Market Outcomes Are Not Always Ideal Outcomes

Mike Konczal explains things in ways far more clear than I ever could:

Privatization replaces the democratic role of citizens finding solutions to collective problems and transforms it into consumers trucking and bargaining in a marketplace. Finding solutions in a public space emphasizes accountability, voice, transparency, rules and claims through reasoning that goes beyond the self. The market emphasizes cost-benefit thinking, profit-seeking strategies, bargaining and the satiation of individuals’ wants; good things in many circumstances, but not necessarily when it comes to the powers of the state. (emphasis mine - JMG)

This is really something I want to hammer home in the face of a long-standing misconception that markets always produce the best outcomes. Markets produce human welfare maximizing results when they are competitive. This is one of the major reasons markets persist as the economic system of rich and successful Western nations.

But the end goal is not to have more "market" relative to "government". Markets are not a goal into themselves. The goal is to maximize human welfare through just and equitable mechanisms; whether it be through the market or through the government shouldn't be a major concern. Moreover, there are a number of goods and services where a profit motive is more harmful than helpful, as this Mother Jones piece on Pontiac, Michigan's privatization ordeal can attest:

Gov. Rick Snyder put Louis Schimmel in charge of Pontiac last September, invoking Public Act 4, a recent law that lets the governor name appointees to take over financially troubled cities and enact drastic austerity measures. Under the law, passed last March, these emergency managers can nullify labor contracts, privatize public services, sell off city property, and even dismiss elected officials.

Schimmel got to work quickly, firing the city clerk, city attorney, and director of public works and outsourcing several city departments. City fire fighters were told that they would be fired if their department was not absorbed by Waterford Township's. Schimmel has proposed putting nearly every city property up for sale, including city hall, the police station, fire stations, water-pumping stations, the library, the golf course, and two cemeteries.

Williams and his six colleagues on city council have been stripped of their salary and official powers. "Nearly the whole city has been privatized," he laments.

The mind-set that places an emphasis on fiscal balance, or profit-maximization on public-service sector goods and services completely misunderstands the logic of the public service sector in the first place. The use of taxpayer funds to provide public goods is grounded in the understanding that there we all benefit when our (or our neighbor's) children are learning in schools, our streets are not overflowing with garbage and we're not continually being accosted by beggars who have no safety net recourse.

Moreover, not only does it make poor philosophic sense for the state to profit from the services it provides the public, or outsource its services to profit-maximizing actors; it is becoming clear that state budget surpluses, and perhaps even perfect fiscal balance, can be a drag on our economic growth.

How Far We've Come

Mike Konczal has some smart points on Polifact's "Lie of the Year" that I think everyone should read. The gist of Konczal's piece, and the general liberal critique of Polifact's claim, is that the factchecking organization is being breathtakingly obtuse in their defense of Paul Ryan's 'Path to Prosperity' Medicare overhaul, and is specifically obscuring some of the important details of Ryan's plan.

The basics of Ryan's plan is to shift Medicare from the broad entitlement plan it is into a voucher system. Medicare is currently a guarantee to cover a certain level of healthcare costs for a broad basket of products and procedures for American citizens 65 and older. Ryan's plan, on the other hand, coverts the program into a (poorly funded) voucher system—a coupon for healthcare. The caveat is that those 55-and older would be grandfathered into the current as-it-is entitlement-Medicare. Only those 55-and younger would face the uncertainty of a voucher; the value of which, I'd like to add, declines over time.

I bring this up because Konczal makes an important, if not interesting point:

Because I’m a senior-in-waiting, and [Ryan's] plan will affect me. Someday I’ll be elderly, and then I’ll have to deal with taking a worthless coupon to the notoriously ugly healthcare market if this plan passes. This is not semantics – it’s the basis of the inter-generational social contract.

Now the phrase "inter-generational social contract" has quite a bit of currency in political theory nowadays. But if you go all the way back to Edmund Burke's Reflections on the Revolution in France, 1791 you'll find one of the first examples of the idea:

You will observe that from Magna Charta to the Declaration of Right, it has been the uniform policy of our constitution to claim and assert our liberties as an entailed inheritance derived to us from our forefathers, and to be transmitted to our posterity; as an estate specially belonging to the people of this kingdom, without any reference whatever to any other more general or prior right. By this means our constitution preserves a unity in so great a diversity of its parts. We have an inheritable crown; an inheritable peerage; and a House of Commons and a people inheriting privileges, franchises, and liberties, from a long line of ancestors. (emphasis mine – JMG)

Burke's basic point is that the “natural rights” of man, whatever they may be, do not spring fully formed in an a priori way. Rather, the rights of man are an hereditary property of a nation, formed through the process and deliberation of the government, and enshrined by the current generation for the benefit of the next.

I bring up Burke because I find it interesting that Mike Konczal, in my estimation at least, qualifies quite well as a "liberal" or "progressive" (or whatever you please). Just a few days ago he wrote an (excellent) essay arguing for a dismantlement of the current subsidization of higher education through the tax code, and simply using the money to provide college for free. Moreover, Medicare (and Medicaid) are thoroughly "liberal" programs in that they were championed by a Democratic president and fulfill the broad liberal goal of a strong social safety net; a public guarantee to aid the poor and elderly who lack the resources to fully care for themselves.

So how did we get to this point where liberal commentators are writing successfully persuasive essays on the defense of liberal polices using quite possibly the oldest argument of modern conservatism? My guess is that today's liberals are more conservative than they'd prefer, and today's conservatives are more radical than they're willing to admit, and politics in general continues its constant cyclical movement towards nothing in particular other than a repetition of the same patterns we've been observing since the Greeks.