Public outsourcing less efficient than central planning. LSE Opinion.

Kommunist

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Why public sector outsourcing is less efficient than Soviet central planning | New European Trade Unions Forum

'The logic of outsourcing is that market-based production is better than public production because the governance of private organisations is more transparent, flexible, efficiency focused and disciplined by owners. But this idea is problematic on two fronts. In the first place the presumption of market superiority is an artefact of public choice theory; it’s not rooted in historical assessment of which regime, public or private, has better produced public goods. In the second, this logic is dependent on ‘first-best-world’ economic theorising: it assumes an efficient market for simple goods, or for goods that can be somehow simplified. Hence for outsourcing to work those archetypal conditions have to exist. While they typically can exist for simple goods and services (the NHS doesn’t grow its own food), the outsourcing markets for complex goods and services characteristically fulfil none of the necessary conditions.'

The state should own the commanding heights of the economy.

Discuss.
 


Disillusioned democrat

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Why public sector outsourcing is less efficient than Soviet central planning | New European Trade Unions Forum

'The logic of outsourcing is that market-based production is better than public production because the governance of private organisations is more transparent, flexible, efficiency focused and disciplined by owners. But this idea is problematic on two fronts. In the first place the presumption of market superiority is an artefact of public choice theory; it’s not rooted in historical assessment of which regime, public or private, has better produced public goods. In the second, this logic is dependent on ‘first-best-world’ economic theorising: it assumes an efficient market for simple goods, or for goods that can be somehow simplified. Hence for outsourcing to work those archetypal conditions have to exist. While they typically can exist for simple goods and services (the NHS doesn’t grow its own food), the outsourcing markets for complex goods and services characteristically fulfil none of the necessary conditions.'

The state should own the commanding heights of the economy.

Discuss.
Certainly FG hide behind this fallacy to justify spending €bns of tax payers money on rented accommodation for social welfare dependents every year, despite the fact that a well managed development programme at a national level using global contractors would be less than 50% of the cost.
 

farnaby

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The tenderpreneur situation in South Africa is an extreme version of what happens in public sector outsourcing. Politically-connected (predominantly) young men bid for public contracts and on winning the tender run off with the up-front proceeds without delivering anything, knowing that the state has neither the capability nor the will to chase them down.

So the article's complaint about over-complicated outsourcing doomed to failure rings true.

But the OP conflates outsourcing with privatisation. State ownership does not work well for all but the most essential public goods. Even where state ownership is necessary (and I would support it in cases of e.g. health and education), services that are provided privately in the private sector e.g. logistics, catering, facilities management can be outsourced successfully.
 

Patslatt1

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Certainly FG hide behind this fallacy to justify spending €bns of tax payers money on rented accommodation for social welfare dependents every year, despite the fact that a well managed development programme at a national level using global contractors would be less than 50% of the cost.
The evidence for these imaginary global contractors?
 

Patslatt1

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Why public sector outsourcing is less efficient than Soviet central planning | New European Trade Unions Forum

'The logic of outsourcing is that market-based production is better than public production because the governance of private organisations is more transparent, flexible, efficiency focused and disciplined by owners. But this idea is problematic on two fronts. In the first place the presumption of market superiority is an artefact of public choice theory; it’s not rooted in historical assessment of which regime, public or private, has better produced public goods. In the second, this logic is dependent on ‘first-best-world’ economic theorising: it assumes an efficient market for simple goods, or for goods that can be somehow simplified. Hence for outsourcing to work those archetypal conditions have to exist. While they typically can exist for simple goods and services (the NHS doesn’t grow its own food), the outsourcing markets for complex goods and services characteristically fulfil none of the necessary conditions.'

The state should own the commanding heights of the economy.

Discuss.
Because the state is run by civil servants who value job security above all else,they have a strong tendency to duck responsibility by creating interlocking committees. They are very slow to adopt new technology and are often decades behind the private sector. Recently, it was reported that the Garda Siochana lack computerised despatch systems and hand held computers that would enable them to check things in the field-technology that small physical distribution companies were using 30 years ago.
 

