Private Sector more Efficient than Public?

[Warspite]

Geniuses - such as owners/founders of big corporations - are capable of keeping them efficient despite their sizes, but when they give up the power to someone else, who is not as good at keeping them efficient as his or her primary goal, things usually go down the drain (vide: Microsoft and Apple).

I disagree. In the majority of cases, the problem is that entrepreneurs find it hard to adjust from an innovative mindset to a managerial mindset. Different scales of firms have different problems. I think someone made the case a while ago that innovators should learn to step aside from leadership once their firms get large enough to focus on their specialism, rather than worrying about brand strategy and so on. Executive polymaths are quite rare.

[The Brain]

The public sector is very inefficient, more so than the private sector.

[Valmy]

Somebody mentioned the state budget -> private companies transfer being wasteful. Well, duh! That's the prime way for embezzlement and corruption, OF COURSE it's ineffective. Thinking that it would be better just because the receiving hand would be a state employee, maybe somebody who can be appointed by the one handing out the money, is very naivé

Yep.  Generally the impact of contracting out government services directly, as in somebody bids and receives the contract to clean up Central Park or whatever, is the workers are more poorly paid.  The public costs basically stay the same.  Heck what usually happens is the contractor will just hire the old public workers for less and pocket the difference.

It can work but generally when the customer is the government itself paying out with tax dollars I do not think it is all that much more efficient to contract out.  The benefits of the private sector are accountability to customers and markets and shareholders and all that jazz which sorta go away when they are just working to maintain their public sector contract.

That is my simplistic take anyway.

[MadImmortalMan]

Yep.  Generally the impact of contracting out government services directly, as in somebody bids and receives the contract to clean up Central Park or whatever, is the workers are more poorly paid.  The public costs basically stay the same.  Heck what usually happens is the contractor will just hire the old public workers for less and pocket the difference.

It can work but generally when the customer is the government itself paying out with tax dollars I do not think it is all that much more efficient to contract out.  The benefits of the private sector are accountability to customers and markets and shareholders and all that jazz which sorta go away when they are just working to maintain their public sector contract.

That is my simplistic take anyway.

The workers who work on our government contracts actually make less money than what we would pay them if we had a choice. The contract specifies what we pay them. It also specifies what total percentage of the contracted amount must be spent on salaries, what percent for benefits, etc. Everything is decided before they award the contract to anyone.

[crazy canuck]

Yep.  Generally the impact of contracting out government services directly, as in somebody bids and receives the contract to clean up Central Park or whatever, is the workers are more poorly paid.  The public costs basically stay the same.  Heck what usually happens is the contractor will just hire the old public workers for less and pocket the difference.

It can work but generally when the customer is the government itself paying out with tax dollars I do not think it is all that much more efficient to contract out.  The benefits of the private sector are accountability to customers and markets and shareholders and all that jazz which sorta go away when they are just working to maintain their public sector contract.

That is my simplistic take anyway.

The workers who work on our government contracts actually make less money than what we would pay them if we had a choice.

Yeah, lower wages is one part of the story.  But Valmy touched on the main reason the private sector is less efficient at doing government work.  Profit motive gives an incentive for contractors to do the least possible work for the maxiumum gain under the contract.  Therefore contractors are always on the bleeding edge of what they can get away with without giving cause to have their contracts terminated.  Indeed so much time and money is spent by government to manage these sorts of contracts and try to get contractors to provide adequate levels of service that any notional savings of contracting the thing out in the first place are lost.

[Barrister]

Yeah, I'm not entirely sure that's correct.  The private sector doesn't have the public service unions to deal with, which helps them a bit.

This.  This, this, this.

Government isn't inherently inefficient.  There's a risk of corruption to be sure, but ways to safeguard against it as well.  I work in a non-union government position and I think we're actually quite efficient.  The government definitely gets its pound of flesh out of me, but we're accountable for our mistakes, and decisions get made quite quickly.

where things slow up is when you start dealing with the unions.  Now your lazy, good for nothing employee can hardly ever be fired.  Now you're paying significantly more  in wages then what is paid in the private sector.

And that's why contracting out can, sometimes be quite effective.  The private company you hire doesn't have to pay union wages.

[crazy canuck]

Yeah, I'm not entirely sure that's correct.  The private sector doesn't have the public service unions to deal with, which helps them a bit.

This.  This, this, this.

Both of you are ingoring the fact that public sector unions are downright docile compared to most private sector unions.  Excepting the teachers unions of course.

[dps]

Grallon hit it spot on. A big enough organisation will be wasteful regardless of being private or public. Difference is, that at some point a private company either reforms itself or it falls. A public company has no such concerns. There is tax money to keep them afloat

I don't necessarily agree that a large organization is always going to be highly inefficient, but the other point is spot-on.  A private company that is too inefficient will eventually go out of business;  government essentially has no such constraints.  This doesn't necessarily mean that government is inherently more inefficient, just that government inefficiency is more abiding.

[The Minsky Moment]

Interesting fact:

90 pecent of of all new mortgages originated in the Unites States are now guaranteed by the federal government.

[The Brain]

USSA

[crazy canuck]

Interesting fact:

90 pecent of of all new mortgages originated in the Unites States are now guaranteed by the federal government.

I am not sure what the percentage is here but I would guess most mortgages are insured by CMHC - Canada Mortgage and Housing Corporation.  The difference may be that CMHC wont insure any mortgage that doesnt follow its minimum guidelines regarding minimum downpayment and affordability.

[Phillip V]

Yep.  Generally the impact of contracting out government services directly, as in somebody bids and receives the contract to clean up Central Park or whatever, is the workers are more poorly paid.  The public costs basically stay the same.  Heck what usually happens is the contractor will just hire the old public workers for less and pocket the difference.

It can work but generally when the customer is the government itself paying out with tax dollars I do not think it is all that much more efficient to contract out.  The benefits of the private sector are accountability to customers and markets and shareholders and all that jazz which sorta go away when they are just working to maintain their public sector contract.

That is my simplistic take anyway.

The workers who work on our government contracts actually make less money than what we would pay them if we had a choice.

Yeah, lower wages is one part of the story.  But Valmy touched on the main reason the private sector is less efficient at doing government work.  Profit motive gives an incentive for contractors to do the least possible work for the maxiumum gain under the contract.  Therefore contractors are always on the bleeding edge of what they can get away with without giving cause to have their contracts terminated.  Indeed so much time and money is spent by government to manage these sorts of contracts and try to get contractors to provide adequate levels of service that any notional savings of contracting the thing out in the first place are lost.

And what incentive is there for a government worker to do more than the "least possible work"?

[The Brain]

One of the many problems with the public sector is that it doesn't attract top talent.

[crazy canuck]

And what incentive is there for a government worker to do more than the "least possible work"?

You are confulsing two things.

One is a private contractor "efficiency" of providing as little service possible for the amount being paid.

The other is a workers motivation to work.  Whether they are in the public or private sectors employee motivation is a universal issue. 

[Barrister]

One of the many problems with the public sector is that it doesn't attract top talent.