Fuzzy Privatization Math: "On page 14 the report says it did no analysis “due not only to the fact that the actual cost of a privatized alternative will often not be known until the end of a full fledged competitive bidding process, but also because New Jersey state government agencies have difficulty calculating with precision the full cost of functions currently performed at the state level.” So, the sunny claims of big savings for the people of New Jersey are a guestimate, at best. and “To Be Decided” is the most accurate statement in the report."
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Governor Christie's privatization task force made a highly-publicized claim that privatization will save $210 million for the state of New Jersey. But it turns out that they did no real number-crunching to come up with that figure. Here is what they say (at p. 14.):
The necessarily short time the Task Force has had to complete its work has not always permitted the exhaustive vetting and cost‐benefit analysis that it recommends in this Report for all privatization initiatives.
Nor has the Task Force been able to calculate precise savings for the proposals that follow. This is due not only to the fact that the actual cost of a privatized alternative will often not be known until the end of a full‐fledged competitive bidding process, but also because New Jersey state government agencies have difficulty calculating with precision the full cost of functions currently performed at the state level.
The Task Force, given these constraints, has done its best to estimate the monetary savings, if any, of each of the privatization opportunities identified.
This is typical of privatization advocates. They are ideologically motivated (government bad, corporations good) and/or driven by the profit motive. The Chamber of Commerce seems to have been one of the driving forces behind the report. Some things can be done quite well by private contractors, but there are so many examples of failed privatization efforts, some at enormous public cost, that these sweeping claims have to be treated with great caution, because they are basically vaporware.
3 comments:
"This is typical of privatization advocates. They are ideologically motivated (government bad, corporations good) and/or driven by the profit motive."
How many of them saw Buried and admired Alan Davenport as a business hero for saving CRT several hundred thousand dollars?
If A = costs borne by city and B = costs independently borne by residents, then the goal should be to minimize A+B - not just to minimize A regardless of how it affects B.
..and that's the problem with the HOA cases. The industry trade group argues about keeping A's costs down while seeking the ability to have unlimited access to the back pockets of the individual owners. The total cost to the residents (A+B) is much, much higher with this privatization scheme.
Transfer fees are just one example of their arguments which make zero sense. The advocates claim that costs for everyone would have to go up if they didn't have transfer fees. Doesn't this miss the obvious point about how that justifies creating a false "cost" that an individual member is expected to bear? Of course, much of the industry claims are merely a diversion since the primary beneficiary of transfer fees are actually the HOA management companies and those fees would never have been accepted by the HOA as a charge to be paid by the HOA corporation to begin with.
From the libertarian Reason magazine:
Reason Writers Around Town: Room for Debate on Privatization
best reader comment so far:
Gregory Smith|4.4.11 @ 4:46PM|#
And there's no corruption in government? The beauty of the private sector is that if they screw you, you fire their asses and never work with them again.
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