redundancy within a company is inefficient. Redundancy between 2 competing companies is competition.
Right.
If two of the 5 garbage companies merged, they would eliminate one of the trucks that service my block because one of them is redundant. If all 5 merged, there would only be one truck, because four of them would be redundant.
There isn’t much to garbage collection here other than taking the garbage. They either do it or they don’t. Much like supplying electricity or natural gas. It’s either on or it’s not.
If the government took over garbage collection, they would eliminate four of the trucks, and as long as the garbage gets collected, we wouldn’t notice a thing. There isn’t much more to the service.
emacknight: I’ll say it again - your observation that private trucks pass each other in your neighborhood is no where near a proof that private trash hauling is less efficient than public trash hauling.
I do analysis like this for a living, you know. Part of my job involves building requirements for companies doing business process reengineering and refactoring to improve efficiency. I know what goes into an analysis like this.
Let me give you an example of just one thing that you are completely ignoring, and which could make all the difference: What is the capacity factor of those trucks? What if the city trucks tend to head back to the landfill when only 70% full, but the private trucks are 90% full? How does that affect your analysis?
This can easily happen. If the city parcels out its trash collection into zones and sets up rigid barriers between them (i.e. driver A is assigned to truck B, and they are assigned to zone C, and this relationship is fixed), then what happens on a light trash day for that neighborhood? Does the truck come back half empty? What if in another area there was unusually heavy trash, and the truck fills up - with three houses left to do? What happens then? Does another truck have to drive out for just those three houses? Or are they flexible enough to re-route someone else? Will union rules allow them to do it? Will they have to pay drivers overtime?
Perhaps their solution to this is to size the trucks and zones such that they typically come back 70% full, so they can handle any overages without requiring a second trip.
Perhaps the private companies are more flexible, and have managed to engineer their processes so that their trucks are 20% more full.
We don’t even know how much of the overall vehicle miles traveled is increased by the neighborhood overlap you described. Depending on how densely packed the neighborhood is and how far away the landfill is, it could be a trivial amount in the first place.
There are no doubt hundreds of factors. I’ve been involved in BPR analysis, and you can spend days just sifting through all the potential factors trying to figure out what the top 20 are in terms of impact. Perhaps the terminus side of the pickup at the landfill is horribly inefficient, with trucks idling in lines for long periods of time waiting to dump their garbage. Maybe the city has under-invested in infrastructure and their trucks are old and inefficient, or union rules have prevented them from automating certain operations.
Here’s another one - maybe the private agencies have a better handle on exactly who their customers are, and can size their trucks accordingly, so that they can send smaller, more fuel efficient trucks into neighborhoods with fewer customers. Maybe they’ve developed technology for interim deposit of trash into larger vehicles for hauling to the distant landfill.
Do the private companies charge by the bag? Did the city? If they do, that acts as an inventive for people to not throw out as much garbage. Maybe they’ve reduced the entire amount of garbage by 10% through pricing, and have lower costs of collection and landfill storage.
There could be hundreds of factors that you can’t see until you dig deep into the operations of a company. Your observation is just one piece of data that would be used to determine where efficiency could be improved. Earlier, I gave you a counterexample of a situation much like that which is unquestionably more efficient - splitting up package delivery between multiple vendors.
Now, it’s entirely possible that in this case having five contractors is less efficient. All I’m saying is that your observations do not come close to proving the case.
That’s not accurate. You’re premise suggests the trucks operate at 1/6 capacity. Just because multiple trucks pass through your area does not mean they could make all the stops. Most of the time in the operation is in the pickup and not the movement of the truck. What is more realistic is that there are 20 trucks serving 18 trucks worth of service.
And maybe the private companies are owned by the Mafia and inflate the cost of dumping, to get kickbacks. If you compare heroes of industry with public boobs, industry of course comes out the best.
What actually happens, and is probably optimal, is that the rights to trash collection are owned by the public, and private companies (the five in the example) do competitive bidding for the contract for a limited time. The public benefits from competition without the waste of multiple vendors recrossing the same area. If the companies are more efficient, the savings goes to their bottom line. if they do not provide service, they lose the contract the next time (and changing trash haulers is fairly simple.) The key to this is that the public can restrict private haulers from entering the market except at well defined intervals. Saying five haulers are collectively more efficient than one is laughable unless you invent all sorts of chains and shackles for the public option. Saying a single private hauler is more efficient than a city (especially a small city) is a lot more reasonable.
