Re-release: Are Governments Effective?
As the UK continues its withdrawal from Afghanistan and the covid-19 pandemic lingers on, this week we revisit a podcast from March about the effectiveness of governments.
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The Covid pandemic has seen a sharp rise in government spending, and large scale testing and vaccination programmes. Some of these have been successful, while others less so. We look at whether, on balance, governments are an effective mechanism for achieving desirable outcomes.
In this podcast, we explore the rationale for having governments in the first place and consider what activities it is appropriate for them to carry out. We look at what happens when the government gets it wrong and also examine what various data sources say about the relative effectiveness of the private and public sectors.
A few things we mentioned in this podcast:
- Chicago School of Economics
- Milton Friedman – Four ways to spend money investorjunkie.com/economics/milto…ys-spend-money/
- Principle-Agent Problem www.investopedia.com/terms/p/princi…%20and%20agent
- Ambrogio Lorenzetti's Good and Bad Government www.visittuscany.com/en/attractions…ad-government/
- PSIRU report summarising some of the evidence www.epsu.org/sites/default/file…ncy%20EN%20fin.pdf
- The effects of bad government www.washingtonpost.com/outlook/2020/…d-government/
- What’s so bad about government anyway fee.org/articles/whats-so-bad…ig-government-anyway/
- What is rent-seeking? corporatefinanceinstitute.com/resources/…concept,It
For more information on Aleph Insights visit our website https://alephinsights.com or to get in touch about our podcast email podcast@alephinsights.com
Transcript
to pay my taxes for a start yeah I mean so obviously this is something that has been discussed I think since governments have started what should governments be doing what should we leave people to do themselves and you know really cuts to the heart of that question of what we have governments for and what the justification is for having an entity which essentially you know compels you to give it money which then spends money on stuff a lot of which you don't see the need for or indeed use and I've so I've kind of looked at some of the arguments and so just looking at the kind of and these are these are the sort of theoretical if you like arguments separately I've looked at the you know what empirical data we might have to work out whether this is true but the the arguments about why governments are inefficient I mean the the probably in recent years the that's been spearheaded by the Chicago school of economics who sort of very famously kind of libertarian but also you know see all problems as as you know anything governments do because of a market failure would be better addressed by fixing the market rather than by making the government do something is is the argument and I think the best expression of it you know what why that is is Milton Friedman's famous sort of thought experiment which is you know if you if you have to buy something with your money you care about the quality and the cost if you have to buy somebody buy something for somebody else you probably don't care about the quality but you do care about the cost if you've got somebody else's money to spend on stuff for you then you care about the quality and you don't care about the cost but if you if you're buying somebody for something for somebody else and it's also not your money you don't care about cost or quality and he says that's what governments are essentially they're spending somebody else's money on stuff which isn't for them and so you know you shouldn't why would anyone expect you know no private companies in that position and no individual is in that position so why should you expect that to be to be you know to be any different when it's a government doing that I mean the other sort of arguments about why we should expect governments to be bad at stuff is the you know the principal agent problem that you if you like the government is a kind of agent operating on your behalf but they have their own incentives which aren't necessarily going to align to yours a lot of that is political so you know the sort of not quite apart from the maybe the corrupt elements like the personal interests of politicians the fact that they may seek to promote outcomes which will benefit them personally rather than the population at large there's the problem that particularly in a democracy people are going to be chasing the marginal voter you know the people the floating voters if you like they're the ones who wield a lot of power and policies are designed to capture them at the expense of you know everyone who's in the on the wings of that distribution there's a tendency towards you know a sort of bread and circuses approach to government where you know certainly a lot of you know the in the in the past less so now we've got an independent central bank but in the past you know governments would effectively try to engineer a boom before an election and you know inevitably we'd have to pay for that with a recession afterwards that politicians are only interested in you know the next electoral cycle so their policies are myopic and then you have all of these other slightly more specific issues like you know governments are big generally the government departments are big and have all the inefficiencies you get with large you know in terms of overheads and communication failures and those kinds of things and and then you know all the slightly more technical things about you know is taxation an efficient way to pay for things well the problem is that you you know you can't really control where tax falls and you and you also you know you give people incentives to try and you're distorting the market by giving people incentives to both avoid tax but also you're you're making um you know you're reducing supply effectively um so there's a whole bunch of reasons why people think governments should be um should be worse
