Public Goods Post
thinking about the public economy
For decades, Americans have been told that government’s problems can be fixed if only government were run like a business. This turns out to be terrible advice. Historically, the imposition of a market model on public agencies and repeated moves to mimic the market have been a central cause of “broken” government. For August’s Public Goods Post, we are pleased to announce the publication of The Public Economy in Crisis: A Call for a New Public Economics, written by June Sekera, founder of the Post.

In her short book, meant both for economists and engaged citizens, June argues that the full effectiveness of government in meeting public needs can be restored only if we counter “the entrenched myth of market superiority” and replace it with “a valid theory and model of the non-market public economy.” She proposes a new explanation of government production of goods and services as itself an essential economic system rooted in democratic choice.

Concluding that “It is time to stop squinting at the public sector through a market lens and to see public production as a distinct, valid economic process,” she urges us, and all citizens of democratic nation states, to recognize “that public products originate from the polity itself, that well-being requires vigilant guarding of the public purse, and that choice and accountability are at the ballot box."

To provide more fuel for thinking about the public economy, we adapt here one revealing example from the book, concerning the demonstrably false claim that the contracting out of government services inevitably saves taxpayers money.
The Real “Waste of Taxpayer Money”: Contracting-Out

Contracting-out is a vast and growing part of the U.S. federal government. Outsourced government mushroomed from $200 billion in 2000 to $530 billion in 2011. Indeed, the majority of government functions at the federal level may already have been outsourced. Studies indicate that the ratio of private contract workers to civilian government employees is likely four to one, or even higher.

Contrary to common assumptions, contracting out generally costs more than direct government provision. A 2011 report by the Project on Government Oversight (POGO) found that, on average, the federal government pays contractors at rates 1.83 times greater than federal employees’ total compensation, and more than 2 times the total compensation paid in the private sector for comparable services (Bad Business: Billions of Taxpayer Dollars Wasted on Hiring Contractors). POGO “estimates the government pays billions more annually in taxpayer dollars to hire contractors than it would to hire federal employees to perform comparable services.”

This finding is contrary to beliefs shared by those inside and outside government, public workers and politicians, on the political left and right. It is a belief that springs from the axiom of mainstream economics, itself unsupported, that markets are more efficient than government and that therefore private providers—inspired by the profit motive—are more efficient and will cost taxpayers less. Instead, research shows, contracting-out generally cost more.

The Public Economy in Crisis: A Call for a New Public Economics
Buy Amazon | Springer Publishing | Google  Preview Google

From Springer Publishing:
This Brief proposes a new theory of public economics which deemphasizes reliance on the free market and affirms the importance of public goods and services within the context of the democratic process and constitutional governance. Public non-market production makes up from a quarter to more than half of all economic activity in advanced democratic nation-states. Yet by imposing market precepts on the public domain, as mainstream economics, political science, and public administration do, public governing capacity is weakened and the democratic system suffers.
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The Public Goods Post has been created by June Sekera, 
Founder and Director of the Public Goods Institute; and Research Fellow at the 
Global Development And Environment Institute, Tufts University.

The Public Goods Post is produced by Daniel Agostino, Digital Media Producer and Editor.

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