I’m not observing them pass. I am observing them pick up trash on my street. Do you realize that? You have yet again failed to understand the situation. I’m not suggesting it’s inefficient that they drive down my street. It’s inefficient that they STOP and make PICKUPS on my street. Do you realize that is what we are talking about?
As I said before, each company is individually as efficient as they can be. Each hired a super smart guy like you to evaluate their process and show them the be routes. But it doesn’t change the fact that there are 5 companies providing the same service. Each company is efficient, but having 5 companies is stupid.
Why do you keep saying this. It’s completely retarded and not in any way relevant.
What if the private trucks drive over children ever day but the government only drives over 1?
You were better off rejecting things that don’t fit your ideology.
This specific example pretty conclusively shows that is not a natural monopoly. A natural monopoly is one in which the fixed costs are so high that there is naturally only one company. Many times it is required for a government to step in and do this, because of the high initial entry and capital costs (but not always, there are private electric companies…of course then it requires regulation because it is still a monopoly). The existence of five garbage collection companies is evidence in of itself that it is not a natural monopoly.
emack, is there any differentiation amongst the companies, i.e. do some offer to pick up more often for a different price? do some offer free haulaway for large items while others don’t? Just curious if the service is completely homogenous amongst the five companies?
Five collection companies competing for the same market is something I’ve never seen any place I’ve lived. (There are multiple companies competing for the business market which has fewer pickups and higher volume.) The “natural monopoly” part (which I may be misusing) comes from the inefficiencies which have been discussed, not cost of entry in this case.
However government regulation can de-monopolize even natural monopolies. We can choose from several DSL companies over the same phone lines, and even for power, California had something allowing you to purchase power from an alternate source, which then fed an equivalent amount of power into the grid (or something.) So things have gotten a lot more flexible since I worked for the Bell System, when we were convinced that long distance was a natural monopoly also.
I don’t see any way to get around the fact that having competing trash haulers introduces an inefficiency into the system that isn’t present with a monopoly. Any of the inefficiencies you mention could be present in either multiple competing systems or in a monopoly system. There doesn’t seem to be much of a way around this inefficiency as long as people are allowed to chose a different trash service than their neighbors.
And, in a neighborhood like mine, very dense, with narrow, one-way streets, the weekly trash pickups are an inconvenience to everyone trying to use the street. Traffic is often backed up quite a bit behind the truck as it makes its way down the street. Multiple competing systems would further add to this.
Whatever the benefits of competition are, they seem better addressed at a system-wide level, rather than an individual level. What could they possibly compete on, other than price? Either your trash is picked up at the appointed time or it isn’t. If your trash service is noisy, smelly, or otherwise a nuisance, but comes at 4AM while you’re at work, you’re just saving money and making your neighbors deal with the problems. If the service is contracted neighborhood or municipality (or whatever) wide, the contractor has much better incentives to keep everyone happy, so they don’t lose the contract.
It really seems like it makes much more sense to have a free market in setting up trash collection schemes for municipalities or other entities, rather than in individual trash collection.
You’re right, and I was thinking about this yesterday. If the 5 trucks from 5 companies end up being near capacity in serving the entire area, it will still take 5 trucks from one company. The only improvement would be in how the trucks are routed, not insignificant, but not really worth the trouble.
But there are two reasons why I don’t think any of the trucks would be near capacity: the area they serve is constrained, it’s not as if they can continue to work outwards until they’re full. They get the city boundaries to work within.
And secondly, when I researched them last year, none of them gave any indication of a wait list or shortage. If, as an example, each truck can service 100 homes, it would be extremely costly to go from 99 to 101 customers, just like with an airplane. You need that sweet spot of about 60-80 customers per truck. That way you aren’t losing money, and you still have room to add new customers.
So I don’t think it’s possible we have 20 trucks serving 20 trucks worth of area (the maximum). And likewise I don’t think we have 5 trucks serving 1 truck worth of area (a minimum). Each company should be at some level of operation, possibly between 60 and 90% for their last truck. If we assume each company has more than 1 truck, their last truck will never be full. So merging all 5 will still allow for a reduction in the last 5 trucks; probably not to 1, but something below 4.
And to clarify again, the trucks are all making stops on my street. Each company has at least one customer on my block. If I see a truck, it’s because it’s making a stop for a customer, there is no other reason to come down my street.
