Governments are not good at managing complexity.

The driving logic for smaller government comes down to the difficulty in managing complexity.  Business tends to focus along narrow lines and once there is no synergy between product A and service B it will divest part of the company or split the enterprise.  Alternatively the business will outsource part of its activities to another group.  Companies that get too complex to manage tend to fail.  But government services rarely fail; they simply give poorer service and raise taxes to their captive constituency.  And when they give away a service private companies can’t compete.

Our Federal government and large state governments have gotten so large and complex that they are simply incapable of managing the complexity.  No corporate CEO could manage it either, and I have far more faith in our top CEOs than I do with our professional politicians dealing with this complexity.  The CEO loves simplicity; the politician tends towards trying to do everything for everyone.

And government can rarely differentiate between what people say they want and what they are really are willing to pay for since most of the prices for their services have no relationship to the cost of providing the service.  What are the odds of a government-run airline deciding that customers were not really willing to pay for meals on their flights or the added costs of assigned seating like Southwest Airlines did.  This fundamental change never would have withstood the onslaught on the media and unhappy customers complaining about the lack of the meals they were “entitled” to.

The answer is to stop government providing services that can be found in the private sector – this means education, and this means health care.  It does not include national defense, police, immigration and border patrol.  Government can still subsidize some education (although this leads to other distortions) but removes the government from running these complex activities.  Our government just isn’t capable of handling the complexity just like the Soviet government was never built to make the millions of economic decisions that needed to be made in the old USSR.

Posted via email from John's posterous