Worse than the Bourbons

by John Quiggin on September 23, 2016

I have a couple of pieces in The Guardian. The first, which came out a few days ago, points out the consistent failure of market competition and for-profit firms to deliver human services effectively and equitably. The second gives the mainstream economic analysis of the problem, in terms of market failure and the mixed economy, developed 40 to 50 years ago, and ignored by the policy class of today, which takes the assumptions of market liberalism (aka neoliberalism) for granted. My summary:

The problem is that the political class, along with much of the economics profession, have done worse than the Bourbons, of whom Talleyrand observed “they have learned nothing, and forgotten nothing”. … Our leaders, and the economists who advise them, have not only shown themselves incapable of learning from experience, they have forgotten much that we once knew.

{ 41 comments }

1

Howard Frant 09.23.16 at 6:03 am

A good start, but you haven’t read the right economists. Yes, it’s clear why market provision of health care and education have problems. But in the US at least, the big question under the rubric of “privatization” is whether public services should be provided by government contracting with private vendors (e.g., Blackwater, private prisons, but also municipal garbage collection). The key economist to read there is Oliver Williamson and his analysis of vertical integration, because contracting is just the alternative to vertical integration. In particular, his discussion of high-powered and low-powered incentives in “The Economic Institutions of Capitalism” is very useful in understanding why non-profits work better for some things than for-profits do. This is not something that a standard market-failure framework is helpful with. The only intelligent discussion of these issues that I am aware of is by Donahue, “The Privatization Decision”.

The basic answer to why economists have been so slow to pick this up is about the same, I think. They’ve got a simple story, about incentives to entrepreneurs vs. bureaucrats, and it so well fits their political predispositions and those of people with money that they see no point in going deeper into it.

2

bruce wilder 09.23.16 at 6:33 am

If the catalog of market failure has failed and the dogmatic myth of market success has prevailed, it might be because the myth serves the powerful. But, it might also because myths do not serve knowledge and understanding.

The market analysis is stubbornly ignorant of how the system of production and distribution is actually organized. This is as true of Bator’s almost painfully abstract analysis as it is of Friedmanite cheerleading. The actual economy of feedback and rules and hierarchy can barely be glimpsed in the list of exceptions to the idealism of markets.

It isn’t only that people “forgot” Bator. The problem is that Bator had so little to say that would fit into the familiar context of control of production processes. None of his market failures is cast as bureaucratic failure.

The naive argument for privatizing education or health care is often tied to vague ideas about how to better organize the production process. Testing of students and firing teachers for poor performance features in these arguments because bureaucracies seeking feedback and control are success stories of actual experience while markets are mythical creatures.

I do not disagree with the main thesis: that for-profit schools and for-profit health insurers are singularly bad ideas is proven by experience as well as theory. The theory of a market economy is not sufficient critic, however, because it is not a sufficient theory.

The sector experiencing some of the most dramatic failures, failures prescribed by Bourbon economists, was banking and finance. These were in the main failures of hierarchy, yet economists insist on market failures categorization that struggle to account for the behavior of executives and managers.

3

Brett 09.23.16 at 7:14 am

The case for not-for-profit provision is stronger in health care than in education. We don’t know what for-profit education would look like in the absence of massive subsidies via loans/grants.

Even still, you’ll get libertarians claiming that you’re not talking about real free market health care, because even the for-profit firms exist in a system of subsidies, heavy regulation, etc.

4

faustusnotes 09.23.16 at 7:20 am

I think there are lots of universal health coverage systems with fairly large amounts of privatization baked in, though not always for-profit. Most of Australia’s primary health care system, almost all of Japan’s provider network, and I think some elements of the German and Korean systems are private or semi-private, though the exact details of ownership and profit-making are in most cases heavily regulated. I don’t know if any of these systems were privatized from a previously public system, though, or organized and regulated under a single government payment system based on a pre-existing private market. I don’t know what difference that makes, but most of those health systems are functioning relatively well despite their different levels of private involvement.

