The debates involving health care and UHC, and now debates about farming, tend to present the notion of government waste as repudiation for socialist policies. The most recent being food rotting in government warehouses in Venezuela and the inability of government to distribute food. A simple fact hard to refute.
But today is garbage day in my little neighbourhood, which means the free market is demonstrating inefficiencies.
All of the past cities I’ve lived in had garbage removal as part of city taxes. Most of the time it was a government run program, but some times it was an external company like Waste Management. And in each of those cases government waste was apparent. All of the typical complaints people have of government programs existed.
My city, on the other hand, has 5 separate companies offering waste removal–sounds like the perfect free market scenario. Each company has an incentive to optimize their routes so as to minimize drive time, to provide the best customer service, and to fuck up the least. Which should result in lower prices and a better product. All of the best parts of the free market we’re promised.
Except for one simple problem: 5 separate trucks are going to drive by my garbage today before one of them stops to take my trash. The free market is providing 5 times as much garbage collection as we need. A process that to me is insanely inefficient,a that repetition is built into the price. So where government could contract to a single company, instead with have the same process run 5 times.
So on this issue, which is better and which is worse? Full government take over of the service? Government contract leading to the inevitable sweet heart deal. Should we have government intervention to force efficiencies? Should we allow/prevent collusion between companies? Or continue to accept this aspect of inefficiency.
Some things you need government oversight of. For example it is hard to imagine private companies building roads and then charging for their use. Power plants are another one. While private they are heavily regulated because they are essentially granted a monopoly. You just do not want 10 power producers out there all running their own power lines all over the place.
Garbage pickup seems it could go either way. For small towns private companies probably makes the most sense. For large cities it’d be more of a mess and probably makes sense for the city to run it (either themselves or to contract with a waste management company).
If 5 different companies can all drive by your house and offer competitive pricing and turn a profit, where is the inefficiency? The fact that they drive by your house?
In my city, the city government contracted with 1 single private waste management company which then contacted everyone within the city limits and offered them a deal based upon the total package of the city limits.
So far, it has worked and has been cheaper.
The good thing about the free market is most times, you get what you pay for. If you want cheap inefficient or screwed up service, you can pay for it. If you want to pay for top of the line service, you can pay for that too.
In my opinion the government is inefficient in the things they do because it doesn’t usually directly affect them.
The inefficiency occurs in situations where a single company, or indeed two companies, could provide the same service at a lower price, yet maintain the same profit level. This occurs because of high levels of fixed costs.
There’s also the inefficiencies associated with the externalities involved - here the exhaust and noise pollution of the extra trucks.
I don’t get it. If companies are tripping over each other to get to your garbage, then this is not necessarily an inefficiency for you. The question is do you pay less for garbage pickup as a result of the competition? Do you pay the same? My guess would be that having more than one company might not save money for the consumer on the front-end but may reduce the inevitable price hikes over time.
Hard to see how it could be efficient in a major metro area.
In Chicago (where I live) garbage is in alleys (often) which generally can only accommodate one car at a time. A garbage truck fills the whole thing. Having numerous companies them bouncing into each other and yelling at who has to backup I cannot see as efficient at all. Would be a nightmare for them and everyone else.
So prices would inevitably increase as the time needed to do the job increases. Or, the inefficiencies in the private sector would result in no savings for the consumer. The point I’m making is that, with competition, inefficiency only hurts the company. With only one company that has a government contract, inefficiency hurts only the consumer.
Essentially. Suppose that we have two neighborhoods with nine houses each, and we have two garbage trucks. If there’s only one company, it will send one truck to one neighborhood and one to the other, like so:
If, on the other hand, I have two companies each servicing some houses in both neighborhoods, and our trucks are split between them, then our drivers may be servicing the same number of houses, but they have to drive twice as far, which adds fuel cost and time:
That added fuel cost and wage both end up on the customer. The company also wants to make a profit, whereas the government just needs to cover costs. Essentially an honestly and efficiently run government agency will always cost less than the equivalent government organization. The only thing is that there’s no particular reason for a government agency to be well run since there’s no competition and generally people will elect their officials on issues of higher priority than garbage collection.
Governments can and do try to make a profit on some services they offer. In fact, they obviously have no choice but to do so, since some government services make little or no revenue, and so the cost of those things has to be made up in other areas. Governments can’t run deficits indefinitely (and if they do run them for a long time they have to make money to pay the interest back.)
So in fact, a government very likely WILL try to make a profit on garbage collection. They’re either going to have to charge collection fees, as is happening in more places around here, or tax you for it.
You have no way of knowing which one is more efficient. Just the fact that you see trucks destined for other houses drive by you means nothing.
Hub and Spoke airline travel has turned out to be highly efficient, but if you look at just one aspect of it it can seem downright crazy. For example, If you need to get to a city that’s 500 miles away as the crow flies, you might have to travel 600 miles to a hub, and 600 miles to the city, more than doubling the length. Boy, that seems inefficient - until you find out that flying direct would result in flights that are only 20% full.
To determine which is more efficient you would have to analyze the total costs of the entire system, not just the small aspect of routes overlapping in some places. For example, the government trucks could all be going to one landfill, which is a long way away. The independent operators could be driving to different landfills that are closer. That might cause their routes to overlap, but overall distance driven could be lower.
Or, the government trucks could be going from one area to another, resulting in slow pickup or requiring that drivers sit idle while waiting their turn in the queue. The private operators could employ the people more effectively.
The ultimate way to know is to look at the overall costs of both. If the city is managed well and has chosen (and stuck with) private contractors, that would be one piece of evidence suggesting the private guys are more efficient.