Let me say this again, my street doesn’t represent an overlap on the supply chain. I’m not just watching trucks drive by, they are physically stopping to pick up trash from their customers. If trucks were using my street as a means to get somewhere else, then those companies have MUCH bigger efficiency issues. These trucks are making stops on my street to pick up trash from their customers.
Well, it’s funny you should ask. When researching them, I requested a trial pick up from each company. Then evaluated whether or not they picked up the trash, and gave them a score of 0 if they didn’t and 100 if they did.
I’m kidding, I called around to find the ‘cheapest’ only to learn that it doesn’t exist. Scott Adams, author of Dilbert, coined the term *confusopoly *in one of his books. Each company has a wildly complex pricing structure, which is ultimately how they differentiate themselves, making it nearly impossible to price compare. One company offers three sizes of a bins, each at a different price. Another company has four sizes, just slightly different than the previous. Do you want a company that provides a 20 and 30 gallon bin, or 22 and 48? Do you want to be billed monthly or quarterly? Do you like forest green or midnight black?
They each have their own strategy for “extras.” One charges a lot more for couches, but doesn’t charge much for lawn waste. The other has a seasonal package for lawn waste instead of a per bag fee. One tried to give me a weird trial rate for the first 3 months.
I spent about a week sifting through the 5 of them without being able to tell the difference, and in the end picked one with a low price for the bin size we guessed we might need.
Even if having the five trucks work the same area is an inefficiency, how much of an inefficiency is it? How does the additional energy and cost of this compare to the overall costs of the system? What other efficiencies might the private market bring that compensate for this?
And again, you don’t know that the five-truck method is less efficient, because you don’t know all the details about how they work. If five trucks means that each can come back 95% full, while the government system sends them back 70% full, and the additional neighborhood drive only adds 20% of the miles driven, then using the five trucks and bringing each one back full is more efficient. Or there could be a whole bunch of unseen factors here that drove this model the way it is. Or, it could really be very inefficient. The point is, the mere observation of their behavior near one person’s house doesn’t give us enough information to know.
Could a single monopoly theoretically be more efficient than competing companies? Sure. But historically they have proven not to be. That’s because true monopolies don’t exist under the harsh pressure of competition. I think people really underestimate this effect. It’s one thing to say you’re going to be efficient, and it’s another when you know deep in your bones that there’s another guy out there doing his best to undercut your prices, and that your company’s existence depends on you constantly striving for improvement wherever you can find it.
Take the last recession. Private industry laid off a lot of jobs. The government? Almost none. Government can pick up the slack with tax dollars. Private companies live or die based on their balance sheets. It keeps them leaner and fitter.
This is just a variation on the old argument that state monopoly is better than the free market because it avoids all that duplication of service. Coke vs Pepsi, Ford vs GM. It seems so wasteful. But it’s not. If monopoly was better than competition, you’d see government monopolies everywhere, and the places that have them would have better economies.
This is a form of Ceteris Paribus fallacy: The assumption of “All else being equal”. Hell, the private market is using five trucks! If we just replace them with one, then all else being equal we’ll be more efficient!" Except all else isn’t equal. The incentives are different, the organization structures are different, the rules are different.
I think you said what I said. I meant they EACH travel the same distance as the one paper boy. BTW why is it easier to explain with 4 paper boys instead of 6?
I’m not arguing that government monopolies are superior to free markets, but that the trash collection market doesn’t make much sense to be operated at the individual level. As has been suggested earlier in the thread, municipalities often contract out to trash hauling companies, and the companies compete against each other for contracts. The company running it’s trucks 70% full has higher costs than the one running 95% full, and can bid out its contracts lower.
I’m no expert on trash collection, but it seems to me that there are efficiency gains to managing things on a larger scale, as well as better accounting for externalities such as backed up traffic behind the trucks.
Personally, I’ve lived in cities my whole life, and all I’m familiar with is that I pay rent, my landlord pays property tax, and trash trucks come around every Friday morning and take whatever I put out, subject to various restrictions. The system emacknight describes would completely baffle me. I have no idea whether the City of Boston runs its own trash collection or contracts it out, or how efficient it is, but I’ve really got no complaints on my end of things. I often do get stuck behind a trash truck on its weekly round on my way to work (not on my street, another one around the corner, on a different day, and I can’t really complain, being on a bicycle), and multiplying the number of truck trips through the neighborhood would probably be a noticeable, if minor, impact on my life.
