If you haven’t read David’s column on Stanley McChrystal yet, you should.
The column prompted a few quick thoughts:
(1) We engage in lots of abstract arguments about the relative merits of small government and big government, but of course much depends on culture, and in particular on institutional culture. States vary in their capacity and effectiveness. Among left-of-center Americans, there is a conviction, often implicit, that we undervalue the work done by public sector professionals. During the 1980s, many pointed to Japan’s MITI as a model of an elite bureaucracy that attracted the best and the brightest, and of course France has its grandes écoles that train a wildly disproportionate share of the country’s political and administrative and corporate leadership. Though we’ve definitely seen an uptick in the number of talented young Americans who look to careers in public service, I tend to think the U.S. environment is not as conducive to this kind of an administrative elite.
Accomplished professionals often aspire to serve the public, but usually on a temporary basis. Part of the reason is that our culture values transparency to such a degree that it is difficult to give professionals the discretion they need to do their jobs well. Rigid rules are a good way to minimize egregious abuses. They aren’t a good way to get people to perform brilliantly and creatively, almost by definition.
(2) I’ve seen some very obtuse people say that David was telling young reporters to ignore the things powerful people say when kvetching. That’s obviously wrong. Why? Because Hastings was the product of a broader normative and economic shift. For him to edit his account to give a sober, boring account of the war of Afghanistan was all but unthinkable given the economic imperatives facing the narrative non-fiction business, and David understands that.
Rather, David was pointing out a structural tension that will have a permanent ratchet effect on who can serve in government, and thus how well government can work at the highest echelons.
(3) Given these structural problems, and given the fact that the “culture of exposure” reflects tectonic rather than episodic forces, shifting towards scalable for-profit social entrepreneurship (buzzwords!) seems like the right way to go. These are institutions that can allow for flexibility, discretion, etc., because they can be easily fired or dissolved if they don’t do their jobs well. It’s not shocking that I’d reach this conclusion, so take it with a grain of salt. But I think it makes sense.
I think this idea of for-profit social enterprises is an extremely interesting one.
As you mentioned, often times in bureaucracy, a lot of rules are introduced in order to limit egregious abuses, but at the cost of inefficiency. The idea of for-profit social enterprises offers an alternative conception of accountability; instead of micromanaging, here the focus is on whether one is achieving results as measured by the bottom-line. This sounds like it could have some advantages, but also some disadvantages.
A couple of points.
Why are for-profit social enterprises not more prevalent now? A big part of the reason, of course, is that the people you would like to serve with such enterprises are simply lacking in economic resources; that is, there is not enough profit to sustain such markets.
So, you will need to have some sort of government intervention to direct economic resources to such enterprises, so that they can sustain themselves. One way that this might especially be usefully done is through vouchers. This empowers the individuals receiving the service from the social enterprise to monitor the provider for quality. Such individuals may have a greater incentive to do such monitoring than anyone else, although in some circumstances they will lack the expertise.
Another way you might do this is by measuring the number of people served. But, one can imagine some problems with this; what if the function was issuing driver's licenses? If you measure a customer served as a person successfully issued a driver's license, then you have a problem since the social enterprise has an incentive to provide driver's licenses to those who should not have them. If you measure persons served by the number of visits, maybe the social enterprise would have an incentive to turn away even more people than the DMV does now based on hyper-technical issues in order to maximize the number of visits by that individual.
What about awarding for-profit social enterprises money based on competitive bidding? This encourages cutting corners. The money that should have been directed towards something socially useful is now, in part, directed towards the wealth of a particular individual or group of individuals. (Obviously, with competitive bidding, where the objective is to minimize costs, the government itself is a partial beneficiary; but maybe the social service as a whole suffers.)
What about the political implications? Isn't there a risk that those who control for-profit social enterprises will use their profits to gain political influence in order to keep the gravy train flowing to themselves, even if they aren't doing an especially good job.
As you can see, for-profit social enterprises would be no utopia. You have to design the incentives very carefully, and that can be very difficult.
In general, one would probably want to move slowly with such experiments, so that we can better learn how to design incentive systems to get the results we want. There is nothing wrong with for-profit social enterprises occupying a space amongst other institutions. But to imagine that they would not have their own problems would be a huge mistake.
In the Bush administration, privatizing everything without really thinking about it was the latest fad. The idea was that if it was private, it must be better. But that does not follow. We probably do not want IRS collections privatized, for example; after all, the same government is going to be subsidizing the health expenses of the people whose stress levels go through the roof do to out-of-control private collectors.
So, I guess I would be inclined to trust you personally, Reihan Salam, with the design of some humble experiments in incentivizing a limited experiment or two with for-profit social enterprises. But that is because you are not representative. In contrast, I would not really trust the Republican Party; they would go too fast and too recklessly because they do not recognize the difficulty of actually implementing such an idea. Instead of looking at incentives very carefully, they probably would substitute their blind faith in markets.
Also, it should be pointed out that there is an alternative model. That is, to focus more on carefully designed incentives within government. Of course, the idea of making the people at the top of a for-profit social enterprise accountable to the bottom-line does transform their incentives. In turn, the people at the top will use their power over the careers of other individuals in the organization to force actions that improve their own profit situation, so there is a sort of ripple-effect. But, maybe we should also be looking at the incentives of the people who do the actual work a little more directly? To the extent that we focus on those incentives, we would move away from for-profit social enterprises whose management would not typically be under our control.
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