Seriously, How in the Hell does Privatizing ANYTHING Make it Better?

Well, what that could be pointing to is the (absence of) a standard. Take railroads before they had standard gauge.

Maybe the entire bureaucratic system begets inefficiency as a whole. Fighting against that, to an extent, is futile?

“Better” was deliberately meant to be vague to accomodate what people could interpret it. “Better” can be synonomous with “more efficient”, “more people friendly”, etc.

Bob Jones University is definitely a joke.

There is no necessitity for Advertisment for ANY industry. Many privately held firms have NEVER advertised (as such) and do just fine, others are able to reduce prices WHILE advertising (seen the cost of a 1GB HDD lately? In 1995 it was $5,000)

BetaMax and VHS are no different than what happens with any other new technology. Same could be said of RDRAM and DDR (for a more current look) or DC verses AC (for some historical perspective) and it is the effiency of delivery (not equipment, the one that is able to get their name out, and at a better price) that wins (BetaMax was a superior technology, just as RDRAM was; but neither were price nor delievery competitive)

Competition ALWAYS leads to lower prices, as with 2 competing firms there must be SOME decision criteria, one if which will ALWAYS be prices (how much do you pay for long distance on your cell phone? It USED to be more expenisve than land lines, now it is free for most programs)

It is also not useful to look at different technologies for a competition model (BetaMax vs. VHS) in that they are DIFFERENT. Instead look at what happened to the price of PCs when Intel started selling chips to 3rd parties (So it was no longer rooted to ONE system, as it was previously), the price pummetted.

The arguements about ‘regulating bodies’ is difficult, but MOST industires are privately regulated (Bar Association, Professional Engineers, Medical Boards), some have oversight some don’t.

The most ‘common’ privatization arguement (that I hear) is Social Security. Frankly I’m for Privatization of SS. The only current ‘promise’ of SS is no matter how much you put in, you will get less out (not adjusted but absolute dollars). You can put your money in a short term CD (or heck a savings account or money market) and make ‘more’ than SS will ever give you. There are several examples of how privatization has done better than SS (not least of which is a 401k and the virtual requirment of having one). Such as several counties in Texas or even the program that the Congressmen use (they are not members of SS as such).

I was thinking that maybe Sampiro meant to write:

“Few would dispute that Harvard Law School is better than Jones Law School in Montgomery, AL, and few would dispute that the science department of University of Georgia is better than that of Bob Jones University.”

But i may be wrong.

I don’t really understand your question. Are you implying that i’m some sort of fatalist who has no desire for greater efficiency in the bureaucracy? If so, you are completely mistaken.

While we can easily point to many instances of bureaucratic inefficiency, i’m actually of the believe that bureaucratic systems can, with the right will and with appropriate strategies, be made more efficient. I’m not willing to make the unequivocal statement that state-run agencies are somehow naturally inferior or less efficient; like any other human institution, they can be improved.

Also, many people who trumpet bureaucratic inefficiency as an excuse for privatization actually do little more than spout rhetoric, and in some cases when the actual figures are examined it turns out that the differences in efficiency between state and private organizations are not as great as they claim. The American medical system is a case in point. The last time i read the figures (admittedly about four years ago), Medicare/Medicaid spent over 90c out of every dollar on health care and less than 10c on overhead and administration; by contrast, the proportion for private insurance companies was somewhere around 25c:75c.

Now, the percentages for private health insurers presumably included profits that are returned to shareholders as dividends, but this simply raises again the question of how we measure efficiency. Some might say that this profit-making itself constitutes efficiency. But, personally, i don’t think it’s unreasonable to measure the efficiency of a health care system by what percentage of the money gets spent on actual health care. YMMV.

I’ve heard that figure a number of times, including in some political material AND entertainment venues (movies specifically). I have NEVER been able to tie it down to any real numbers (and I have TRIED). Where specifically did you find that statistic?

I don’t think that’s right. Sure, as a general statement there’s some merit to it, and you’re correct that some companies don’t advertise, but this is usually an industry-wide phenomenon. Once your direct competitors start advertising, most businesses feel compelled to respond, until we end up with the arms race of advertising that we see in industries like running shoes, soft drinks, beer, cars, etc.

