should be moved to Contentolopolis. You could continue this process for all agencies, finding the best fit for each one.
Would that really change much fundamentally? Probably not. Consider that the Defense Dept. is the largest civilian employer of bureaucrats; and they are much more distributed across the US and internationally because of the basing system. This has some impact, but not that much, although the DoD is the most diverse agency in terms of the political tendencies of its employees. The reason why D.C. pulls in people is because of the nature of the rules more than the head count size of the bureaucracy.
The real federal bureaucracy in terms of headcount and impact is the "private" sector. Even the farmer is maybe 70%+ federal bureaucrat and 30%- person who pulls sustenance from the earth. The music producer is mostly an intellectual property bureaucrat mixed with a concert planner and song promoter. The corporate executive is mostly a securities regulatory bureaucrat and partially a leader-manager. The CTO is partly an intellectual property bureaucrat, part engineer, and part leader-manager implementing the federal law of human resources, perhaps with a little panache and creativity of their own.
Another question worth considering is what media truly glues the conglomerate together: its media-based religion, its laws, or the media of its money and credit. I believe that they are all bundled and cannot be unbundled.
To update P.J. O'Rourke, "The President, 535 Congressmen, 9 Supreme Court Justices, and 100s of thousands of bureaucrats would have to get real jobs. Our economy would be destroyed overnight."
Agree. A possible way forward:
https://digitalcommons.library.umaine.edu/cgi/viewcontent.cgi?article=1989&context=mpr