13-01-2003 02:33									#421
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I think it would be far more effective for the gov't to give people/companies some walking around money to help it get its act together.

	13-01-2003 02:33									#422
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There are other cases where privitization doesn't work and is not in the public's best interest, such as the case where people were calling the New Jersey welfare office and ended up being redirected to a call center in INDIA of all places!

	13-01-2003 02:34									#423
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The people of New Jersey got a bargain for their call center services. The people of India got high paying jobs.

Edit: In my view, we should see what we can do to be able to trade services such as you mention. Right now, it's limited, as we were discussing before.

	13-01-2003 02:39									#424
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Bargain smargain.

We are talking about people in poverty here. I sure as hell wouldn't want somebody in India, who knows absolutley nothing about New Jersey culture, evaluating my situation.

I'd rathar eat at that hole in the wall restaurant that can't manage it's supply costs, but where the manager knows my name, than the impersonal chain restaurants.

Everything doesn't have to equal getting the most efficient product for the least amount of price you know.

	13-01-2003 02:42									#425
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"Everything doesn't have to equal getting the most efficient product for the least amount of price you know."

Right. Price isn't the only factor in the equation. This should comfort you, since Americans have a lot of built-in advantages. We can distinguish ourselves in other things, like location. Apparently location was not important for this service.

	13-01-2003 02:42									#426
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The only industries that should be in the public sector are some natural monopolies, and industries that exhibit large externality effects.

On a slightly different tack there are 'public goods' like defence, and 'merit goods' like education.

	13-01-2003 02:49									#427
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Spike: I would be interested in your take on trading of services, or some references that might talk about it. Think it's good idea? If so, how good is it? How would a gov't push trading of services?

I got to thinking about this a lot, since my recent mortgage has been worked mostly over the phone and internet. You would think somebody in India could do this just as well (or in the case of my loan officer, much better).

	13-01-2003 02:58									#428
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Not sure I get what angle you want, but trade in anything is good........because of the comparative advantage arguments first laid out by the chap on the left.

Many services have been outsourced in recent years.....things like manipulation/building of databases and other assorted number crunching.

Of course this is something that happens in a market economy seeking to allocate resources efficiently.......there is no need for govt to 'arrange' trade.

	13-01-2003 03:13									#429
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quote: Originally posted by DanS All that would do is reward inefficiency. I think the unemployed should find refuge in healthy industries. The ability and tendency to shed jobs so quickly is an advantage for US industry, since the contraposit (hiring so quickly) is also true.

This is true. But very hard for the stakeholder weenies to embrace. watch Roland get all spun up about this. he wants a Euro-style economy full of sinceures and office politics and similar silliness. I know. I've consulted to German companies. They are so frigging ppolitical it is crazy. Americans aren't much better. But Germans? Crap.

	13-01-2003 03:16									#430
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quote: Originally posted by DanS I DanSed you some.

:grrr:

	13-01-2003 03:39									#431
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What is a DanS?

	13-01-2003 04:12									#432
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Tell me what a DanS is damn you!

	13-01-2003 04:13									#433
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It's when he edits it stuff after you have responded, or whilst you are responding.

He's going to claim I'm exaggerating.

Last edited by DrSpike on 13-01-2003 at 04:20

	13-01-2003 04:17									#434
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Oh okay.

Thanks Spike.

	13-01-2003 04:17									#435
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Totally exaggerated!

	13-01-2003 04:29									#436
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"Not sure I get what angle you want, but trade in anything is good"

Exactly what I was looking for. The angle I'm most interested in is if there is anything that the gov't does that holds trade in services back.

My hunch is that a true productivity miracle in developed countries would be accompanied by large amounts of services trade, considering that most of our economies are in services. Those countries with the highest growth rates seem to be those whose economies are based on products that are tradeable. Those with the lowest growth rates (US, for instance, once you subtract immigration), seem to be those economies with the lowest % of tradeables.