5

reason 09.23.16 at 9:08 am

Bruce – you and Howard should talk to one another.

6

bruce wilder 09.23.16 at 9:25 am

I know, it is scary, isn’t it? Sounding the same theme as Howard Frant! And, maybe not even doing it as well. But, when he is right . . .what can I do?

7

Collin Street 09.23.16 at 9:34 am

I don’t know what difference that makes, but most of those health systems are functioning relatively well despite their different levels of private involvement.

The sociopathic urgers are small in number; if you keep firms small in size, then the percentage of the market that falls under their control will remain small and resolution will remain straightforward. Can even be left to be self-acting, by-and-large.

This isn’t just applicable to medicine, really, it’s just that failures in medicine are difficult for customers to avoid because of the heavy rent components. Other sectors with similar rent components get similar problems: too much focus on comprehensible short-term numbers, little understanding of the value of customer or supplier [or staff] goodwill.

Sociopathic urgers don’t actually make very good businessmen, by-and-large, because sociopathy -> lack of understanding of customer desires. But if your industry sector is rent-heavy then customer dissatisfaction isn’t a deciding factor.

[In relation to this I note without explicit comment that the business sectors traditionally associated with support for the Right — resources, real estate, chain retail, certain forms of government contracting, network businesses like telecommunications or transport — are also extremely rent-heavy.]

8

Manta 09.23.16 at 10:00 am

From the article “The issue is not, in the end, one of public versus private. Rather it is the fact that market competition and the profit motive inevitably associated with it is antithetical to the professional and service orientation that is central to human services of all kinds.”

Why this analysis would not apply to e.g. law firms, or restaurants?

9

Collin Street 09.23.16 at 11:00 am

Why this analysis would not apply to e.g. law firms, or restaurants?

It does!

Remember: the profit a business generates ultimately derives from the gross benefit the business’s services provide to consumers, and the greater the profit the smaller the net benefit. At the point of profit-maximisation the net benefit is, definitionally, zero… and there’s no net reason to keep using the business, and no net cost-to-consumers in winding the whole thing up.

If you’re running a business purely for profit, then it won’t actually sell anything that’s worth the price and it’ll fail in pretty short order. You have to be willing to pass up some profit — “serve” — if you want your business to last any sort of significant scale.

10

James Wimberley 09.23.16 at 12:28 pm

(Cross-commented from JQ’s blog)
The fifty-year old economic analysis by economists of market failure has been enormously buttressed recently by psychologists. Before, the corrective to the simplistic but enticing homo economicus model of human nature relied on commonsense observations: people have imperfect information and they often make mistakes in processing it. But this wasn’t enough to overcome a “beautiful theory”. Now, thanks to Daniel Kahneman and others, we do have an elegant Theory of the inevitability of systematic cognitive failure. The neoliberals sound now as if they are reading from a dog-eared Victorian textbook.

11

faustusnotes 09.23.16 at 12:31 pm

Collin Street succinctly summarizes why economics is a crock of shit.

12

jake the antisoshul soshulist 09.23.16 at 2:06 pm

You have multiple factors. First, since markets favor the holders of capital, those
holders prefer market based theorizing that supports their priorities. And they support those who support them.
And you have people of Faith, many of whom have the same dogmatic Faith in the markets that religionists have in their religion.
It seems a little like Fred Hoyle clinging to the “Steady State Universe” long after the evidence pointed heavily in favor of “The Big Bang”.

To restate Manta more forcibly, the profit motive is a “moral hazard” in cases of public service. Though, I consider it a “moral hazard”
in general, it is less obviously detrimental in consumer goods.

13

Anarcissie 09.23.16 at 2:20 pm

Collin Street 09.23.16 at 11:00 am @ 9 —
Doesn’t your formulation assume that value is hard (that is, unchanging) and that the value of an item is the same for all parties throughout the transactional period? But that might not be the case.

