Friday, September 16, 2005

Stupidest Berkeley Economist Pounds Head on Wall Until...

Someone comes along and puts him out of his misery:

There is no magic "market dust" that the market sprinkles on organizations to make them efficient. Managers *make* organizations efficient. Managers of organizations embedded in markets have strong incentives--the fear of losing your job and the desire for more commodious living--to work hard at making their organizations more efficient. But there are other possible motivators as well: the pleasant feeling of a job well done, the pleasant feeling of having helped someone, the shame of public humiliation when you have messed up, loyalty to the person who put you in the job, and so forth.

I think we would all agree that these alternative motivating factors were not sufficient to induce appropriate performance and effort on the part of George W. Bush, Michael Chertoff, and Michael Brown. But this is at least as much a statement about who they are as a statement about whether FEMA could have been expected to do a reasonable job in New Orleans.

Posted by: Brad DeLong Sep 15, 2005 5:42:01 PM

The FLUBA Committee on the Need for Economists to Understand Some Economics notes that it's always a delight to see someone who is really, really asking for it, getting it...on his own comments section (not yet deleted!):

Brad, you seem to have missed the point of the Intelligent Design analogy. Walmart wasn't just created and managed, it also *evolved* into what it is now, in a competitive marketplace. Sure, the managers tried to make it successful, but the reason Walmart is big is that the strategies those managers came up with *worked*. It might have been good sense or it might have been sheer blind luck that led to the structure Walmart now has, but in a competitive marketplace companies that are well-adapted for their market niche grow and those that aren't shrink. So we have reason to believe, simply due to the fact that Walmart is big, that it is relatively efficient. We have no similar reason to believe the same of FEMA.

In short, the market *does* sprinkle "magic market dust" on organizations to make them more efficient. Just like evolution sprinkles magic evolution dust on species to make them more efficient. It's a weeding-out process and a growth dynamic that can't possibly apply to government programs unless government programs are regularly allowed to fail, go broke, and be dismantled.

Posted by:
Glen Raphael Sep 15, 2005 6:43:42 PM

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