public and private expense

[Steve Cooke <scooke@uidaho.edu>]

Visionaries,

I sent the following message to Dale and forgot to send it to visision2020 as I had intended.


> Dale,
>  It is conceivable to me that a public investment in the same project could 
> be more expensive than a similar private investment. A problem is that the 
> public servants and officials may be less diligent in spending money 
> carefully because it is not their own. This is called the principal-agent 
> problem. The agents (public officials) are less careful than the principals 
> (voters) would be. (Remember the "Courtship of Miles Standish"? Who got the 
> girl, the principal or the agent?)
> 
> I would quickly add that this problem not limited to government agents. Any 
> organization w/ a large staff including large business corporation can have 
> a principal-agent problem. For example, CEO's can overpay themselves or 
> (perhaps less likely) their workers at the expense of share holders or 
> customers.
> 
> To me, this principal-agent problem exists. It is often used in the battle 
> of perceptions against government. However, it is just is applicable for 
> big business. For example, TVA & Bonneville Power electric generation 
> utilities are rationalized for continued public ownership because of their 
> ability/willingness to provide low cost power to their customers, even 
> lower than their private competitors. This gives regulators a benchmark to 
> compare private power generation cost against. Examples going the other way 
> can also be found. The cost of the pool may be one, I don't know, but it is 
> surely  possible.
> 
> Both private and public organizations have problems. Ironically, in this 
> case, both have the same problem. To me it is not that surprising in the 
> following sense. Private business is a form of private government. 
> Conversely, public government is a form of public business. They are less 
> different in some ways than they appear from the outside. Each is providing 
> goods and services, albeit of a different type.
> 
> Steve Cooke
> 
> -----Original Message-----
> From:	Dale Goble [SMTP:gobled@uidaho.edu]
> Sent:	Wednesday, July 08, 1998 10:55 AM
> To:	John and Laurie Danahy
> Cc:	scooke@uidaho.edu; 'vision2020@moscow.com'
> Subject:	Re: Old High School
> 
> 
> On Wed, 8 Jul 1998, John and Laurie Danahy wrote:
> 
> >      The concept that was recently used to explain the cost difference
> > between the two pools was that Moscow's pool will be built with public
> > money so naturally it would cost more.  This is a problem.  Why should I
> > support a public project that is funded solely thru tax dollars when the
> > same project could be built with private donations at a much less cost?
> 
> 
> This is another of my favorite bits of nonsense: I have never seen
> anything that suggests that this is accurate.  When examined in any
> detail, the presumed-ability of private enterprise to do something more
> cheaply comes from the fact that it is doing less.
> 
> Dale Goble
> Moscow
>