I'm talking about social benefit, not narrow private benefits, as per standard welfare economics. In this framework, it should be clear why private, self-interested organizations, particularly business firms, are intrinsically ill-suited to providing public services.
A basic prejudice harbored by the public with respect to government is that it is indifferent to cost, that it would help everyone to any extent without regard to taxpayer wishes. "The heart is bigger than the wallet," the conservatives like to say.
Rejecting any efficiency criteria with vague talk about the wealth of society reinforces this prejudice; it says the advocates don't care about the after-tax incomes of ordinary people. It's silly, since any semi-conscious worker knows that it is not, by and large, the rich who are going to finance public services. It's the worker.
>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.)
O.K. Suppose something costs $1 million, but it provides some measure of "social well-being." How do we decide whether to buy it, rather than some other source of such well-being, or rather than higher after-tax incomes, another type of social well-being?
I'm interested in your paper too.
>
>Cost-benefit analysis is terrible.>>
You see to be going well beyond a technical critique of the way c-b is done, or could ever be done.
\<< 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 Reagan's executive order 12291 (superceded by a Clinton Exec order that is little different) made every piece of regulatory legislation pass a cost-benefit test.>>
You are equating a political decision (the exec orders) with an analytical technique. The problem is political, not technical. If we put Steve Marglin in charge of cost-benefit analysis, we could see lots of projects approved.
<< 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;>>
I'm puzzled by this. We just had a mammoth highway bill passed and I would stake my life on the proposition that few, if any, of its included projects passed any such '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."
We're swinging by the privates right now, because the public thinks we want to tax them into penury to buy them stuff they don't want for people they don't like.
Even for liberal trade unionists, I have found, expanding the public provision for social well-being is not an easy sell. All the more reason to demonstrate (and live up to) a commitment to social efficiency.
Cheers,
Max