Barroso

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Why public sector outsourcing is less efficient than Soviet central planning | New European Trade Unions Forum

'The logic of outsourcing is that market-based production is better than public production because the governance of private organisations is more transparent, flexible, efficiency focused and disciplined by owners. But this idea is problematic on two fronts. In the first place the presumption of market superiority is an artefact of public choice theory; it’s not rooted in historical assessment of which regime, public or private, has better produced public goods. In the second, this logic is dependent on ‘first-best-world’ economic theorising: it assumes an efficient market for simple goods, or for goods that can be somehow simplified. Hence for outsourcing to work those archetypal conditions have to exist. While they typically can exist for simple goods and services (the NHS doesn’t grow its own food), the outsourcing markets for complex goods and services characteristically fulfil none of the necessary conditions.'

The state should own the commanding heights of the economy.

Discuss.
Probably true.
After all, private enterprise works on the profit principle - they're in it to provide the service, and make money for the owners.
There are two ways to make a profit: 1. charge more than you need to, and bank the extra. 2. Charge the going rate and underpay your employees. I suspect that the average outsourcing event involves both of these. Possibly with kickbacks for the outsourcing official(s).

By way of an anecdote, I used to work for a largish PS organisation. They had a catalogue of products that you could order from the company that provided office supplies.
One day I was in the office supplies shop (unrelated to the provider) across the road from my office, and I noticed the prices of several items. Their retail prices were cheaper than the provider's wholesale prices.

BTW I also noticed that their IT supplies - from a different provider - seemed to be exhorbitantly priced.
 

aldiper

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Probably true.
After all, private enterprise works on the profit principle - they're in it to provide the service, and make money for the owners.
There are two ways to make a profit: 1. charge more than you need to, and bank the extra. 2. Charge the going rate and underpay your employees. I suspect that the average outsourcing event involves both of these. Possibly with kickbacks for the outsourcing official(s).

By way of an anecdote, I used to work for a largish PS organisation. They had a catalogue of products that you could order from the company that provided office supplies.
One day I was in the office supplies shop (unrelated to the provider) across the road from my office, and I noticed the prices of several items. Their retail prices were cheaper than the provider's wholesale prices.

BTW I also noticed that their IT supplies - from a different provider - seemed to be exhorbitantly priced.
Barroso, you repeat the standard anti-capitalist/anti-business rhetoric of our times. Unfortunately.

Perhaps consider this “alternative” interpretation of “profit” (although, I am aware that attempting to defend profit is likely to be as successful as defending paedophilia)

Things have prices, because stuff is scarce: for example, there is only so much carbon dioxide available on the market. We need a way to determine how we should use the scarce resources we have available to us – and prices let us do this.

People want stuff, because it delivers value (however subjectively perceived..a bottle of water is worth more to a man stranded in the Sahara, than a diamond necklace), that is, some benefit to them.

The entrepreneur* (the real kind, not the state-sponsored-dole-junky-who-runs-for-president-kind), undertakes a new venture in the hope of using existing resources in a way that delivers more value, that is, more benefit to people, than what these resources are currently providing.

A simple example would be Uber, versus traditional taxis. The entrepreneurs behind Uber estimated that people would value more, and hence pay more, to use a privately-hired car, through their app, than a cab. Now, the vehicle is the same between uses (same block of metal), but the value (i.e. benefit) to the consumer is greater in the former, than the latter.

Hence, the profit is greater in the former circumstance: not because Uber is evil, but because Uber provide a service that people value more highly than what could be provided, with the same resources (cars), in an alternative manner.


* A term – and concept – invented by a gallicized Irishman, no less.
 

aldiper

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Probably true.
. I suspect that the average outsourcing event involves both of these. Possibly with kickbacks for the outsourcing official(s).

