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Why government does things inefficiently

Let me start off by stating that I have no knock against government – I have a degree in public policy and was a hard-working employee of the City of New York for many years, so I have a lot of sympathy for institutions and the people trying to survive in them.  And yet, when I think of the huge deficits we’re running and the problems this is going to create, it does give me the chills.

One reason is that government functions simply do not take into account any notions of efficiency.  It isn’t that bureaucrats (well, most of them anyway) are evil, its that their structure of incentives has nothing to do with how efficient they are.  Further, public policies are always trying to achieve social goals (hire the disabled! Make sure that minority vendors get to bid!) by distorting business practices. When I was basically running technology for the City’s major purchasing function, I’ll never forget the day a senior executive from the Mayor’s Private Sector Task Force came to see me.  Yes, you heard it – every few years, we had these guys seconded from the private sector to tell the misbegotten public sector how to do things.  Anyway, his first question had to do with the costs of the things we bought.  I looked at him blankly and said I had no idea.  He was dumbfounded.  How could the head of technology for purchasing not have any idea how much things cost?  As it turns out, for government, it doesn’t matter.  What matters is whether all the process steps were properly conducted, whether the bids were awarded according to the rules, whether the backlog in requisitions was reasonable…all those things.  But cost?  Never even came up in our discussions.  My interlocutor slunk out of my office, shaking his head, not to be seen in my quarters henceforth.

I was reminded of this incident the other day when applying to get a “certificate of residency”.  Some countries, such as Spain, require you to present such a certificate to avoid backup withholding for taxes in their country.  Well, the process involves downloading, completing and faxing forms, paying $35 and indicating (individually) which countries the certificate is to be from.  Lo and behold, some weeks later, I received a letter from the head of the residency program in my district that I had missed an important component of the process – a letter from me indicating that I intended to be a US resident for the relevant tax year.  I couldn’t help but think of the dozens of people who must be employed in this office if it has an actual “head”.  I was also thinking that if I needed such a certification from Amazon, I probably could have filled everything out on the web, paid my fee with one click and been outta there in minutes. 

So we have a government that seems, at all levels, in an expansionary phase.  My concern is that without some incentive to operate more like Amazon and less like the Certificate of Residency Office we are simply going to be getting into ever-increasing debt, without even the fun of retail therapy to show for it. 

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