Government monopolies are usually less efficient than private businesses. This is for two reasons:
-politicians benefit from public monopolies-they get patronage jobs and campaign “contributions”, from those they place in public jobs
-the main goal of politiians is to increase budgets, so having access to the public’s money (taxes) guantees that costs always rise (never go down)
Take the case of school busing (to achieve racial “balance”): the city of Boston (MA) has had a busing program for over 35 years. This costs about $77 million/year, and causes air pollution and clogged streets. Because children are moved (bussed) from one end of the city to another, many parents have opted out (by sending their kids to private schools). So, the schools are now mostly minority, and there is no sense in continuing…but the busing continues (the owner of the bus line makes substantial campaign contributions/bribes to Boston politicians.)
Thus, the waste of money continues. The schools suffer, but it is important that the failed bussing continue-it is now a vested interest, and must be funded.
There is no doubt it my mind that competition between private companies will drive efficiency and innovation. As I said repeatedly, each garbage company has the best route they can, runs trucks as full as they can, invests in better trucks to speed up collection. This part at the level of the individual company is not in question.
I don’t know why Coke and Pepsi keep getting mentioned because they are completely irrelevant to the discussion, each is a different product Trash collection doesn’t change, it’s taking my garbage. But since they seem important to people consider that each company delivers pop to the same places. It’s not uncommon to see both a coke and a pepsi truck outside a gas station making deliveries.
If Coke and Pepsi ever merged, would it be more or less efficient to keep having two trucks make the deliveries to the same places? Two bottling plants? Two head offices? Each company on it’s own is individually very efficient. But two similar companies have overlap.
You’ll notice that Coke also makes diet Coke, Cherry Coke, Coke Zero, and Vanilla Coke. All get sent to the same stores. Coke realizes that it makes more sense to send them all in the same truck, than to have 5 separate trucks with 5 separate drivers, all leaving from the same place and going to the same place. Even if the 5 trucks are at 90% but the one truck is at 70%.
You mentioned busing children to school, and that works in this example. Imagine if instead of a horribly inefficient government run system, the city gave up and said, “from now on each parent can contract with a licensed bus company.” Each morning, 5 separate buses would come to your neighbourhood, each stopping at a different house, to take kids to the same school.
Notice how that’s set up. 5 kids, at 5 houses, all on a single block are going to the same school. Should you send one bus or 5? If my city gave up the bus contract to private competing companies, I would have 5 buses makings stops on my street.
You mentioned busing children to school, and that works in this example. Imagine if instead of a horribly inefficient government run system, the city gave up and said, “from now on each parent can contract with a licensed bus company.” Each morning, 5 separate buses would come to your neighbourhood, each stopping at a different house, to take kids to the same school.
Notice how that’s set up. 5 kids, at 5 houses, all on a single block are going to the same school. Should you send one bus or 5? If my city gave up the bus contract to private competing companies, I would have 5 buses makings stops on my street.
No, my point is, bussing to achieve racial “equality” is a failed idea. Kids should go to schools in their neighborhoods 9they can walk)…instead of being shipped off to a school on the other side of town.
The city I live in (St. Paul, Minnesota) has private trash pick up. Completely private. There are at least a dozen companies hauling trash, and you get to choose among them.
The results are:
a) you can save money if you shop around and are willing to switch companies.
b) companies compete on price and service
c) trash pickup is much cheaper than in Minneapolis, where they let out the contract for each neighborhood.
d) there are garbage trucks on the street every day.
This last is a big deal if, like most St. Paulans, your trash is picked up from the alley. In St. Paul the city doesn’t maintain alleys. That means that the present system results in heavy garbage trucks running down the alley you have to pay to fix. (I don’t live in an alley neighborhood, so this doesn’t affect me.)
There are occasional calls to go to a district system, but the argument against that is that small companies with few trucks would be shut out.
I admit that having all these different trucks and trash cans seemed weird when I moved in, and it seems inefficient, but I’m not sure how to measure that. I do know that it’s cheaper for me the trash producer, especially since I don’t have to worry about the alley issue.
Oddly enough, curbside recycling is a one-company monopoly.
Sam Stone I am not sure I nderstand the capcaity arguments you are making. resumably the amount of trash is fixed regardless of privae versus public. X amount of trash requires X amount of trucks which requires X amount of trips to the dump. Maybe I am not understanding something.
Ispolkom raises a good point, what exactly are we talking about when we are talking efficiency. I suspect that a lot of the back-and-forth may be due to different definitions. There is the standard economic definition of efficiency, but that is not necessarily THE definition to go by.