It is not that the elected officials in smaller jurisdictions are better or that the electorate is better. The superior performance stems from the reality that smaller governments are closer to the people, and decision-making tends more to reflect their interests more faithfully than in a larger jurisdictions. _NewGeography
The reality is that there is a single measure of efficiency: spending per capita. Here there is a strong relationship between smaller local government units and lower taxes and spending. Our review of local government finances in four states (Pennsylvania, New York, Indiana and Illinois) indicates that larger local governments tend to be less efficient, not more. Moreover, the same smaller is more efficient dynamic is evident in both metropolitan areas as well as outside. "Smaller is better" is also evident at the national level (Figure 1).One reason why larger governments -- with their larger special interests -- become less efficient and less sustainable, is the swelling bloat of public sector pay, pensions, and benefits. This can be a huge problem for national governments as well as for provincial and state governments. Public sector unions are always corrupt, with ties to elected officials as well as to even less savoury elements of society.
...special interests have more power in larger jurisdictions, not least because they are needed to finance the election campaigns of elected officials, who always want to win the next election. They are also far more able to attend meetings – sending paid representatives – than local groups. This is particularly true the larger the metropolitan area covered, since meeting are usually held in the core of urban area not in areas further on the periphery. This greater influence to organized and well-funded special interests – such as big real estate developers, environmental groups, public employee unions – and drains the influence of the local grassroots. The result is that voters have less influence and that they can lose financial control of larger local governments. The only economies of scale in larger local government benefit lobbyists and special interests, not taxpayers or residents. _NewGeography
Public Sector Union Pensions are Unsustainable
The same type of corruption found in larger local and regional governments is also seen in national governments. As illustrated below, the more of a nation's output that is confiscated by government, the less economic output the nation typically will have. <
US President Obama has accelerated the accumulation of debt significantly, rapidly leading the US government toward an economic point of no return.
Even before Obama, the US budgetary system was headed for a cataclysm. But Obama has accelerated the time table to the train wreck by a matter of decades.
The chart shows that by 2030, Government spending will exceed historical levels of receipts and lead to ever increasing amounts of borrowing. The chart also shows that if receipts remain at their historical level of 18.3 percent of GDP, by 2070, receipts will be sufficient to cover the costs of only Social Security, Medicare and Medicaid. _Unsustainable US SpendingAbout the time the US runs headlong into its inability to finance its aging citizens' infinite demands and "needs," China will be splitting into warring fiefdoms, Russia will be collapsing from demographic implosion and population pressure from the outside, the senile former EU will be history, dotted with rival Revolutionary Islamic Republics, and Japan will be an island museum dedicated to the phenomenon of demographic decline. Africa, of course, will be on fire.
All of this unfortunate messiness might have been prevented, had citizens of advanced western nations thought to keep their governments small enough to be efficient and answerable to their people.
Let that be a lesson to you.
Agency costs.
ReplyDeleteThere is a fundamental disconnect between members of the public (who can be presumed to be relatively united in a desire for government to go about its business efficiently, whatever their disagreements about the proper scope of that business), and members of the government (who not only lack a natural incentive for efficiency in government, but are _actively counterincentivized_ by the structure of the bureaucracies in which they work).
"Efficiency" is simply the term we use for the ratio between input (in this case, money) and the output (in this case, work) of a process. More work for less money equals greater efficiency. More money for less work equals lesser efficiency. In a free market, the natural desire of the provider of work to be as inefficient as possible is counterbalanced by the freedom of the provider of money to take his business elsewhere, and thus the situation trends toward equilibrium over time. In government, on the other hand, the provider of money generally does not have the option of taking his business elsewhere. Hence the tendency to deteriorate.
And of course, with the exception of those government functions that consist quite nakedly of taking money from taxpayers and giving it directly to recipients, the most effective way of promoting increased inefficiency in a government agency is to make it bigger. Hence, the tendency to growth.
About the time the US runs headlong into its inability to finance its aging citizens' infinite demands and "needs," China will be splitting into warring fiefdoms, Russia will be collapsing from demographic implosion and population pressure from the outside, the senile former EU will be history, dotted with rival Revolutionary Islamic Republics, and Japan will be an island museum dedicated to the phenomenon of demographic decline. Africa, of course, will be on fire.
ReplyDeleteWell aren't you cheery today.