Speaker A:at stuff um yeah well let's concentrate on that um for a moment i actually feel a bit bad actually just really slacking off of government gateway um because actually it is a vast sprawling site that is not pretty i'll be i would be interested to know how it was designed and managed but i mean first of all um i'm actually pretty lucky that i'm able to pay taxes to do it all online and pay online i think there's a lot of countries where you're not able to do that and also i was just thinking of any civil servants listening to this i you know i don't want to i don't want them to
Speaker B:feel bad about things or feel bad about me um i'm pretty sure that most civil servants this is based on my own experience and my knowledge of civil servants today dislike me anyway well that's true uh but they but also they probably feel the same about the computer systems they have to use yeah you know and i and i think if you think about the um you know a lot of the things we just talked about these these sort of the some of these those fundamental issues of um being essentially non competitive i mean they happen within government departments if you're a you know if you're a civil servant working in the ministry of defense you you can't just say well you know i don't like microsoft i want to use uh you know different word processor i want to use a different browser you just can't do that you know you've got a similar problem inside government departments
Speaker A:um of uh you know yeah so there we are so um here's a question how how far back does this go and have people always had this kind of view of governments have they always been suspicious of
Speaker C:governments um yes i think historically governments have always been seen in a good and bad light and i think more recently it's more the good the bad and the ugly um in i think in the renaissance periods and early 14th century there was an italian painter called uh ambrosio lorenzetti i believe and he painted a series of fresco paintings called the uh called the allegory of good and bad government and the fresco paintings depicted one bad government which had a deterioration of society the landscape was um um was dry there was no crops there was the city life included violence famine famine and poverty and there's actually a figure that's sort of depicted sort of like a devil-like creature and him and his cronies so to speak represent fraud anger war and tyranny and i think that can and still remains to be quite true to today and then on the other side you have this fresco painting that says what a good government should consist of so that's you know cultivated cultivation of good crops a healthy and wealthy society and um the figure or the head of state is seen as a wise old man or a monarch-like figure and he has other figures around him that represent hope faith strength and peace and there are a lot of sort of political scientists who have looked and theorists who have looked into this painting and have said these sorry have looked into these uh fresco paintings and have sort of tried to uh determine what these figures or what the roles of of these governments uh could could be seen as and that and that's that's actually seen in these paintings so um i guess in essence it it underlines the meaning and the purpose of government that it's a reliable and stable system uh in which the society trusts it uh to to carry out its its duty in protecting citizens in their ability to either have property and to maintain to sustain themselves is is something that's holds holds true to today i think yeah i think that's really interesting because um you
Speaker B:know certainly in at least at that at that time and right up actually until probably 200 years ago or so we we governments were minimal you know they were what we would call a minimal government today um and they did exactly what you just described you know they they they kept the peace by um you know through internal security and um and through the maintenance of armed forces and they enforced contracts and and that is actually pretty much what the uh what the sort of libertarian um manifesto for government is that the government shouldn't be you know mucking about with with you know welfare payments to people or you know with uh providing health care or trying to regulate you know the the type of foam you're allowed to use in cushions and those kinds of things you know all of that stuff can be handled by the market that's the that's the libertarian now um the in in you know in the medieval late medieval uh uh era really and probably dating back you could imagine you know thousands of years um governments were essentially a king or a king-like figure um or a bunch of oligarchs um and not much else you know that the the organs of government were pretty small and and it's really only sort of with the rise of of um the kind of technology that we have to to run a bureaucracy um that governments have become big and now you know we we have a situation now where you know something like 40p in every pound is is spent by the government in the uk that's that's enormous by comparison i mean remember when they first brought in income tax during the Napoleonic era i think it was a few percent or something and people were were outraged by that um you know we've moved to a situation governments are really big now governments do a lot and um and you know in a way there's so there's there's
