The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [117]
Second, government regulation has become extensive, even intrusive, without most people seeing obvious benefits to it. After all, financial services were already heavily regulated before the 2008 crash. All kinds of products have safety rules and requirements but these add to the cost and inconvenience of life without preventing significant incidents such as oil spills or auto recalls. There are restrictions on people’s freedoms, and the protections gained in return aren’t obvious. One argument, with which I have great sympathy, is that regulation has on the whole served the powerful. Dean Baker, for example, argues that financial regulation has helped big banks, regulation of medicines has served big pharmaceuticals corporations, and new laws on copyright and patents are designed to protect the revenues of record companies against the interests of consumers.7
Third, and related to this, Western societies have become more complex and difficult to manage. Partly this is due to social change, the sources of the problems just mentioned. Partly, it is due to the continual innovation and specialization in the economy, the globalization of production, the development of new services, the innovation in financial markets. If bureaucrats and politicians were once able to direct the economy effectively from the center, it’s hard to see how they could manage it now. It has become harder to identify the public interest as opposed to special interests.
For these reasons, the job of government has grown harder. In addition, while private businesses have on the whole made great strides in improving their productivity thanks to the use of new technologies, there has been little if any improvement in productivity in the public sector. People who are used to lots of choice and good service in their experiences as consumers are disappointed by the low quality of service and its lack of personalization in their experiences as citizens. During the decades that marked the start of large structural changes in the economy, driven by information and communication technologies, the structure of government has changed much less. Nor have governments begun to come to terms with the proliferation of information in the Internet age, and the ways that has changed their citizens’ capabilities and demands.
At the same time, the provision of services in the public sector has not kept pace with the productivity changes in the private sector due to new technologies. This is partly a measurement problem, as statistics on public services often use the number of employees to calculate the level of output, making the figures on productivity flat by definition. But it’s a real problem too. The adoption of technological tools has often been slow, due to anything from lack of investment to the opposition of strong public sector unions seeking to safeguard jobs and working practices. Strikes are far more likely in the public sector than the private.
The result has been a growing challenge to the authority and expertise of public service workers. By the 1980s, and drawing inspiration from the earlier public choice literature, it was a standard diagnosis that public services were being run by self-serving elites with insufficient attention to the real needs of their “customers,” the taxpayers funding them. The reason government failure is widespread is essentially because of the shortcomings inherent in having public officials take decisions on behalf of other people while lacking the information they need or the incentives to reflect fully the preferences of those they are supposedly serving. In short, they were unresponsive, inefficient monopolies. One response was privatization, a central policy of the Thatcher government, which caught on around the world. In many countries the past thirty years, have seen large areas of economic