Saturday, September 29, 2007

The Difference Between Government and the Free Market

Earlier this week, I had a couple of experiences that demonstrate just how radically different the culture of government bureacracy is compared to the productive sector, specifically as it relates to the subject of serving the public.

First stop: The Bureau of Motor Vehicles. I walked into a branch to take care of some business, took my number, and quietly stood off to the side to wait my turn to get served. It was going to be a while because the line was rather long. A few other people came in behind me and did the same thing. A lot of the seats were filled up, but if you wanted to sit down, you probably be coming into intimate physical contact with your neighbor since the seats were ridiculously undersized. Needless to say, many people preferred to stand against the wall and enjoy their "personal space" in quiet.

However, this would just not do with the bureaucrats behind the desk. At one point this one lady - i'll call her Mugzilla, since she was not very pleasant in her physical appearance, nor her demeanor - behind the desk, in between taking customers, pointed to a sign that said "Have a seat", and proceeded to scold everyone standing that they must sit down while waiting. She was very stern, and refused to take the next person in line until the approximately 7 or 8 people standing along the wall sat down. When one person said, "that's ok, I'm fine standing here", she got even more adamant with the person. Apparently, the availability of the seats was not for the luxury and comfort of the patrons, but rather a means to extract submission and obedience - order! - from the unwashed masses who are forced to deal with this bureaucracy.

When it was my turn to be "served", who did I get called up by? You guessed it - Mugzilla! I politely walked up and said, "I have two items of business to transact today," to which she replied that I was only able to do one. At first I thought this was a joke, but two minutes later, when I went on to item #2, she very sternly told me that I had to go to a different location to accomplish what I was after. Apparently, she wasn't joking.

I left the BMV, thankful to have ended that interaction. The long wait, the rude treatment, and then getting the run-around with what I needed to get done, did not make me feel like I, as a taxpayer, was being well-served by these public "servants". So, off I went to my next stop: The Post Office.

I needed to mail a letter. I usually only go to the post office once a month, when its time to mail my bills. (Yes, yes, I know... I am still old school that way - writing out checks and mailing them, sue me!) But this time, I had a special need to mail something - one letter. and I needed one stamp. Just a single, 1st class stamp to put on the envelope, and drop in the slot. I walk in to the branch in the middle of the afternoon and walk over to the stamp machine.

Out of order.

Everytime I have walked into this post office - and many of the times I have walked into other post offices - the stamp machine is busted. This means I now have to stand in line - STAND IN LINE! - to buy ONE stamp. There are like 7 people ahead of me, and like two people behind the desk waiting on people. And yes, I understand that I should probably buy 600 stamps and keep them in my desk drawer so I can avoid these situations - and one of these days, I may finally learn that lesson. But the point here is that making the experience of dealing with the USPS a pleasant and efficient one is not a priority of this government agency.

Five minutes later when it was my turn to step up to the counter, I asked the woman..."Does that stamp machine EVER work?" She told me that it was scheduled to be replaced by a newer - and presumably functional - one. That got me thinking about the companies that manufacture those machines, and what kind of quality they are committed to delivering. But mostly, its amazing to me how there is so little incentive for the post office to monitor and actually do something when its machines break down. If you went into McDonald's and the soda machine was broken, how long do you think it would take for the management to get it fixed? A couple days? Who knows.

So I left Government Run Public Service Agency #2 feeling frustrated by the excessive amount of time I seem to be wasting this particular day. So I'm ready for my third stop: the bank.

I walk into the bank to deposit a check, transfer some funds, and take some cash away with me. I walk up to the table off to the side, immediately grab a slip of paper to fill out. I then walk up to the line where one person was in front of me, although he was called up almost immediately. So I was the only one in line for all of about 30 seconds, when the teller finished with a customer, and cheerfully called to me, "Hi! May I help you?"

I gave her my slips and check, and she began punching her keyboard and stamping papers following whatever procedures she needed to follow to process my requests, all the while pleasantly making small talk about the weather and the upcoming weekend. Less than a minute later, she handed me my receipt, smiled at me, asked if there was anything else she could help me with that day, and then bid me a good day. I was in an out of the bank in no more than three minutes.

So, what's the difference here? Easy - government. The BMV and USPS are government agencies. Fifth-Third bank is a private sector entity. I am not forced to bank there. I am forced to deal with the red tape of the BMV and USPS when in need of their "services".

So often, critics of the free-market make the case that somethings must be done by the State because while private sector companies are only interested in raking in profits, and fattening their bottom line - ie. they are greedy and selfish - the State, run in the name of the "people", has no profit motive and can atruistically serve the "common good". But is that really the case?