Again, this is heavily dependent on the industry. If you have two competing firms producing goods for which there is high elasticity of demand, then sure, price competition will be a big factor and lower prices will probably be the result.

But if the products produced by the two firms have low demand elasticity, the companies can effectively form their own little oligopoly and refuse to engage in price competition in the knowledge that a certain number of people will always have to buy their stuff. They just carve up the market between them and wallow in their large profits.

Of course, the free market response to this is always along the lines of, “Well that sort of collusion is illegal, and anyway new companies will always come along to fill the competitive gap and bring down the equilibrium point.” But oligopolistic practices can go on with no overt or actionable collusion, and many industries have high enough entry costs that challenging the oligopoly is seen as too risky.

Just to use your examples (if I might).

There are plenty of examples of each industry that do NOT advertise (or at a rate so low that it can’t be considered an ‘arms race’). They sell purely on prices (cheap beer and college kids are a good example, so are ‘kmart’ or ‘sams club’ branded shoes). Advertising is meant to drive demand, not follow it (though people do not always use it as such). Let’s take a famous example: Air Jordan shoes.

MOST shoes at the time were >$50 and Air Jordans came out (circa 1985?), then Air Jordans were sold for ~$150. They became a status symbol, but at the time many could not afford them (I know I was one of them, and man did I want mommy and daddy to buy them for me). At the same time I wore Puma’s (which I have recently seen SOME advertisments for, but I had never seen them at that point), because they were the least expensive on the market (as they were competing with OTHER low end shoes).

Another example could be Cars. There are TONS and TONS of car commericals, then there are quite a few cars that have no (or very little) advertisment that DO sell (and very well) such as the Ford Focus. Which compete with other low end vechicals, each of which are bought and sold largely on price.

I would argue this as well. Gasoline is a HIGHLY in-elastic demand product. I also see very few advertisments for local gas stations (sure some of the chains do, but even there it is less and less); and I personally drive ~4 miles out of my way to save $0.04 a gallon (about the price break for me, I know others travel further to no net savings). If the local station were to drop their prices (to capture my business) I would then switch. I know i’m not alone, and I also know that competition is the only thing that has kept gasoline relatively steady state prices.

See above (and before we talk about how much fuel companies make, it is a volume business; and also a VERY public one, you can dig and find the profit per gallon, which is ~$0.02 at the refinerary and about ~$0.04 at the station)

Yeah, Dell computer was absolutely unable to compete with Apple/IBM/HP/Compaq (Dell was started on a shoe string budget, by a single man), there are plenty of examples of such.

EEMan There is a difference between efficiency and “goodness”. Competition tends to benefit the consumer through lower prices and innovation. Having multiple manufacturers and vendors does not neccesarily make things more efficient. Combining several smaller companies into one larger one can improve efficiency through economies of scale. In that case reducing competition can improve efficiency. Once you get below a certain number of competitors then you have monopolies and oligopolies that can control prices, but that is not the same as being less “efficient”. Companies have an incentive to reduce their costs by becoming more efficient even if they have few competitors. They will not pass that along to consumers however, unless there is competition.

Many of the examples you have cited are in high tech where technology has driven down prices and improved features. Other industries, such as salt and toothpaste, have less chance for changes in technology.

I think you imply the answer to my quesiton in a moment, but I would like it explicit. Define ‘goodness’.

Efficient in what manner? The goal of every business is to increase profit. That alone will drive efficency, though with competition the emphasis is increased, you want to get your product out for less; so that you may charge less and keep your margin. There are examples of this not occuring, but that is always a short term game (as you can not compete if you can’t profit).

Having worked for one of the largest companies in the world, I can tell you that it depends on what you mean by being efficent. You certainly increase your ability to ‘buy’ and ‘sell’; you also have a larger work force (and hopefully more diverese and better able to be more efficent), but those things tend to be counter-efficent. There are meetings about meetings, to make sure the meetings are effiecent (such things are not needed when you are the only guy doing such work). Price is not the sole indication of efficency, but it is often a driver.

What it does is remove the need for increased efficency (or a put a much smaller requirement for it).

