Major government reform has always been challenging to achieve. The sheer complexity of government provides one obstacle, as it overwhelms reformers of all stripes, whether Republican or Democrat, advocate or academic researcher, voter or elected official. While one cannot avoid complexity in a multi-trillion dollar set of spending and tax programs, systematic ways exist to address the inefficiency it might foster. Here, I discuss three practical approaches: competition, integrated pursuit of broad goals, and information systems built to reveal, not hide.
With you as one of the nation's leading authorities, how can I disagree? It seems to me, however, is that you are simply cautioning about using any approach without care. I'm not sure I would find nonprofits as being better than government along some average scale. In fact, one reason that government contracts so much with private parties is that government provisions often gets monopolized. As an extreme example, I always claimed that governments that took over the steel industry probably did succeed in being more efficient on some fronts. But years later they became stuck because of failure to innovate, as well as react to new demands, opportunities and circumstances.
Put another way, if you know exactly what to do forever, it's often cheaper to have one supplier. If you need to make adjustments over time, competition forces innovation.
Agree that there's much inefficiency, though often for things we voters want. One of my favorite people in dealing with this issue was Demetra Nightingale. She took a job as Chief Evaluation Officer at the US Department of Labor from 2011 to 2016, where she developed what is recognized as one of the premier evaluation units in the federal government's Labor Department. Her trick was to engage the staff of different agencies in coming up (with assistance) with their own efforts at evaluation and improvement, which motivated them. I only hinted a bit in my column about why so many benefit-cost effort in government fail. They are top down and at times threatening. They also pretend at finding definitive conclusions when, as I say, continual improvement is needed.
"My point is simple: improving efficiency and reducing complexity among government programs involves more than identifying $100 hammers purchased by the Defense Department. It requires continual improvement through competition among programs, integrated pursuit of common goals across program areas, and information structures built to assess and reassess over time."
Gene, no argument with this statement. Let's take it a step further though. Let's start judging the individual programs/departments/agencies by results they produce rather than the intentions of their creators/managers/employees. "Mission Creep" is a huge understatement when one examines the sheer number of programs/departments/agencies under the ever growing umbrella of government.
The result has been the wholesale failure of government in providing basic government services, while trying to do everything under the sun.
I submit, if government (at all levels, federal, state, and local) were kitchen gadgets you bought at WalMart, you would return them and demand a refund.
Great column, as usual. I want to caution the recommendation for increased competition. Competition is often desirable, but particularly in social service provision, problematic when there are hard problems of asymmetric information. Henry Hansmann defined contract failure as occurring when, due to the nature of a good or service or the circumstances under which it is provided, the consumer/beneficiary finds themselves unable to evaluate the quantity or quality of the services they purchase for themselves and others. In cases of contract failure, for-profit providers have the opportunity and incentive to deliver less than the promised quantity or quality. Nonprofit organizations and government agencies may behave better, providing what was promised (although there are some exceptions). Importantly, when aspects of service are observable, neither nonprofits nor for-profits suffer from contract failure. But for aspects of quality that either cannot be observed or can be observed but not verified by third parties, for-profits will shortchange the government.
In cases where the government wishes to contract out service provision to private organizations as a way to increase competition, competition can make contract failure worse. In order to win a too-competitive bidding process to run a school or prison (both are services subject to contract failure), contract failure is made worse. Nonprofits that are trustworthy will be out-competed by less scrupulous nonprofits and for-profits in a race to the bottom.
In cases of contract failure, we have a tradeoff -- competition may result in cost-savings due to efficiency but also cost-savings due to hidden lower quality. Hence, there are occasions when competition should be limited.
I wanted to suggest two other ways that reduce inefficiency and complexity in government programs.