14

Tim Worstall 09.23.16 at 2:21 pm

“Remember: the profit a business generates ultimately derives from the gross benefit the business’s services provide to consumers, and the greater the profit the smaller the net benefit. At the point of profit-maximisation the net benefit is, definitionally, zero… and there’s no net reason to keep using the business, and no net cost-to-consumers in winding the whole thing up.”

No.

Profit maximisation is the maximum profit you are able to make. There’s nothing at all to insist that you reach that point and then there’s still a consumer surplus.

What you’ve really said is that you’re defining profit maximisation as capturing all of the value add. This is not the same thing.

15

Howard Frant 09.23.16 at 4:53 pm

As I think Tim is saying, there’s some confusion here about total and marginal. The marginal consumer gets, by definition, no consumer surplus. But the other consumers do. If the market is perfectly competitive, the firms are all identical, so I guess you could say there’s no consumer surplus from any *particular* firm; they can leave any time. Business people hate this, of course, so a lot of what businesses do is to try to find ways to differentiate themselves so they can charge a higher price, and even charge different prices to different consumers, like the airlinesw. . Nothing in the model says businesses have to *like* perfect competition.

Getting back to the OP, my impression is that Britain and other Commonwealth countries had much more faith in the idea of turning things over to the market, and perhaps disregard for the literature on market failures. In the US the response of the right to that literature has been to say, Fine, we’ll use non-market provision, but we’ll do it by having competitive bidding and writing contracts. Then you need the “contract failure” theory of Williamson et al.

16

John Quiggin 09.23.16 at 8:18 pm

Manta @8 The second linked article raises and answers your question. Second sentence

This failure presents a puzzle: how is it that (assuming we have an adequate income) we can rely on for-profit corporations to put food on our tables and clothes on our backs, but not to educate our children or preserve our health.

Answer a bit later

Information isn’t a problem, or not much of one, in the case of food supply. We buy food on a weekly or even daily basis and have plenty of chances to determine what we like, and which suppliers offer good value for our money. There are things we can’t easily observe, like the cleanliness of food preparation, but these can be dealt with through regulation rather than through governments getting into the food supply business themselves.

17

Manta 09.23.16 at 8:25 pm

Thaks, JQ: I should have read both articles before commenting…

18

Tom H 09.23.16 at 10:48 pm

Noting the disturbing trend by the Right and Christian groups describing public schools as “government schools”

19

Howard Frant 09.23.16 at 11:11 pm

James Wimberly

While Tversky and Kahneman have been influential, what has been a lot more significant, as you might expect, has been extensions to the model from within the profession. Specifically, understanding of information that is not just imperfect but asymmetric, whether that be “lemons” problems (as in the possibility of a health insurance death spiral) or “principal-agent” problems, as in the example of human services. The problem is that political rhetoric on the right (even from economists) has not caught up with what economists actually know.

John Quiggin, bruce wilder

When you look at the way James Wimberly uses the word “neoliberals”, does it really seem to you that it has some relevance to the ideas of of Charles Peters? I just don’t see it. It seems to me a lot less trouble to give up the Procrustean bed and say that this is one of those words that has a different meaning in the US than elsewhere, like “privatization” or “tabling the discussion”.

20

bruce wilder 09.24.16 at 12:07 am

I cannot endorse James Wimberley’s peculiar use of “neoliberal”, that is true. I do not think 21st century neoliberals are anachronisms, fundamentalist throwbacks to classical liberalism — if that is what JW intended to invoke. But, let’s not . . .

21

bruce wilder 09.24.16 at 12:21 am

JQ @ 16

The 2nd quoted paragraph seems like a prime example of the distorted impression left by the canonical market failures analysis.

In real life, the government administers elaborate schemes and systems, in which for-profit firms are embedded, through out the food supply, and some major for-profit firms occupy dominating positions in shaping the overall system. Dismissing rather than explaining these arrangements seems the rhetorical intention.