By way of an anecdote, I used to work for a largish PS organisation. They had a catalogue of products that you could order from the company that provided office supplies.
One day I was in the office supplies shop (unrelated to the provider) across the road from my office, and I noticed the prices of several items. Their retail prices were cheaper than the provider's wholesale prices.

BTW I also noticed that their IT supplies - from a different provider - seemed to be exhorbitantly priced.
The issue with corruption you describe above (which is one I have encountered myself in the PS) is not an inevitable consequence of Capitalism, but is an inevitable consequence of people acting the dope/the c*nt, depending on their position. And such f*ck-acting is much more likely to continue in a State-funded entity, than a a privately-run one, since the former can spend other people's money, through compulsion, as well as printing its own money...
 

Alan Alda

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Things have prices, because stuff is scarce: for example, there is only so much carbon dioxide available on the market. We need a way to determine how we should use the scarce resources we have available to us – and prices let us do this.

People want stuff, because it delivers value (however subjectively perceived..a bottle of water is worth more to a man stranded in the Sahara, than a diamond necklace), that is, some benefit to them.
Wow. I want what aldiper is drinking:cool:

That sounds like some whack , provocatuer ,situationist art 'post'.

Carbon Dioxide is a legit 'product' ? Takes some mental gymnastics to say the least.

Then following up with that lame , 'man in a desert' rubbish.

But the punchline is nicely deadpan.

Your'e actually serious!

Im bemused but mildly entertained by your high level trolling/serious delusions/drugs trip.
 

aldiper

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Wow. I want what aldiper is drinking:cool:

That sounds like some whack , provocatuer ,situationist art 'post'.

Carbon Dioxide is a legit 'product' ? Takes some mental gymnastics to say the least.

Then following up with that lame , 'man in a desert' rubbish.

But the punchline is nicely deadpan.

Your'e actually serious!

Im bemused but mildly entertained by your high level trolling/serious delusions/drugs trip.
Mr. Alda, by assuming I am “drinking” you are merely exhibiting your conceptual conformity.

Indeed, yes, CO2 is a legitimate economic good: it being bought and sold by individuals for their own needs, either for adding “gas” to pints of lager (for those “drinkers” among us) or rendering pigs unconscious prior to slaughter.

My “lame duck” reference to a man, who is stranded in the desert valuing a bottle of water more highly than a diamond necklace, is an allusion to the subjective theory of value, whereby “value is determined by the importance an acting individual places on a good for the achievement of his desired ends.” (from Wiki).

This theory stands in stark contrast to the “Labour Theory” of Karl Marx and others – it is a theory that is a component of much of our current economic policy, such as minimum wage laws. That is, the mere fact that someone has spent time in doing something, means that their efforts are worth a given amount.

And, for your information, I troll at a level of a PhD.

In Gender Studies.
 

Alan Alda

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Yes,well.
I was referring to the unethical and totally dodgy 'carbon credits' industry not the the legitimate Co2 industry ,who provide us with our essential carbonated products.
Fizzy drinks, Lager ,unusually textured chocolate etc.
 

mr_anderson

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Probably true.
After all, private enterprise works on the profit principle - they're in it to provide the service, and make money for the owners.
There are two ways to make a profit: 1. charge more than you need to, and bank the extra. 2. Charge the going rate and underpay your employees.


Due to technological efficiency driving down costs, it's entirely possible to ''charge more than you need to, and bank the extra'' and still undercut the government competition.
SpaceX with their Falcon Heavy rocket would be a prime example of this.
And I sincerely doubt they are underpaying their employees.

