The key, however, is that revenue is a direct result of the exchange of goods or services for the payment by the consumer. Since the consumer in this case provides the revenue directly to the supplier, the supplier's focus is directly on the needs of the consumer.
But what happens when the supplier gets its revenue from some source other than the consumer of the product or service? The answer is that the supplier provides what the payer demands, not the consumer. This is the case when an insurance company or a government pays for goods or services for the consumer. The problem in this case is making sure that the payment is what the consumer expects.
This is particularly complicated when an insurance company gets advance payment and is expected to pay later. The insurance company can make a profit by refusing to pay. As long as the contract is relatively simple, like life insurance, this isn't too hard to enforce. Death is generally easy to determine and the payout is a simple contracted amount. Even this leads to lawsuits. Health insurance is another level of complexity. What exactly has the insurance contracted to pay for? Without some kind of outside judge (government regulations and enforcement) the conflicts are inevitable. There is still a lot of room for fly-by-night companies to sell a contract, collect the money, then go out of business when a few big payouts are due.
Government is another issue entirely. Government focuses on providing goods and services which cannot be effectively provided in the market for an exchange of payment. Police and defense are two clear examples. These are provided to everyone in a community and it is rational for some members of the community to avoid paying. They will get the advantage of the services whether they pay or not. This "Free Rider" problem is what leads to taxes on everyone to pay for the items. But since the money does not come directly from the individuals getting the products there is a real control problem. How do you ensure that the money provided by the legislature from taxes is effectively and efficiently spent?
Bureaucracy. Rules, regulations, and preestablished procedures. The service provider cannot be permitted to innovate without going through a lot of review and supervision. The flexibility that a direct exchange of goods and services in the market for the organization's revenue simply doesn't work in government. When it is tried, we call it corruption.
There is an advantage, though. Workers do the same job throiughout their career, and can develop real professionalism in ways that the rapid turnover of employees in private enterprise does not generally permit. Long term military experts like the Delta Force and Seals are an example. The commercial aviation industries is built on military trained pilots, because it costs too much for most individuals to provide their own training.
In a brief nutshell, this is the essence for the difference between free enterprise and government.
What brought on this lecture? Howie Klein over at the Huffington Post is discussing the current administrations' effort to privatize the air traffic control agency. The problem is, air traffic control isn't a simple market exchange of services for revenue each time an air traffic controller contacts a plan and provides instructions. It is a typical government service requiring long professionalization and bureaucracy. Turning it over to the market will provide less professional services and permit - even require - a lot more errors.
addendum 06-07-06
An interesting take on Democratic Libertarians over at Daily Kos. Where Libertarians in general believe in minimizing government (sometimes to nothing) there are Democratic Libertarians who recognize that corporations can be more danger to individual liberty than government is.
I'll agree with that view. Corporations (and all businesses) choose their markets and ignore everyone else. This allows them to be more productive than government because they don't have to consider every possible use and sale of their product or service. The only have to consider the profitable ones.
Government is in a different situation. Governments are responsible for everyone in their geographical boundaries. No exceptions except hermits who effect no one else. Since a government cannot select its target market, the decisions and service provisions are much more complex than is true for corporations, companies and other private businesses.
One of the aspects of decision-making that corporations can ignore is what happens to people they ignore. If, perhaps for some social or justice reasons, someone deserves the use of a corporation's service or product but providing it is not profitable, the corporation (for purposes of efficiency and low cost) simply ignores those individuals. Only government can force a corporation to provide a product or service to individuals who corporations might otherwise exclude as being to expensive to service. Government then sets the lower limit of the market, so that the lowest-cost options are not forced down to those that exclude the expensive cases. This places all providers on the same expense level by forcing an expansion of the market. The best example is generally health insurance. This is a decision by society that setting the lowest level of service at the lowest level of total profit does not provide the best social benefit.
Another possibility revolves around privacy. A corporation or company can collect any kind of information they want about any individual. And they do. Check the credit industry. This information provides the ability to control individuals. It is not to the economic advantage of private companies not to collect all the information possible, and frequentl not to their advantage to dispose of that information. It is also costly to offer an effective appeal process to individuals. This complicates decisions, making them more expensive and increases costs of the use of that information. That's why government has to offer regulations that require all companies in the information business to follow the same rules, and the government has to offer legal remedies for misuse of information collected.
Individuals can't trust corporations any more than they do government. But government has been around long enoough so that individuals know what kinds of checks and balances work. Corporations are more free than governments, but that is frequently at the cost of controls that make them socially acceptable. Only government can provide those controls. An example is the Environmental Protecion Agency, Tom DeLayt's most hated enemy. Why? Because the EPA eliminated use of certain fire ant poisons that were one of his best selling products. They elimiated it because the poison had extensive long-term side-effects that seriously impacted people and the environment.
From the Daily Kos article:
"The key here isn't universal liberty from government intrusion, but policies that maximize individual freedom, and who can protect those individual freedoms best from those who would infringe."Any sensible Libertarian needs to look at the uses of government as protector of human rights like life, liberty, and the protection of personal privacy. In many circumstances corporations cannot or will not do it. If he or she does look at that, then he will become a Democratic Libertarian.
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