22

Tim Worstall 09.24.16 at 7:31 am

Howard @15 yes, I slightly garbled it.

Another way to put it is that only if all producers can perfectly price discriminate/product segment will there be no consumer surplus. And since they can’t…..although all try to some extent….

23

Collin Street 09.24.16 at 8:46 am

Another way to put it is that only if all producers can perfectly price discriminate/product segment will there be no consumer surplus.

Sure. But it’s important to realise/remember that businesses run by people who try to maximise profit will, ipso-facto, be trying to minimise consumer surplus: that this attitude is detrimental to the overall economy/society goes without saying, and that it’s detrimental to the long-term prospects of the firm isn’t that far removed.

[and… just because you’re trying to reduce the consumer surplus to as close to zero as possible without going over doesn’t mean you’ll actually succeed: it can be reliably predicted that the most aggressively profit-focussed businesses will overshoot the mark and leave their customers net-worse-off.]

24

James Wimberley 09.24.16 at 4:03 pm

Howard Frant:
Your are no doubt right that the bits of cognitive psychology that economists have taken up tend to be those that hew fairly closely to the homo economicus model. But Kahneman’s book is largely about miscalculation. It’s Murphy’s Law all the way down, and this has not yet been fully taken in.

Kahneman does not SFIK propose a theory about how we can learn to be wise. The answer has to involve other people, and a structured conversation. As in a good blog post and a good comments thread.

25

bruce wilder 09.24.16 at 5:59 pm

Collin Street: businesses run by people who try to maximise profit will, ipso-facto, be trying to minimise consumer surplus: that this attitude is detrimental to the overall economy/society goes without saying

It shouldn’t “go without saying”. Economics is enough like alchemy as it is without your efforts to make it more so with your burdens of “heavy” rent “components” and allegedly socio-pathic intentions as driving forces. What a mess you make!

Any economy of specialists in production must resolve conflict and coordinate disparate activity; the discovery and motivated processing of information is central to how any system of conflict-resolution and coordination operates. That specialists will have a limited informational purview follows as logical necessity from being specialists; motivation is also as necessary as it is desirable. We couldn’t expect much from a system featuring apathetic specialist saints.

It is in the resolution of the inevitable conflict of interests among specialists as well as between specialist producers and general consumers (producer and consumer being just differing roles for the same people) that we look for the opportunity to see the general welfare served by the institution of competition, arbitration of disputes, constraint by public authority and so on.

The construction of a story about consumer surplus and producer surplus follows from trying to understand in a fundamental way how competition could work to resolve the conflicts between people qua producers and people qua consumers. It really doesn’t work as a morality tale, though there remains a long history of it being used that way even by economists.

For the archetypal firm engaged in a monopolistic competition and with a sunk-cost investment in a technically efficient production process, passively accepting a price equal to marginal cost is not a practical option: there is an insufficient return to capital investment to finance the sustained reproduction of that investment — the firm cannot cover its total costs at the “perfectly competitive” price and will bankrupt. A true monopoly price is also not a practical option, as there are always substitutes, and in the case of a durable good, even the firm’s own prior output is such a substitute. Hence, the ubiquity of price discrimination. It is not inherently a “bad thing”.

Neither price discrimination nor motivated profit-seeking is the essence of what can go wrong with the political institutions of a decentralized economy.

26

bruce wilder 09.24.16 at 6:22 pm

James Wimberley: Kahneman’s book is largely about miscalculation. It’s Murphy’s Law all the way down, and this has not yet been fully taken in.

In Kahneman, it is not always obvious who is doing the miscalculation: the economist or the subject employing a rule-of-thumb.

This has not been “fully taken in” because it has not been fully sorted out.

Economists have notoriously undue confidence in highly stylized rules of rationally calculated behavior. It is easy enough for Kahneman to show that untutored subjects either do not understand the conventions of these stylizations or simply do not follow the rules. Their thinking is fuzzy compared to the sleekly abstract rationalizations of the economists. It is not so easy to show that the subjects are irrationally wrong to apply fuzzy thinking in situations that fully manifest the complexity and uncertainty of real life.