	13-01-2003 04:37									#437
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quote: Originally posted by DanS Exactly what I was looking for. The angle I'm most interested in is if there is anything that the gov't does that holds trade in services back.

Sure they do in practice.......such as tariffs, the provision of funds for vocal industries, all these sorts of things. Of course most 3rd world competition isn't in services, but as I said earlier outsourcing of certain tasks to 2nd world countries is common.

	13-01-2003 04:56									#438
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I reserve the right to revise and extend my remarks.

	13-01-2003 05:07									#439
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I was thinking of nationalised electricity generation for the purposes of efficiency.

We had a less than cheerful experience in New Zealand with privatisation, much of which can be chalked up to introducing a competitive market where it wasn't needed. Prices went up and supply occasionally became erratic, once shutting down the country's financial heart for weeks. What's worse is that there wasn't a whole lot wrong with the old nationalised system that couldn't have been sorted out with more efficient management.

And for the record, privatisation of the electricity sector in New Zealand was for "political purposes", so nationalisation/privatisation - it cuts politically either way for me.

	13-01-2003 05:19									#440
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Well, every country seems to have a botched privatization or two. In the US it was electricity. In the UK it was railroads. Don't think we should draw broad conclusions about privatization from it though.

	13-01-2003 05:51									#441
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I think there is more to it in this case. I think that however well the privatisation had gone it would have been worse than an efficient restructuring of the national system.

It seems to me that under certain conditions and with respect to certain goods, public monopolies can do a far better job than private competition. I'd add education to my list as well.

Another example is New Zealand's domestic airline. There simply isn't enough traffic to support two airlines (one has just gone bang) so it looks like we are back to a (semi in this case) public monopoly which will have to be regulated to avoid gouging (and don't tell people to take the train until you've been on a New Zealand train).

I'd suggest that would be privatisers could do with a dose of pragmatism.

	13-01-2003 05:53									#442
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I agree with you Kiwi.

	13-01-2003 05:56									#443
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quote: Originally posted by Agathon I was thinking of nationalised electricity generation for the purposes of efficiency. We had a less than cheerful experience in New Zealand with privatisation, much of which can be chalked up to introducing a competitive market where it wasn't needed. Prices went up and supply occasionally became erratic, once shutting down the country's financial heart for weeks. What's worse is that there wasn't a whole lot wrong with the old nationalised system that couldn't have been sorted out with more efficient management. And for the record, privatisation of the electricity sector in New Zealand was for "political purposes", so nationalisation/privatisation - it cuts politically either way for me.

1. I wouldn't be so blithe about saying "just needed mroe effecient management". The criticism of state-run industries is that they usually have very inefficient management. Since they are not drivien by the amrket, efficient management is not forced. The Soviet Union had lots of time to work on how to be more efficient, but never really cracked the nut.

2. What I mean by political is not whether or not you are in favor of nationalization, what I mean is that nationalized industries will not respond to customers or compete in the manner that competetive ones do. What they respond to is political issues.

	13-01-2003 05:57									#444
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quote: Originally posted by DanS "Not sure I get what angle you want, but trade in anything is good" Exactly what I was looking for. The angle I'm most interested in is if there is anything that the gov't does that holds trade in services back. My hunch is that a true productivity miracle in developed countries would be accompanied by large amounts of services trade, considering that most of our economies are in services. Those countries with the highest growth rates seem to be those whose economies are based on products that are tradeable. Those with the lowest growth rates (US, for instance, once you subtract immigration), seem to be those economies with the lowest % of tradeables.

What services do you think should be traded more?

	13-01-2003 06:26									#445
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Trade where the production is, I guess. From the list of products and "services" taken very broadly, here's a few target areas...

http://www.bea.gov/bea/dn2/gposhr.htm#1994-2001

Business Services (5.4% of GDP and growing)
Health Services (5.8% of GDP and fluctuating)
Wholesale trade (6.8% of GDP and fluctuating)

A couple of years ago, Roland pointed out that the US spends a lot on health care, which at that time I agreed with. I'm surprised by looking at those numbers, though, as it's roughly in line with what is produced in Europe--5.8% of GDP. Of course, then you've got to do 1.4x to account for the size of US economy. Maybe I'm not counting enough and he'll set me straight tomorrow. And maybe he would like a piece of those legal services.