First: Reduce the NUMBER OF FACTS that must be reported by applicants, and confirmed by government, in deciding whether an individual qualifies for a particular benefit. For all the complexity of Social Security's old-age benefit formula, the only thing that most applicants must report is their decision to claim a benefit and the bank account in which they want their benefit to be deposited. The Social Security Administration already knows their age and prior earning--thus, whether they are eligible--and, thus, their benefit amount. Compared to the complexity of the information that (for instance) an applicant for Supplemental Security Income (SSI) must report and have confirmed, the complexity that an applicant faces--and government must deal with--when applying for Social Security's old-age benefit is minimal. As a result, inefficiency (i.e., risk of error, delay, and other dimensions of inefficiency) are at a minimum.
Second: Avoid the need to CONSTANTLY CHANGE what applicants must report and government must verify. SSI recipients must periodically report changes in their income, assets, spouse's income, etc. But recipients of Social Security old-age pensions, once their monthly payments start to flow, need to report almost nothing. Only very limited and occasional events must be reported, e.g., change of address and change of financial institution (which do not affect the benefit amount) or death of a spouse (which may, but may not, affect the benefit amount). Avoiding the need to report lots of changes in information to government by definition reduces the complexity of any government program. It also reduces the degree of inefficiency (i.e., risk of error, extra burden on both beneficiaries and government employees, and other aspects of inefficiency).
It will not always be possible, of course, to reduce either the number of facts or the number of changes that are required to properly administer a government program. But advocates and policy-makers should strive to avoid these two sources of complexity and inefficiency...whether by simplifying the "fact-heavy" and "change-heavy" programs themselves or by avoiding the need to to have "fact-heavy" and "change-heavy" programs in the first place.
We cannot reform the government directly. We need to make new systems that are high-trust, decentralized, and transparent. Migrate to them, and then plug them in to fix government.
The weak link is the leaders. That is where the corruption happens. We don't need them anymore.
The rebellion is decentralization and transparency in all systems.
It is happening with media - podcasts, Substack, and videos are the decentralization of media. CNN, FOX, and MSNBC are almost dead. The same thing happened to music in the early 2000s with Napster and Kazaa.
Now it is happening with Bitcoin and money.
Next up is our food supply needs to be decentralized.
With you as one of the nation's leading authorities, how can I disagree? It seems to me, however, is that you are simply cautioning about using any approach without care. I'm not sure I would find nonprofits as being better than government along some average scale. In fact, one reason that government contracts so much with private parties is that government provisions often gets monopolized. As an extreme example, I always claimed that governments that took over the steel industry probably did succeed in being more efficient on some fronts. But years later they became stuck because of failure to innovate, as well as react to new demands, opportunities and circumstances.
Put another way, if you know exactly what to do forever, it's often cheaper to have one supplier. If you need to make adjustments over time, competition forces innovation.
Agree that there's much inefficiency, though often for things we voters want. One of my favorite people in dealing with this issue was Demetra Nightingale. She took a job as Chief Evaluation Officer at the US Department of Labor from 2011 to 2016, where she developed what is recognized as one of the premier evaluation units in the federal government's Labor Department. Her trick was to engage the staff of different agencies in coming up (with assistance) with their own efforts at evaluation and improvement, which motivated them. I only hinted a bit in my column about why so many benefit-cost effort in government fail. They are top down and at times threatening. They also pretend at finding definitive conclusions when, as I say, continual improvement is needed.
Thanks for your comment.
"My point is simple: improving efficiency and reducing complexity among government programs involves more than identifying $100 hammers purchased by the Defense Department. It requires continual improvement through competition among programs, integrated pursuit of common goals across program areas, and information structures built to assess and reassess over time."
Gene, no argument with this statement. Let's take it a step further though. Let's start judging the individual programs/departments/agencies by results they produce rather than the intentions of their creators/managers/employees. "Mission Creep" is a huge understatement when one examines the sheer number of programs/departments/agencies under the ever growing umbrella of government.
The result has been the wholesale failure of government in providing basic government services, while trying to do everything under the sun.