This makes Kahneman and Tversky a two-edged sword, as likely to cut into the hubris of economists as the alleged residual irrationality of humanity.

27

John Quiggin 09.25.16 at 12:05 am

BW @20 That’s opaque to me. Could you expand on “In real life, the government administers elaborate schemes and systems”, bearing in mind that “real life”<>“the USA”.

28

Peter T 09.25.16 at 7:05 am

I’m not convinced that “private” vs “public” or “market” vs “government” are useful analytically. That we talk in these terms is the inertia of a centuries-long political struggle. No economy I have ever seen described is purely private, nor wholly government-directed or provided, and all have large components that fit neither of these descriptions. So I think it frames the analysis wrongly to start in terms of “market failure”.

Howard Frant’s “contract” vs direct provision” is a little sharper, but even here the issue is not whether but how much. C18/early C19 European states were very much into contracting, but learned by experience that it paid to keep some part of capacity in public hands. They also learned that, where continuity of service is critical, direct provision worked better – more costly day to day, less so over the long run.

One model with a lot of history is for private investors to build some major infrastructure, which then does not pay the anticipated returns, is written down and taken into state ownership (Panama, Suez, many railways, Channel Tunnel…) . Is this market failure or success?

One could also note that the reasons for choosing one mode of operation rather than another are much broader than cost. That the plebs will riot and burn the palace if the price of bread is too high a perfectly good reason for guaranteeing supply. That government provision has a more equitable salary structure is an equally good reason.

29

John Quiggin 09.25.16 at 7:15 am

No economy I have ever seen described is purely private, nor wholly government-directed or provided, and all have large components that fit neither of these descriptions.

The term “mixed economy” comes to mind. We seem to be in furious agreement.

30

Peter T 09.25.16 at 9:33 am

“We seem to be in furious agreement.”

We are. My doubts are around starting the analysis at market failure, which puts markets at the centre. Markets seem to be a very small part of the economy – in their purest form confined to a few commodities (oil, sugar, wheat, pork bellies, plywood…). I’ve never seen much economics writing on the changing forms within the household economy, and analysis of the composition of the corporate sector (in terms of scale, composition) seems to be very thin. And “not for profit” also seems to cover a wide range, while contracting with IBM or Serco is a very different proposition to contracting with Steptoe and Son. Going back and forth on government vs market does not seem to really get at the issues. At that, I’ll wait for cassander to turn up, and leave it.

31

magari 09.25.16 at 1:36 pm

John, honest question: to what extent do you consider class interest as an explanation for why 40 years of evidence has not changed the minds of (many, not all) policymakers and (most) economists? Work like Mark Blyth’s or Kim Phillips-Fein (Invisible Hands) seems to suggest a very real ideological convergence of anti-Keynesian economists and conservative/centrist politicians mediated by the business lobby.

32

bruce wilder 09.25.16 at 8:31 pm

OK, in the spirit of comparing and contrasting the U.S. with the RoW:

Here’s an egg scheme.

Or, you might consider the case of milk.

Milk can get really complicated.

And, it is not as if it is without consequences consumers may notice. But, the ultimate causes of consumer complaints may be difficult to identify and remedy in what is, after all, quite a complex system.

The market failures canon is a product of a priori theory. As Francis Bator observed in that paper you referenced, almost sixty years ago:

I am not here concerned . . . with the efficiency of “real life” market institutions
operated by “real life” people in a nonstationary world of uncertainty,
miscalculation, etc.

