Soft privatization

[Mathew Forstater]

I go with Marta, Jessica, et al. on this one.  I understand Max's point that state enterprises or productive
activities may at times be more "efficient" (in the narrow technical meaning of that term, i.e., cost
minimizing), and I can understand the desire to throw that back at the privatization gang, but it just isn't
worth it.  Public sector activity should not be judged by the same criteria as private sector activity.
Firms in the private sector are compelled by capitalist competition to adopt certain technologies, methods
of production, capital-labor ratios, etc., but the state needn't make decisions based on such criteria.  The
state is not forced to operate within the same narrow confines as a private firm, and it shouldn't.  Instead
the state can make decisions based on social well-being, etc.  (I know I sound like a broken record but I
have a working paper on this if anyone's interested.)

Cost-benefit analysis is terrible.  Cost-effectiveness analysis is better, but still unacceptable for some
public activities.  Reagan's executive order 12291 (superceded by a Clinton Exec order that is little
different) made every piece of regulatory legislation pass a cost-benefit test.  So instead of OSHA and EPA
having final word on worker health and safety legislation and environmental legislation, the final word was
with the OMB!  Previously, any government sponsored 'development' project had to pass an environmental
impact assessment; now the tables are turned and any environmental legislation has to demonstrate it's
"cost-beneficial."  There are so many problems here I can't list them all.  Jim Campen's book on
Benefit-Cost analysis is still good, anyone interested i can give more references.

We should not hang ourselves with the rope of "efficiency."

Mat