Edited liberally, since I was looking at the wrong table and other stuff.

Last edited by DanS on 13-01-2003 at 06:52

	13-01-2003 06:55									#446
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Those are fun tables. A full 1.7% of GDP is produced by securities and commodities brokers.

Also, housing as a %-age of GDP hasn't moved much over the last 10 or 15 years. Where's that bubble again?

	13-01-2003 07:08									#447
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quote: Originally posted by DanS Trade where the production is, I guess. From the list of products and "services" taken very broadly, here's a few target areas... http://www.bea.gov/bea/dn2/gposhr.htm#1994-2001 Business Services (5.4% of GDP and growing) Health Services (5.8% of GDP and fluctuating) Wholesale trade (6.8% of GDP and fluctuating) A couple of years ago, Roland pointed out that the US spends a lot on health care, which at that time I agreed with. I'm surprised by looking at those numbers, though, as it's roughly in line with what is produced in Europe--5.8% of GDP. Of course, then you've got to do 1.4x to account for the size of US economy. Maybe I'm not counting enough and he'll set me straight tomorrow. And maybe he would like a piece of those legal services. Edited liberally, since I was looking at the wrong table and other stuff.

Give me some tangible examples of what should be traded more.

	13-01-2003 07:30									#448
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Kind of busy tonight, so I will just step in for a minute or two.

re public vs. private firms:

Econ literature, primarily in the US, shows that public firms usually have higher operating costs than similar private firms. Studies include electricity, water, hospitals, refuse collection, railroads, airlines, and weather forecasting. There's a good summary in Viscusi, Vernon, and Harrington, Economics of Regulation and Antitrust, 2ed, cpt. 14.

re NZ airlines:

If there is only room for one airline (natural monopoly), cost effects are such that it is probably more efficient to regulate it rather than have it publicly owned. Public ownership provides fewer constraints on cost than admittedly imperfect regulations.

Also, probably the most convincing study of costs of private vs. public firms is David Davies, "Property Rights and Economic Efficiency: The Australian Airline Revisited", Journal of Law and Economics April 1977. Davies compared two Australian airlines, Ansett (private) and Trans Australian (public), which were nearly identical in terms of route structure, freight, passengers, revenue, etc. He found that Ansett's costs were half those of Trans Australian for the same service.

re political motivations of public firms:

One particularly disasterous recent case was the Bonneville Power Administration, a public firm which produces hydroelectric power in the Pacific Northwest. At the height of the California power crisis, Bonneville refused to sell power into California because they understood their political mission to be providing low cost electricity to consumers in the Pacific Northwest. A profit-oriented firm would have sold power into California, increasing PNW prices a bit, but reducing California prices dramatically.

I will be at an economics conference most of this week, so I won't be around much.

edit: spelling

	13-01-2003 07:36									#449
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Well, OK, let's try health services. Tell me if this is tangible enough. Of course, I'm pulling this outta my azz.

Health services are extremely information-intense. Much of the back-room stuff should be moved to India, where they can do this cheaper. Where possible, tasks involving information should be standardized in the back-room operation. This should help reduce costs.

Doctor groups in the US should pair with Indian doctor groups. Many of our doctors state-side are Indian anyway. As many health services as possible from 6 pm to 6 am should be moved to remote doctoring and doctor support facilities in India. In turn, specialists in the US will consult or direct Indian doctors on some areas. All of this should increase availability, reduce cost, reduce doctor hours on call, and reduce doctor error due to fatigue state-side.

	13-01-2003 07:43									#450
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Excellent post, AS.

And that airlines colleague has nothing on you!