What follows is an attempt, rather, to explore and order those phenomena which cause even errorless profit- and preference-maximizing calculation in a stationary context of perfect (though limited) information and foresight to fail to sustain Pareto-efficient allocation. I am concerned, in other words, with the decentralizing efficiency of that regime of signals, rules and built-in sanctions which defines a price-market system.

the decentralizing efficiency of that regime of signals, rules and built-in sanctions which defines a price-market system.” — In the history of political ideas in economics, I do think it is worthy of note in passing that Bator was self-consciously connecting the market failures canon with the Hayekian idea of price as a sufficient statistic coordinating a decentralized laissez-faire system of markets and with the project for delineating a theoretical neoclassical “socialist” economy. As Phillip Mirowski has documented, the import of Hayek’s idea into the Friedmanite version of Chicago School market economy as a system was and is an important underpinning of neoliberal ideology. (Sorry Howard, I know, there’s that word; I will try to make my point from here on without that label.)

The uses of information or knowledge in society and in the “self-organization” of society’s political economy feeds into common intuitions and expectations about when the performance of a sector poses a problem that might be solved by reform and reorganization. The a priori purity of “markets” vs public provision and “justified” state interventions to remedy “market failures” carries important insights, but it is too spare, too little informed by actual and practical experience.

As Howard and I pointed out at the beginning of the thread, the “markets” framework conspicuously left aside the processing of information through hierarchy. I objected to casually waving a hand at for-profit provision in the food supply and the use of regulation to remedy its manifest problems, not because I necessarily think “competition for profits will always find a way to subvert” regulatory frameworks, but because I think the reality of the “mixed economy” is not a sharp line separating a public sector from a private sector from a non-profit sector, but rather a heterogeneous jumble of real people in real institutions “in a nonstationary world of uncertainty, miscalculation, etc.”

The most common use of knowledge in society is not the mediation of value and scarcity by price, but feedback for the control of error and learning. Contra Hayek, critical information is often not recognizable on the front-line atomistic periphery of workers and consumers. Instead, it emerges from centralized processing of statistical information and expert investigation; the periphery is constrained to follow rules by bureaucratic supervision, in mixed chains of public, private and professional devising.

The example of milk is instructive. It is certainly not an example of problem-solved for all time by the magic of markets, nothing to see here, consumer sovereignty prevails. Uncertainty matters and, therefore, history and precedent matter. And, my cites above didn’t even get into the complex schemes that manage the quantity supply and price of milk, dairy cooperatives and so on. On some high level of abstraction, it is not wildly different from education, where complex systems manage the training and certification of teachers, the certification of schools, professional standards, research on curriculum effectiveness, testing students, et cetera.

In my area (Los Angeles), there’s a local dairy that has built its business around a reputation for delivering high-quality milk and dairy products at a premium price. It has a long history (more than 50 years) of pushing back against the requirement that milk be pasteurized. The Alta Dena folks are convinced that there is a market niche for unpasteurized milk and that, with their superior processing and distribution systems and controls, they could safely supply that market, if they were allowed to do so. Periodically, pushing against the regulatory apparatus, they have managed to try (we call that innovation!) and, of course, they kill or injure a few people (deniably) and the public health authorities quash their efforts until next time. Clearly, I am skeptical, but it is not obviously crazy to suppose that some people might value unpasteurized milk if “the market” could safely deliver it. Nor do I think the for-profit motivation to subvert the system is pure greedy evil.

In one of the articles cited above, an Australian firm is mentioned, which is trying to market so-called “A2” milk in the U.S. and other places where “A1” milk is standard, and may, arguably, cause some people digestive difficulties. They have some intellectual property associated with sorting out A2 milk cows from A1 milk cows.

Other cites mention the differences between U.S. standards for pasteurization and European standards for ultra-high temperature pasteurization. UHT milk is distributed in the U.S., but receives limited consumer interest. (I am rather fond of Nestlé chocolate milk, which I believe is UHT pasteurized though it is distributed in the U.S. refrigerated and has a weirdly pleasant texture that I like.)

