Yeah, been there, too.
Fundamental rule: if the key people in a company can’t see each other from their desks (or at least encounter each other on common turf during the day) it’s going to faction out. Putting management and/or s/m and/or “development” in different floors or buildings is always a bad move.
It is a product of our crazy healthcare system. Apparently there is a generic version of Epipen coming on the market soon and the company is trying to squeeze every dollar while they still have a monopoly. Because people are insulated from having to pay for their own medicines patients and doctors keep using epipens over cheaper alternatives and the only people trying to get people to use the cheaper alternatives are the insurance companies who everyone hates anyway. If there was a real free market in insurance or health care then this move would be impossible.
But of course, someone has to decide what, for this purpose, is good and bad, and what constitutes value for money. That has to be government, on behalf of the taxpaying customer; but, human nature being what it is, they (we) want it both ways - cheaper, but better quality. As a result, too many politicians try to square the circle and say we can have the service without any additional cost, or even cheaper, and/or that we can have lower taxes but not lose out on services (this has been a running issue in the UK for pretty well all my adult life).
Prison services are one of those that most of us will never have to experience or know much about. So guess where choosing a “good” company turns out to mean choosing the one that keeps costs down regardless.
You’re welcome to expand on that, past generalities. Tell us how a 100% free-market healthcare system would serve everyone.
Depends. Microsoft did basically end up with a de-facto monopoly on the operating system component of computers, mostly because of forces that weren’t really directly due to their own market muscle.
In other words, when IBM picked MS-DOS to be the OS on the original PC, that’s when this started- that gave MS a sort of automatic boost into being the default and having a very large installed base once the PC took off, and the clone market did as well.
Then, with Windows, they leveraged their existing DOS installed base and went from there.
It was pretty much a natural monopoly for DOS and the various Windows OSes. Where Microsoft gets a lot of criticism is how/when they basically used the leverage inherent in having that natural monopoly to horn into other markets- specifically the browser market, where they essentially took a product that was actively being bought and sold for real cash, bundled it with new PCs and claimed that it was part of the OS, when that’s a very, very questionable situation. Their productivity apps are less clearly sketchy, in that in many ways, they WERE superior to their entrenched competitors, and were integrated with each other in ways that the competition didn’t dare dream.
Outside of the browser and OS markets in the PC world, the rest of the computing world is a triumph of free markets.
And the EpiPen situation is probably exactly what **puddleglum **says- a last-ditch grab to make hay while the sun shines, since a generic competitor is soon to be on the market. And they can do this- they have a price-insensitive good in the EpiPen (i.e. people will pay 4x the cost because they have to have it, and there are no alternatives… yet). It’s kind of mercenary, but then again, they’re in the pharmaceutical business first and foremost to make money. Not a market failure at all though- just a relatively insensitive manifestation of basic economics.
The problem with free market thinking in regards to private prisons is that there is no attractive product that the companies are competing to supply. That the customers are seeking. The product is a required service that must happen. You don’t have the same economic forces at work that tend to lower costs and at the same time improve the quality of the product, the competition does the opposite.
The 3 Federal prison contractors, CCA, GEO and MTC, each compete against each other to provide the service to the government for the lowest cost. There are other performance issues in play, but mainly it is the cost.
Lowest bidder that can provide the service wins the contract. But these three corporations are going to earn a profit too. So where does that profit come from? Lower quality of everything! Medical and mental health care. Shitty food. Poor, overcrowded living conditions. Under-staffed and under-paid workers.
These are the things that tend to cause prison riots, guards smuggling drugs in to pad their meager pay, poor employee retention, etc. And there have been such riots at these facilities, for these reasons.
Oh, yeah, their performance is monitored by the Dept of Corrections and contracts can be cancelled due to poor performance. Who is in charge of the reporting of significant incidents? Why the companies themselves, of course. So major incidents become minor ones. Many go unreported because it is all about the protection of the contract and your performance numbers.
Corruption is inevitable. So you ask yourself as a taxpayer that they are providing the service to, would you really like prison guards who make $12 an hour, open to bribes and other factors operating these places? Or do you want a more expensive federal government employee, with better training, better pay, an actual career?
Federally operated prisons are more expensive, they are also much safer and provide a slightly less miserable existence for the inmates.