I submit, if government (at all levels, federal, state, and local) were kitchen gadgets you bought at WalMart, you would return them and demand a refund.
Great column, as usual. I want to caution the recommendation for increased competition. Competition is often desirable, but particularly in social service provision, problematic when there are hard problems of asymmetric information. Henry Hansmann defined contract failure as occurring when, due to the nature of a good or service or the circumstances under which it is provided, the consumer/beneficiary finds themselves unable to evaluate the quantity or quality of the services they purchase for themselves and others. In cases of contract failure, for-profit providers have the opportunity and incentive to deliver less than the promised quantity or quality. Nonprofit organizations and government agencies may behave better, providing what was promised (although there are some exceptions). Importantly, when aspects of service are observable, neither nonprofits nor for-profits suffer from contract failure. But for aspects of quality that either cannot be observed or can be observed but not verified by third parties, for-profits will shortchange the government.
In cases where the government wishes to contract out service provision to private organizations as a way to increase competition, competition can make contract failure worse. In order to win a too-competitive bidding process to run a school or prison (both are services subject to contract failure), contract failure is made worse. Nonprofits that are trustworthy will be out-competed by less scrupulous nonprofits and for-profits in a race to the bottom.
In cases of contract failure, we have a tradeoff -- competition may result in cost-savings due to efficiency but also cost-savings due to hidden lower quality. Hence, there are occasions when competition should be limited.
Excellent article.
I wanted to suggest two other ways that reduce inefficiency and complexity in government programs.
First: Reduce the NUMBER OF FACTS that must be reported by applicants, and confirmed by government, in deciding whether an individual qualifies for a particular benefit. For all the complexity of Social Security's old-age benefit formula, the only thing that most applicants must report is their decision to claim a benefit and the bank account in which they want their benefit to be deposited. The Social Security Administration already knows their age and prior earning--thus, whether they are eligible--and, thus, their benefit amount. Compared to the complexity of the information that (for instance) an applicant for Supplemental Security Income (SSI) must report and have confirmed, the complexity that an applicant faces--and government must deal with--when applying for Social Security's old-age benefit is minimal. As a result, inefficiency (i.e., risk of error, delay, and other dimensions of inefficiency) are at a minimum.
Second: Avoid the need to CONSTANTLY CHANGE what applicants must report and government must verify. SSI recipients must periodically report changes in their income, assets, spouse's income, etc. But recipients of Social Security old-age pensions, once their monthly payments start to flow, need to report almost nothing. Only very limited and occasional events must be reported, e.g., change of address and change of financial institution (which do not affect the benefit amount) or death of a spouse (which may, but may not, affect the benefit amount). Avoiding the need to report lots of changes in information to government by definition reduces the complexity of any government program. It also reduces the degree of inefficiency (i.e., risk of error, extra burden on both beneficiaries and government employees, and other aspects of inefficiency).
It will not always be possible, of course, to reduce either the number of facts or the number of changes that are required to properly administer a government program. But advocates and policy-makers should strive to avoid these two sources of complexity and inefficiency...whether by simplifying the "fact-heavy" and "change-heavy" programs themselves or by avoiding the need to to have "fact-heavy" and "change-heavy" programs in the first place.
We cannot reform the government directly. We need to make new systems that are high-trust, decentralized, and transparent. Migrate to them, and then plug them in to fix government.
The weak link is the leaders. That is where the corruption happens. We don't need them anymore.
The rebellion is decentralization and transparency in all systems.
It is happening with media - podcasts, Substack, and videos are the decentralization of media. CNN, FOX, and MSNBC are almost dead. The same thing happened to music in the early 2000s with Napster and Kazaa.
Now it is happening with Bitcoin and money.
Next up is our food supply needs to be decentralized.
Then finally we need to decentralize government further. It was decentralized for 1776, but not enough for modern corruption. We need to push it further. Like this: https://joshketry.substack.com/p/decentralize-everything-in-1776-america