You don’t have to search very hard to find controversies concerning organizational performance and sectoral structure in the food supply. The nutritional value of McDonald’s fast food. (In India, whether the grease used to fry the potatoes contained beef — doing my bit for RoW.) Monsanto and Round-Up and gene patents. GMOs and hormones and mad cow in the U.S., Europe and RoW. Michael Pollan wherever he goes.

In education and health care, the struggles over “for-profit” are side-by-side with the emergent attempts to reform the technology of “production” with more effective hierarchical control of the “production process”. Craft methods have been giving way to new systems of student testing or electronic medical record-keeping. The country doctor administering his own practice and taking his own counsel is long out-of-date. That kind of professional craft production has long since given way to systems that generate rules of best practice for medical doctors and other care-givers to follow. I’m not advocating; I’m just observing that that is part of the context for controversy and emergent organization and reform.

In relation to your thesis — that for-profit provision of services is often a bad idea for fundamental reasons — I am in agreement. I don’t know it is furious agreement, but what I offer above could be considered a quibble, though it is founded in fundamental objections to some of the presumptions and self-limitations of neoclassical economics.

I do object to the market failures framework as rhetoric, for hiding hierarchy, for demanding exceptional “justification” for state interventions, for a language of exceptionalism that falsely implies that perfectly competitive markets could exist (free of market failure), and for excusing economists from the obligation to actually know things a posteriori about how the economy works: the whole real people in real institutions facing uncertainty, miscalculation, learning and the challenges of controlling production processes.

I hope that’s less opaque, informative and not offensive to you.

33

John Quiggin 09.25.16 at 10:39 pm

magari @30 I’m genuinely puzzled about this. There’s no obvious and systematic difference in class background between those economists who end up working for the business lobby and those who end up neutral or on the left. Some of the business lobby types are fairly obviously in it for the money, but I’d say the majority are genuine ideologues.

As regards the political class more general, there’s now a recognisable career path running from student politics to adviser/union jobs (SPADs in the UK context) through politics to a high-paid lobbying or business job. But again there’s a purely ideological component. Political types whose ideas were formed between the 1970s and the Global Financial Crisis are unlikely to change. Hence, the new alliance between the young and the very old (Sanders, Corbyn).

34

Howard Frant 09.25.16 at 11:21 pm

John Quiggin

The thing that sometimes bothers me reading your stuff is the feeling that you’ve formed model in your head about how things work in the Westminster or “-our” countries (my third and fourth attempts at coming up with a term to designate the English-speaking world excluding the US) and then tried to stretch the US to fit that model. That’s certainly true for my unease about the word “neoliberal,” and it resurfaces on rereading the linked “Face the facts” article, and the statement “What works is traditional public provision.” That’s not so obvious in the US.
It may be that a lot of these experiments in the “-our” countries were attempts to fix something that wasn’t broken, but in the US there was good reason to think that things were in fact broken.

In education, the US has an extremely decentralized system that produces very good results in more privileged neighborhoods ad very bad results in poor neighborhoods. In the sixties, in fact, the call to bypass public schools came from the left (e.g., Jonathan Kozol), accusing the political system of racism. That led to the fights in NYC between the newly created community school boards and the teachers’ unions. No one ever took for-profits seriously as an alternative; for-profits were always a low-status fringe in American (higher) education. But it was not crazy to think that schools in poor neighborhoods might improve if there were more political accountability, which required more measurement. Nor was it crazy to think that competition from non-profits might help. Unfortunately, measuring without creating perverse incentives turned out to be a lot harder than people realized.

Though the basic framework was created under Bush, this was never something that the right ideologues strongly supported. Their goal is vouchers to individual parents.

Hillary Clinton, btw, was/is strongly supported by teachers’ unions, despite her alleged neoliberalism.

Things are even worse with prisons, which again are highly decentralized. In addition to the violence between inmates, and by inmates against guards, there is some really horrific violence against inmates by guards. And the guards’ unions use their considerable political clout to protect their members. Not totally crazy, even if it seems so ex-post,to think that private prisons might be worth a try. People who complain that privatization created a powerful constituency for more draconian sentencing should be aware that there has long been such a powerful constituency, using votes instead of money.