That is really a question of supply/demand/sales you may be able to incrase your over all profit by reducing your price (and increasing your sales for a net gain), though if there is no way to get a net gain; it wouldn’t make sense to reduce prices (I agree with you there).

Actually bringing up toothpaste (my expertise is in high tech, so I have more examples; but I’ll work with these). The release of ‘technology’ (specifically when Ment-a-dent was released); caused the current toothpastes to reduce prices (Crest and Colgate reduce the price per fluid ounce), but at some level there is no more that can be taken out of the prices (esp in long term industries with large amounts of competition like tooth paste).

This sentence typifies the problem with your whole post. Offering a few specific examples does not negate the point i was making, especially since my post was a response to your excessively generalizing claims about the merits of competition and efficiency and privatization.

Your post confirms that there are always firms and industries that fall outside of some mythical norm, which is exactly the point i was trying to make in response to your broad brush boosterism.

Having been to both, I have found that the state college gave me a much better rate of return.

Privatizing a government function makes things better for the guys who control the private company.

Anyway, that’s my usual reaction when someone talks about privatizing something these days, because many of the things suggested for privatization really are better left in the hands of a public organization. And all too often the privatization is being urged by the folks who hope to benefit from it.
At the rate things are going I fully expect someone someday to suggest the privatization of traffic lights.

[side bet: this being the SDMB, I’ll give even odds that someone will provide a cite showing that someone has actually suggested private ownership of traffic signals!]

We agree that the issue is a problem of ‘in general’; there are no conclusive statistics of the statements that it is ‘difficult’ or turns people away because some are in grained in an industry. On the other side, there are not statistics that support how ‘easy’ it is either.

There are examples (and not a small number) of companies growing from nothing into powerhouses in industries that are well developed (using the business systems examples, when GE and IBM ran the world, HP developed (out of a garage) when HP/IBM and the like Dell grew into a power house, Alienware (a small ‘niche’ company) is also ‘growing’ into an industry leader (in their field, high end gaming systems)).

Book Sellers could never have imagined the success of, Independant Booksellers never saw Barnes and Noble coming out… plenty of examples.

What you don’t get is ANY such benifits from government run systems. There is no incentive, the same is also true of monopolies.

Are there no problems with having a free market system? I’m not saying that at all, as there are plenty; but having things ‘privatized’ is not ‘evil’

My younger brother is getting his masters in divinity there, it is rather sad the amount and level of right wing fundamentalist crap they cram into their students. Sorry about the hijack.

Which of course is nothing like UC Berkley :wink:

Honestly it seems to be the same junk on different sides (and likely will always be)

Since you seem to be ignorant of the excellent Haas school of business that is a huge division of UC Berkeley (and it is a big modern building on campus) I can safely dismiss your points. :slight_smile:

More seriously, don’t even joke on that.
-Ed *

PS: you will also surprise my teacher on the business class in the current **private ** institution I’m currently enrolled. Particularly on your sorry points on advertisement, the reality is that even if you don’t see it, advertisement happens either in the store or their trade press or it is extremely targeted to a class of consumer. The reality is that business that don’t advertise do suffer in the long run.

  • (former computer tech at UC Berkeley that worked for several years at UC Berkeley, and did repairs at the Haas library computers… not a single statute of Marx on sight!) :stuck_out_tongue:

Not at all, my good man. I don’t put words in peoples’ mouths. I was merely trying to understand and clarify.

at least I mean I don’t INTENTIONALLY put words in peoples’ mouths…

*See below

I would NEVER argue with a business professor (as business is SUCH a hard science); though I have plenty of statistics to back up my stance (Currently writting a Masters Thesis on Advertising and the Sucess of Companies who don’t (working on my MBA) )

  • (former computer tech at UC Berkeley that worked for several years at UC Berkeley, and did repairs at the Haas library computers… not a single statute of Marx on sight!) :stuck_out_tongue:

There are 2 statues of Marx that I’m aware of on campus (well as long as you accept a bust as a statue); along with at least 4 plaques with quotes from him (I used to use their facility all the time while enrolled at UC Davis).

That said, there is plenty of leftist ‘teaching’ going on (much like BJU does with the right).