Speaker A:more things to go wrong um but it's interesting yeah potentially in the past then i don't know if it's a simplistic question does that mean that they were better at what they did in the past so for example if your job is to i don't know let's say as you say the key thing you said there was enforcing contracts was government better at it i don't know if it's a very good question i think it's just a bit simplistic but i mean is it i mean i think in the example we're
Speaker B:talking about running websites let's say no but let's no let's run with that yeah take take Anna's pictures right yeah the point is that economic you know i mean if if we judge the performance of governments by what's actually happened you know economic growth over the last couple of hundred years has been astronomical um you know it's it's it's grown vastly more as a percentage every year than it has had done in the previous you know throughout recorded history so these big governments may look inefficient at stuff but it compared to you know absolute rulers and these minimalist states of the medieval time um you know it looks like they're pretty successful at delivering what we actually want which is security and peace and a kind of level
Speaker C:playing field absolutely i agree with that and i was just going to say that technology has facilitated that it's enabled politicians to to disseminate their message uh more openly the use of social media in being able to connect to particularly younger voters to understand what their policies about um so yeah i think i think it's difficult when you're dealing with big government departments who have a lot more responsibility as well to be able to be transparent about how their department is functioning but i think with the use of technology it is in some way helpful but albeit difficult yeah i mean i think i mean more widely technology
Speaker B:understood as a kind of the the ability to do more with with the same amount of staff uh i know steven pinker in the better angels of our nature essentially traces all developments all kind of positive developments and that's the reduction of death rates the reduction of you know violence um increase in uh sort of societal openness and all of those trends that have been going on for the last few hundred years to the ability of the government to essentially enforce a kind of cooperative solution to the prisoners dilemma um which is that you know in a sort of state of nature people have no incentive really to cooperate with one another um and and the the fundamental role of the government is to enforce that cooperation it's to it's you know so in other words i've got no incentive not to drop some litter um and the result is everyone drops litter you know everyone picks the blackberries from the common land and grazes their sheep on it and as a result it's ruined and the whole point of the government is to stop that kind of situation happening by introducing regulations and um and enforcing you know a sort of fair outcome um and uh and his his view is that essentially you know the all of the great progress uh has been because because of the government's because of government's increasing technological ability to enforce that you know to get better at um at imposing peace um so yeah i think i think i think we can what we can say is that the is that governments have got bigger but also in have achieved their aim but uh but i think let's not forget though unless you're particularly edgy it's hard to say that you know well facebook hasn't committed any genocides yet has it i mean not yet no no so as good as government is let's not forget that all the bad things are also produced by governments as well all the wars and genocides um you know that they're all they're all uh they're all things that you can only really do if you have a sizable armed forces um to do them with so so there's you know so anyway i mean i mean i think
Speaker C:well actually i was just about to extend that um yes and actually that that goes back also to the to one of the painting of one of the fresco paintings um that the idea of justice um there's a very fine balance between how that's perceived by society so if there could be a deterioration of trust between government and society if individuals believe that or groups believe that just it has justice hasn't been served and i think when it comes to government accountability as we've seen in the united states that has been a very touchy touchy topic um particularly around a police brutality and sort of a a perception that governments haven't been doing enough to to implement justice um in that sense yeah which is which is a quite a high level of
Speaker B: es um uh there was a study in: Speaker A:yeah um look we we need to stop fairly soon there's a couple of things i need to discuss um but before we do um is there anything you want to weigh in on ana um i was going to ask
Speaker C:whether whether you thought if government were to spend more on marketing making their website function functionality and design prettier would would that mean people would perceive the government as more efficient and more um yeah better at what it does better what it does yeah
Speaker A:pretty is is that yeah hold on okay i mean i did mention that i thought the website was ugly but it's not as much i mean to be honest it's more the functionality of it it's just not very user friendly and they need a you know they need a ux specialist on there um so i mean i know i'm actually interested as to how that website um and it's almost more than websites probably one of the biggest websites i know i guess apart from stuff like wikipedia and all the other sort of usual suspects but um i mean i just do they have in-house people who are ux designers and and developers etc um who do this stuff or do they farm it out um and if it's the latter why is it still so difficult to use and i guess because it just looks like a website that just wants to do everything and it's meant to be a one-stop shop and but it's still very difficult to use anyway