Multiple companies may result in a higher price - because of the required investment in trucks. If the market can be adequately serviced by 4 trucks, and yet sufficient profit can be made to maintain 6 companies in the business, each with one truck, it is perfectly feasible that, in the short term at least, there will be six trucks doing the work that four could do, resulting in higher prices for consumers.
Also, if you increase the number of trucks, you increase the externalities. More fuel pollution; more noise pollution, more damage to roads. These costs are born by the customer, not the producer.
I’ll have to deal with clogged alleys as I try to get to/from my garage.
Also consider these companies would likely lock the consumer into year or more long contracts. They simply could not deal with consumers changing companies every week as they compete to lure new customers. My experience with cell phone company contracts is they are rarely in my best interest.
Add in pollution, traffic congestion, noise, smell and so on and the consumer is definitely adversely affected.
Does it have to be all or nothing? You imply (all) government contracting leads to sweet heart deals. Got a cite for that? Are you aware of best value contracting in government contracts?
So your complaint is what? Are you attempting to compare US healthcare within a capitalist economy and open government with the political/government policies of a foreign country just to hang the “socialist banner” the-world-is-coming-to-and-end drama? Seems a bit disingenuous. If Venezuela has a food distribution problem, how does that equate to healthcare in America? Are you aware of how much edible food is thrown out daily across America by private enterprise, while people just around the corner beg for a meal? What’s your real point?
Governments waste in America (Yeah, plural as in federal state and local.). So does private enterprise. Is one version of this waste “better” because your tax dollars are not directly apparent?
You might want to brush up on the definition of “profit”. Revenue isn’t profit. Revenue is revenue. Meeting cost is not profiting. Not-profiting is not necessarily running at a deficit.
Loss/Running at a deficit: Higher costs than revenue
Break even/Covering cost: Revenue equals cost
Profit: Revenue is greater than cost
Waste hauling contracts frequently involve a contracted rate to the municipality, which is then passed to the customer. So if Waste Management finds its costs suddenly increase, it will have a difficult time passing that cost on to the customers until it can renegotiate the contract, but bids are likely to factor that risk into the bid. Contracts typically last a few years, but when they come up for renewal, the existing waste hauler typically has the inside track due to already having the routes planned out, drivers trained, etc…
The one cost that is frequently allowed to be passed on to customers is fuel costs. This cost would likely get passed on by any waste hauler, monopoly, governmental, or free market.
IMO, this short term contract system is the best way of doing it. Yes, it grants a monopoly to one waste hauler, but it’s temporary and forces the hauler to remain competitive or it will lose that contract when it’s up for renewal. It reduces the number of trucks required to drive each route, as shown by Sage Rat.
I’m not sure this model would work for most utilities such as electricity, water, sewer, and (depending on your political leanings) health care. Those work in a very different way, with only one set of transmission lines, one set of water pipes, and one set of hospitals. If two companies were to manage the same service, their product would be mingled within the lines/pipes/hospitals. Compare this mingling and dependent operations to waste hauling, where several trucks can drive a single route or two companies can service different neighborhoods without mingling efforts.
Full disclosure: I work with the solid waste industry frequently in my professional work, but do not typically with waste hauling contracts or planning.
This is not just associated with garbage pickup. Why should we have Coke and Pepsi, there is a tremendous amount of redundancy there. Also Burger King and McDonalds and Wendy’s all have redundant efforts.
This is the traditional arguement for socialism. A central agency which is not trying to turn a profit can reduce the costs of redundancies and eliminate profit, thereby lowering cost for the end user.
The problems of centralized management isthe incentive problem. A monopoly has no incentive to provide good service since there are no alternative for customers to leave to. There are no incentives for innovation or cost cutting since there is no more market share to capture. Incentive problems can be solved but usually are not.
The inefficiencies I referred to represent the system as a whole. 5 trucks are covering the routes while being below capacity. To compare this to the airline industry would have 5 flights leaving at the same time, to the same city, with 10% capacity. One flight could service the entire route, just as one truck could service my entire neighbourhood. Instead, we have 5.
During one of the UHC debates a few months ago the USPS was brought up as an example of inefficiency. My neighbourhood only has the one truck driving around delivering mail. Imagine if they had -> 5 <- trucks running under capacity, overlapping each other.
Imagine for a second what it would look like if USPS split up the mail for our area into 5 piles based on our waste service contract. Would anyone in their right mind call that an efficient system?
So what I am providing is a case where the free market has established a system that is 5 times more wasteful than it needs to be, without any discernible benefit to the consumer. Garbage pickup is pretty binary, it’s either done or it’s not.
*As a minor comparison, but not entirely relevant, recycling is tax funded and contracted to one of the 5 companies. It is done using one truck for the entire area. It’s not a real apples to oranges comparison, but I find it interesting that the two are happening at the same time. *
The public/private question is being framed by starting from a supposed example of private market inefficiency. The only evidence for this we have is that apparently trucks from different companies pass each other while driving their collection routes.
This is simply not enough information to tell us which is more efficient. The private companies could be using newer, more efficient trucks. They could have more efficient landfill management practices. They could have a more productive labor force.
The whole overlap thing could be an illusion anyway. One truck cannot collect all the garbage for a city, so even one waste company will be sending many trucks out. I’m sure they follow the same routes to various areas. You may not notice the overlap because they all look the same. But when it’s different companies doing the same thing, you notice.
Or maybe five trucks from the same company all head into the same area. One drives along until it’s full, then it leaves and another one drives in to take it’s place. They’re still overlapping the same routes, but they’re doing it one at a time.
So basically, I reject the entire premise of the OP based on that example.