Competition And Private Sector Waste

A fascinating blog post from Antonio Fatas, and having worked in the private sector for many years, one I fully agree with (excerpt):

Does competition get rid of waste in the private sector?

It is very common to hear comments about the waste of resources when referring to governments and the public sector…In fact, we all have our list of anecdotes on how governments waste resources, build bridges to nowhere and how politicians are driven by their own interest, their ambitions or even worse pure corruption. If only we could bring the private sector to manage these services!

In addition to the anecdotal evidence there is something else that matters: we tend to use framework that starts with the assumption that in the private sector competition will get rid of waste…And we believe that the same does not apply to governments…

…But is competition good enough to get rid of all the waste and inefficiencies in the private sector?…

…we simply do not know about it, we do not even attempt to measure it (at least at the macro level). And the reason why we do not bother measuring it is because we assume that markets and competition must make this number close enough to zero. Maybe it is time to challenge this assumption.

Maybe we should start talking about plugging leakages in the private sector. All joking aside, there’s a fairly serious point here. The presumption of waste in the public sector is often true. The assumption that the converse is also true however is not always the case. One more reason for hoping MyCC becomes more aggressive.

[H/T Mark Thoma]