SpaceX has promoted reusability as a major cost-saver for the private spaceflight industry. Right now, rockets are treated as trash once they've taken off, so companies must spend millions of dollars on manufacturing brand new rockets for every single flight.
It costs $60 million to make the Falcon 9, and $200,000 to fuel it, according to SpaceX CEO Elon Musk. Reusing rockets could substantially lower these costs, he says; theoretically, a rocket would only need to be refueled to launch multiple times again
....
All together, this helped to drive up the cost of each [NASA] Shuttle mission to somewhere between $450 million and $1.5 billion per launch.
https://www.theverge.com/2015/12/24/10661544/spacex-reusable-rocket-refurbishment-repair-design-cost-falcon-9
 

Alan Alda

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HSE seem to be using similar methods as SpaceX.
Looks pretty efficient alright.
Flying tests to other continents etc.
Yet it just doesn't add up.
Health Minister needs to refer back to his 48k spectrum for instruction.
 
Last edited:

bokuden

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Roisin3

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Wow. I want what aldiper is drinking:cool:

That sounds like some whack , provocatuer ,situationist art 'post'.

Carbon Dioxide is a legit 'product' ? Takes some mental gymnastics to say the least.

Then following up with that lame , 'man in a desert' rubbish.

But the punchline is nicely deadpan.

Your'e actually serious!

Im bemused but mildly entertained by your high level trolling/serious delusions/drugs trip.
He’s simply a child of the Thatcher-Reagan era propaganda.
 

Clanrickard

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Why public sector outsourcing is less efficient than Soviet central planning | New European Trade Unions Forum

'The logic of outsourcing is that market-based production is better than public production because the governance of private organisations is more transparent, flexible, efficiency focused and disciplined by owners. But this idea is problematic on two fronts. In the first place the presumption of market superiority is an artefact of public choice theory; it’s not rooted in historical assessment of which regime, public or private, has better produced public goods. In the second, this logic is dependent on ‘first-best-world’ economic theorising: it assumes an efficient market for simple goods, or for goods that can be somehow simplified. Hence for outsourcing to work those archetypal conditions have to exist. While they typically can exist for simple goods and services (the NHS doesn’t grow its own food), the outsourcing markets for complex goods and services characteristically fulfil none of the necessary conditions.'

The state should own the commanding heights of the economy.

Discuss.

 

Roisin3

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The tenderpreneur situation in South Africa is an extreme version of what happens in public sector outsourcing. Politically-connected (predominantly) young men bid for public contracts and on winning the tender run off with the up-front proceeds without delivering anything, knowing that the state has neither the capability nor the will to chase them down.

So the article's complaint about over-complicated outsourcing doomed to failure rings true.

But the OP conflates outsourcing with privatisation. State ownership does not work well for all but the most essential public goods. Even where state ownership is necessary (and I would support it in cases of e.g. health and education), services that are provided privately in the private sector e.g. logistics, catering, facilities management can be outsourced successfully.
Highly debatable that complex facilities management can be successfully outsourced in the long term. Generally speaking when this is undertaken, initially it will be a case of transferring public employees and that section of the business to a private corporation, and the private corporation promising (contracted) to deliver at a cost savings. Usually this misses out on the bells and whistles, the extras, that are part and parcel of the public sector employment, and when the bill comes in from the private corporation, the cost savings evaporate. The biggie is when they lose the employees they inherited with the business and replacement employees have a knowledge gap that is hard to fill. At that point you hear cries of who ever had this mad idea to outsource facilities management.
 

Roisin3

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Because the state is run by civil servants who value job security above all else,they have a strong tendency to duck responsibility by creating interlocking committees. They are very slow to adopt new technology and are often decades behind the private sector. Recently, it was reported that the Garda Siochana lack computerised despatch systems and hand held computers that would enable them to check things in the field-technology that small physical distribution companies were using 30 years ago.
That’s down to funding shortfalls and nothing to do with mystical, magical privatisation.

Secondly, the essential services should not be at the forefront of technology, as they have a zero outage requirement*, and will use tried and tested and totally trustworthy and reliable technology ahead of new super gadgets.

* 999 call went unanswered because some mobile operator’s tower was down.
 


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