Economic Nonsense: 33. Things like healthcare and education are too important to be privately provided

Healthcare and education are not only important; they are vital.  Most of us would prefer to live in a society that so organized itself that these services were accessible to all its citizens.  This is not, however, the same as saying that they should be produced and delivered by the state.  

When the state goes into the mass production of services it tends to put them into the political domain, where they can be influenced by ideological or interest groups.  Politicians can manipulate them to secure electoral advantage.  They can be effectively captured by producer groups such as teachers' or healthcare workers' unions, to the detriment the citizens who consume them and the taxpayers who fund them.

When the state does mass-produce services, they tend to be standardized.  It is easier to have a one-size-fits-all output than one that caters for individual preferences and allows a variety of choices.  The private sector, by contrast, tends to find different niches being filled by a variety of producers, allowing consumers to choose the level and quality that suits them.

The state can fund education without producing it by giving people vouchers to cover the education of their child, or by routing the funding to the school of their choice, as is done in Sweden.  This leaves the schools independent and in control of the education they offer.  Healthcare can similarly be financed through insurance or refunds, without the state having to own hospitals and employ nurses.  Again, countries that do this tend to have more variety and choice.

Education in state-run comprehensive schools is not very good.  There are some good ones, but a great number that fail their parents and children by leaving them ill-equipped for life.  Healthcare in state-run hospitals varies hugely in quality, with recurrent exposés of inadequate care or neglect. 

Funding for state-produced schooling and healthcare depends on what politicians think taxpayers will tolerate.  Their output does not depend on what customers want.  Far from being too important to be privately provided, healthcare and education are too important to be publicly provided.

Economic Nonsense: 32. Economies of scale mean that bigger is better

It can be true up to a point that bigger is better, and there can be economies of scale. It does vary, however, depending on the type of activity. In manufacturing, for example, larger orders for components or raw materials can yield bigger discounts. In service industries, however, bigger might mean less personal and therefore less attractive to customers. It is simply not true that bigger necessarily means better. Several different studies have put an upper limit of about 150 employees as the optimum size. Above that level relationships become more difficult and absenteeism can rise while productivity can fall. It is noticeable that some large organizations split themselves into smaller, semi-autonomous units in order to keep each one inside the threshold of manageability.

New firms are constantly entering the market and nearly always start small. Many succeed by taking business away from larger, more established firms that are slower to respond to changing tastes and needs and changing market conditions. Small firms create the overwhelming majority of new jobs in the UK. Small tends to be more adaptable, more nimble, and quicker to change. When firms grow large they can grow complacent, even sclerotic, with a bureaucracy that finds it difficult to change course. In larger units people often find it more difficult to relate to each other and to co-operate effectively.

If bigger necessarily meant better, firms would continue to grow. This does not tend to happen in practice. They expand to a size they feel comfortable with.

It has been claimed that large public industries and services, such as Britain's National Health Service, are literally too big to manage and would operate more efficiently if they were broken into smaller, more easily managed units. Experience suggests that schools have better results if their size is measured in hundreds rather than thousands.

While there can be economies of scale when a new firm is growing, there does seem to be a point after which diseconomies of scale outweigh the advantages of size.

They're spouting rubbish about rubbish again

We're really got to get ourselves a new group of people running our public services you know. The current lot seem to have missed the point of the whole exercise. For, at root, the entire exercise of politics and state power is really a method of deciding who empties the bins. There are certain things that simply need to be done. There's also a group of things that can be done individually, one of those that can be done by simple voluntary cooperation and another group of things that can only be done by some fairly strong compulsion. And those that are properly the province of that state, this government idea, as those that must both be done and can only be done with that compulsion. And taking out the rubbish is one of those things that is both. Yes, a free market would indeed deal with most of it but the public health benefits of not having those remaining piles of stinking ordure mean that there's always going to be some state compulsion necessary.

At which point we get:

A town has been left overflowing with rubbish bags after binmen have refused to pick them up - because the sacks are the wrong colour.

Mountains of household waste is lining streets in Weymouth, Dorset, after residents were given blue bin bags as part of a new waste collection scheme rolled out in the town.

But some claim they did not receive the new blue sacks, and have continued to use the standard black ones - only for them to be left by the side of the road by binmen under strict orders not to take away the 'unauthorised bags'.

Piles of rubbish bags have been mounting up in streets around the town for the past two weeks, to the anger of residents.

What?

The council-run Dorset Waste Partnership said it is 'applying its policy' to limit residents to one household rubbish bag a week in the hope they will recycle more.

The loons have taken over the asylum. We need to fire these people and get a new set.

Please note this is not about party politics and it's also not about the "shortage of landfill". We don't have such a shortage. The country produces about the same amount of waste each year as the number of holes we dig each year for other reasons. The only shortage is in the licences to be allowed to put the rubbish into the holes we already have available.

What this is about is that we've simply got the wrong group of people ruling us and that needs to change. On the basis that government really is about deciding who take out the rubbish and if they can't even manage that then....well, why don't we try finding some people who can manage that minimal task?

On the merits of competition in government services

Perhaps we should be having more competition with government services? A businessman who built his own £325,000 toll road to bypass roadworks is to close the shortcut after the local council invested £660,000 to finish repairs five weeks early.

Mike Watts, 63, claims he will now not make a penny and will lose out on a profit of several thousand pounds after Bath and North East Somerset completed the work ahead of schedule.

He became the first private individual to build a British toll road in more than a century when a crucial road in Kelston, Somerset, was closed by a landslip, leaving locals with a 14-mile diversion.

The roadworks were scheduled to last until Christmas, which would have given Mr Watts and his wife Wendy, 52, a healthy profit on their £325,000 investment.

But instead the A431 Kelston Road between Bristol and Bath will re-open tomorrow, meaning he couple will just break even after spending £150,000 to build the road and £150,000 on upkeep.

That he won't make a profit is no doubt distressing to him but it's of no importance at all over public policy. And there's more than a suspicion (look, your humble writer is a Bathonian and he's absolutely convinced that there's no suspicion at all, this is simple fact) that the speed up was done out of spite. Can't have the council being made to look bad or incompetent, can we, people will wonder what they're paying their taxes for! But again that's of no real import here.

What is important is that the landslip has been corrected, the public road opened 5 weeks earlier than it would have been without the competition. And yes, even if is simply spite that drove that decision the consumers are all better off as a result. So, more competition in public services please: for we are supposed to be running this whole economy and government thing in order to benefit the consumers.