What market critics fail to realize - or perhaps stubbornly refuse to admit - is that in a free market, in order to get rich and earn profits, one can only do so by serving the needs of one's customers. Successful businesses - in a truly free market, devoid of State intervention, that is - are the ones that are serving society the way society has deemed best. Profits are society's way of giving back to those producers who spend their energies in socially useful, productive, and efficient ways to meet the needs and wants of humanity. If these desire happen to be "better customer service", "low prices", "safer products", "products produced by union labor", "products produced by non-union labor", "animal testing free", or a whole slew of possible consumer values, it is the market which enables these values to be expressed and satisfied.

State-enforced monopolies, like the USPS, have no incentive to innovate, reduce waste, improve efficiency, or satisfy consumer preferences because they are not exposed to competition, where their customers can go elsewhere if they are unsatisfied with some aspect of the way the USPS runs its business. Take any introductory economics class and one learns that while all businesses operate with their own cost/profit optimization in mind, a monopoly exerts power over the entire market. State-enforced monopolies go the added step by then forcing consumers to put up with poor service, and unmet needs. The cruel irony here is that when Statists say that the government "needs" to provide some service - schools, healthcare, mail delivery - because only the State selflessly "cares", when it is completely opposite from plain, empirical reality.


Anonymous Anonymous said...

Granted, the USPS could use competition. FedEx and UPS can't legally place envelopes in mailboxes. However, I can buy stamps at my grocery store, and at my employer (who has an internal post office, not affiliated with USPS, but who handles our mail). I never have to deal with the USPS directly--I just check my mailbox at home every day.

Your experience with the DMV was bad. I have not had such an experience. However, the DMV is not an organization that I think should be privatized (or, at least, I can't see a model in which privatization might be successful). Yes, customer service would be better, but a privatized DMV would have added incentive to give licenses to unqualified drivers. If you can come up with a way to apply markets to cover that kind of externality I'd be interested.

As for your other examples, schools and healthcare, I don't completely agree or disagree with you. For instance, with schools, the government has a vested interest in getting every child a good education. Markets force inequality, which is not desirable. However, the current system is clearly less than desirable as well.

3:29 PM  
Blogger Libertarian Jason said...

Anon -

My point wasn't so much that these agencies should be privatized, but rather to show how government bureaucracies have little stake in offering anything more than the bare minimum level of customer service. A private organization, because its very existence depends on the voluntary choice of consumers to do business with it, has to place customer satisfaction at its core... otherwise it disappears.

Your comment, "the government has a vested interest in getting every child a good education" cannot be more erroneous. On what grounds is this true? As I stated about the natural incentives for private vs. government entities, how can a government school - which derives its income by forcing people to buy its services, and gets its custoemrs by forcing them to enroll and attend its classes - really be said to have a "vested" interest in quality?

Our education system is worse than a mess. In the past 20 years, nearly every form of communication technology has been revolutionized in ways beyond the wildest imaginings of any science fiction writer could have ever conceived, yet our schools are, by and large, still operating on a model that was created in a pre-industrial, agrarian society. Most kids come out of the government schools, barely able to read, knowing dangerously little about history, nothing about philosophy and a whole host of higher subjects, and with an frightening disinterest for learning and exploring for knowledge, wisdom and higher truths. Young children go into these camps with a wide-eyed fascination and curiosity about the world, only to emerge 12 years later with those traist smashed out of them by the mind-numbing Pavlovian assembly line they sat through year after year.

In my view, if all schools were private - if we completely separated school and state - education providers would be scrambling to provide a diverse array of educational products, delivered by innovative and dynamic means, resulting in higher and higher quality at lower and lower prices. Parents would have more power and flexibility to get what their kids needed, and gone would be all the red-herring controversies such as "evolution or intelligent design", "sex education", and new math, while non-parents would be saved the expense of having to pay for something that is someone else's responsibility.

I fail to see where a government school system has such incentives. It is nothing more than the USPS and BMV all over again.

6:55 PM  
Anonymous Anonymous said...

>Yes, customer service would be better, but a privatized DMV would have added incentive to give licenses to unqualified drivers.

What added incentive would a private DMV have that a state run DMV does not?
Both employ people that can and sometimes be corrupt and paid-off for favors. The private DMV could be held liable in court for damages, which occurred from their misconduct. State run departments seem to be immune to being held accountable for their misconduct no matter how costly or how many are hurt or killed.

BTW what is the location of Mugzilla’s DMV office? I might want to stand at the wall just for grins.


11:00 AM  

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