>[WS:] There is no trick in it at all - see my previous posting about
>mandatory private spending that is counted as 'public' in the statistics I
>quoted. The private - public is really a semantic distinction and it merely
>denotes what kind of tax mechanism is being used to finance social programs.
>You need to give more credit to government statisticians. Unlike
>economists, they are smart people and look beyond labels.
Sorry about that, you have me cold - I've been underestimating government statisticians.
>However, I concur with your larger point that social spending per se, even
>as a percent of the GDP, is not necessarily a good indicator of social
>security/insecurity. It is the institutional arrangements that make all the
>difference. For example, the US spends more on health than most other
>nations, but most of it goes into transaction costs i.e. covering expenses
>and profits of bloated private bureaucracies, fabulous executive salaries,
>expensive but medically unnecessary facilities and procedures and so on.
>
>However, if the expenditures are mandatory - which again includes both
>public and private outlays - this provides more social security than
>discretional spending (private or public). A good case in point is
>comparing x-socialist countries to the US. The level of actual spending per
>capita or as % of GDP in x-socialist countries was much lower than that in
>the US - yet the former had a higher level of both, actual and perceived,
>social security than the US. The difference lies in the institutional
>arrangements. In x-socialist countries, these expenses took mainly the form
>of subsidies on the production of public goods, whereas in the US it takes
>mainly the form of subsidies on private consumption (that may or may not
>include consumption of public goods).
>
>The chief difference between the two is that the latter has a much higher
>transaction costs - referral services, insurance companies, intermediaries
>of all sorts, collection agencies, cost of servicing the uninsured,
>litigation and what not. These costs are, to a large extent eliminated when
>the government controls, either directly or though subsidies, the supply
>side. This is really a s standard argument made by Transaction Cost
>Economics (TCE), and anyone interested in this topic should perhaps
>familiarize him- or herself with this literature.
That all makes sense. I'm starting to see it now, I think.
One thing though, the explanation for some of these extra inefficiencies you put down to "transaction costs" may not be quite so innocent. Some of the waste is simply, as you no doubt already know but are too polite to say, legal corruption. Government ensuring that their business friends are permitted to "wet their beak" as its put on the Sopranos. But another factor is the simple imperative within the capitalist system to ensure that the other objective of any welfare system, that is the imperative to police the poor. That costs a lot of money and of course this cost is at the expense of providing benefits.
Bill Bartlett Bracknell Tas