This is the conclusion that the Dept of Justice has came to.
I have a "friend’ who has some experience with one of these corporations.
I guess I see this as an issue of institutional organization, rather than a free-market question, because private corporations face the same issues as the government did with regard to its prisons. The basic question is “what should the institution do for itself, and what should it buy from others?”
Plenty of things get outsourced. The government doesn’t make the pencils or the machine guns that it uses; it buys them from others. It owns some of its buildings but rents others, and it often contracts out the cleaning and security of those buildings. All of these things are equally true for Microsoft and Wal-Mart, too, however. (Although they’re more secretive about the guns).
Core functions get done in-house. The government commands its own army and collects its own taxes. Wal-Mart runs its own stores. Microsoft doesn’t go out and buy operating systems from other people. Well, not any more.
Looking closer, even within what look like core operations, Medicare hires private contractors to administer claims, as does the Department of Education with student loans.
So the question is where prison administration falls on this spectrum, and I know nothing about what the answer should be. The idea of giving outsourcing a try does not seem crazy to me, particularly after decades of litigation in various places about the conditions in public prison systems. But on the other hand, if the experts now believe that there is good evidence that this is a function that works better when kept in-house, that seems entirely defensible as well.
As I noted in the other thread, the market for pharmaceuticals in the US, especially of the prescription kind, is highly regulated, so this doesn’t tell us much, if anything, about a free market situation.
In a real free market, real insurance would not be banned and many people would pay for this type of preventative medicine out of pocket. If the company hiked the price by 400% then people would switch to the alternative rather than pay. The company would lose so much money they would be forced to lower the price or go out of the epipen business. That is why companies of all sorts don’t just jack up prices by huge amounts.
There is nothing inherent in the free market system that says cost has to be the only determinant. People still buy Mercedes despite their cars being more expensive than the alternatives. If companies are only being chosen on cost that is the fault of the customer, the government, not the system whose purpose is to please the customer.
True- there are two basic business strategies, when everything is distilled down- companies either compete on cost, or they differentiate themselves from the competition. The corollaries to these strategies are that if you choose to compete on price, you’re entering a competition where you pretty much HAVE to be the cheapest source, or buyers will buy from your competitor who is the cheapest. Differentiation is a method for setting yourself apart through some perceived better performance, looks, etc… and charging a correspondingly higher price than other similar products.
That’s why people buy Mercedes Benz cars- they’re differentiated from say… a Ford Focus.
But in the context of privatized prisons, various laws have essentially forced public institutions to be extremely price sensitive, to the virtual exclusion of other factors, due to the various bid processes that are usually in place. The remedy is to write detailed and restrictive bid proposals that mandate that the bidders meet certain minimum standards, but this usually comes with a certain increased cost. So there’s almost certainly a back-and-forth process where the public institutions and the bidders come to a sort of equilibrium where the lowest bid comes in within the range that the public institutions are willing to pay, and the service level comes in within some range that the public institutions are willing to put up with.
The big problem is that there’s little external oversight to ensure that the private contractors are indeed living up to the conditions of their contract, and effective methods for punishing them if they do not. Neither of those are problems with the free market- they’re problems with the implementation by whatever government is doing it.
Governments contract out all sorts of stuff all the time- road building, civil engineering, earth moving, food service, laundry service, even health care services. And almost universally without issue. There’s something about outsourcing prisons that they haven’t figured out just yet, not something special about prisons themselves.
No but the assumptions underlying most free market principles means that marginal cost becomes one of the primary determinants of price. As competition creeps in, the price starts to approach cost for the least efficient producers. This also means that if prices are too low, then you will have shortages that will raise the price that will entice less efficient producers to start producing.
Differentiation and branding moves things around a bit but Mercedes is still competing with manufacturers like BMW, Cadillac, Audi and now Tesla.
You can’t blame the market experiment with the Federal prison system on capitalism. It rest squarely on the Bureau of Prisons. The Bureau established the contracts with the private operators with lower standards than they had for the government operated prisons. The reason? Because it was lower costs than the government operated prisons. You get what you pay for. The results that the privately operated prisons failed at compared to the government run prisons, were a direct result of the standards in their contract set much lower. You can’t blame the operator for operating to a lower standard than they are contracted to do.