Frankly, I often envy the “-our” countries ability to turn things over to a nationwide apolitical bureaucracy. This is even more true for elections. Where did the US ever get the the idea that football should be refereed by whichever team was ahead at the start of the period?

35

Howard Frant 09.26.16 at 12:49 am

John Quiggin @31

Sorry, just noticed your comment about the alliance between the young and the very old. This is a good example of trying to squeeze the US into your model, in this case how this new ideology of neoliberalism supplanted the old ideology of the New Deal.

Bernie is not the last surviving New Deal liberal. He is a sixties radical, who no doubt had contempt for New Deal liberalism. He says he is a socialist, though I’m not sure what he means by that. The last surviving New Deal liberal was Mondale, and the voters were not kind to him. The heir to that tradition– pro-union, pro-civil-rights, pro-poor, internationalist and somewhat interventionist– is not Bernie Sanders but Hillary Clinton.

36

bruce wilder 09.26.16 at 1:07 am

Howard Frant @ 33

You make some good points. At the risk of being parochial, I would just like to add a couple of points.

Re: education. Primary and secondary education in the U.S. is highly decentralized, but it has also been remarkably homogenous. For all the decentralization, we didn’t get much diversity or experimentation.

Re: prisons. I worked with a pioneer in private prisons briefly way back when and I don’t feel guilty. The for-profit orientation came with obvious hazards, which, at least initially, were offset with adequate safeguards. But, back in the day, introducing private provision was often the occasion for breaking political stalemates that had created horrendous conditions. I particularly remember what a revelation it was for a board of county commissioners that had a poisonous relationship with a sheriff, when a private company with professionals in nice suits presented a short business plan that specified a reasonable budget per head for inmate meals that met nutritional standards. Ditto for laundry and janitorial and health services and educational services.

Whatever the merits of for-profit v public provision in the long-run, the change constituted a garbage can solution to an acute problem of administration. I didn’t follow up to see the long-term history; I think they went to a mix of public and private provision later.

I suspect that testing and charter schools are often seen as a similar garbage can solution: a way to break a political stalemate and relieve a straitjacket of bureaucratic monitoring and reporting. (Of course, there’s the grift and the looting, but that might also be related to the runaway financial sector in the U.S.)

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SamChevre 09.26.16 at 1:36 am

bruce wilder @ 34

That account is helpful. I’m not greatly enthusiastic about some of the contract human services providers, but I do think “compared to what?” is a reasonable question. In primary education (where I know the most) the alternative has been public provision that has quintupled in cost relative to household income, while becoming less and less accountable to voters.

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John Quiggin 09.26.16 at 4:10 am

“No one ever took for-profits seriously as an alternative; for-profits were always a low-status fringe in American (higher) education. ”

In today’s NY Times, one of many stories

http://www.nytimes.com/2016/09/23/business/government-moves-to-close-a-watchdog-of-for-profit-colleges.html?

For-profits may have not been high-status, but they were and still are big business. And back in the day, Edison Schools was taken very seriously indeed
https://en.wikipedia.org/wiki/EdisonLearning

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Howard Frant 09.26.16 at 6:30 am

My point was, this wasn’t some ideologically driven manifestation of neoliberal philosophy. Basically, it was a scam to get Federal money from unsophisticated people. It mushroomed the way it did because no one was paying attention. Your point that this may not be the best way to organize higher ed stands, though.

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John Quiggin 09.26.16 at 7:08 am

“This wasn’t some ideologically driven manifestation of neoliberal philosophy. ”

At least in the case of Edison Schools, it clearly was. The Board was packed with big names from the political right.

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John Quiggin 09.29.16 at 7:58 am

@32 BW I just extracted this from moderation, but I remain a bit mystified. I mentioned health regulations in the OP, but it doesn’t seem like a big deal to me.

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