Speaker B:um my answer so i don't know about well i go i just i give a really speculative answer which is yeah most of the time governments do um uh you know contract out certainly today these days um uh they they they may have had an in-house team at the time when it was first rolled out and now of course you know you have this legacy system which is very very hard to change um yeah and and you know they are they aren't allowed to spend public money on things that are unnecessary so they will have a list of specifications uh for functionality by and large and not for you know snazzy ux and fading things and pop-up menus and all of those nice things that we're used to um you may consider that an essential for your uh browsing experience but in terms of well it's public money right so do we really want to spend public money on floaty on floaty transparent menus you know i've been
Speaker A:demonized here but um but look um i want to move on because actually i'm rather convinced actually but i feel i feel rather guilty actually slacking off the government i'm the other way around i was
Speaker B:really hoping to discover that governments really were crap at stuff but actually i've really come
Speaker A:to the conclusion that they're not bad well that's how i feel right exactly that's how i feel so i'm persuaded um i feel rather petulant um but look i do want to finish off with something um which is i've got a question to ask you which is um yeah i mean i i start i kick this off by saying there was something i was unhappy about that i thought i was getting a poor service from the government right um what can you think of something an experience of yours where you feel oh my god that's where you were you perceived in the moment the you were really benefiting this is something that government or public sector had done really well for you personally and you were happy about this um do you think that's a good question yeah yeah let's do it okay so um when you because i've got something um but um but yeah who wants to go first nick or anna it's a bit boring i'm afraid
Speaker B:no my answer is boring it's boring because i'm british and so i feel like you're gonna have the same as me go on i've fallen into a the trap of you know i don't i've never used private health care i mean i have dentistry right and it's great my dentist is awesome he's private um but when i went i mean several occasions now i've had sort of weird infections and um you know like bits of my an infected elbow which was infected cornea like for some reason i'm vulnerable to them and uh every time i've gone in and you know when you have a serious problem you all of the all of the bureaucracy disappears and they're just like look you go take this to the hospital take this bit of paper to the hospital and they'll sort you out and i you know you get treated straight away you get your you get your antibiotics and i'm still here um when you look on online you look at us you know you know when you think you've got uh cancer because you've got a sore throat so you look it up online and and um you know americans you get loads of people saying oh you know i've i've got this uh four centimeter growth on my eye uh i'm wondering if i should go and see my gp but you know it's i'm worried that it's going to cost me 150 to do that it's it's i really do feel incredibly uh lucky now you know you um the free marketeer which i count myself as would say well yes but you don't know what it would be like it might be equally great if you know that was funded my insurance but but as i said i mean i'd certainly have no complaints i think i think it's fair to say that what government produces um is uh low cost but it's often slow and that is how i would summarize what you get when you when you ask the government to do something for
Speaker A:you yeah um i just think that's quite funny there's something about you and your elbow and i just mentioned you turning out with the hospital girl here he comes again the elbow guy
Speaker C:um anna anything for you um i think it would just be a consolidation of information online particularly for for british uh expats and i i have lived abroad in germany for many years and i had to use the website of course but i had all the information i needed so i think um i think in that sense yes there could be room for improvement on on its design but i think in in hindsight actually it's it's a it's a useful resource and i think it's often underappreciated particularly yeah by other countries who perhaps don't even have the ability to have a server to host a
Speaker B:website um so very fortunate agreed and i think you know national statistics it should be something we all forget about the nhs national statistics is one of the is the best statistics agency in the world and we should all be really proud of it they're awesome this turned into rather flag
Speaker A:waving affair this isn't it um i mustn't i feel you know listening to you just then and if i was already feeling guilty i felt even more guilty and also you know and just uh just maybe a bit ranty shouty and you're horrible ungrateful yeah and you're calm rational sort of explanation of things but um but yeah just say i think probably for me two things actually i mean i'm slightly hesitant to say this because i'm you know quite privileged white middle class male but the police i think the british police are pretty good but um no i think the other one the big thing is yeah the nhs i mean i've smashed myself off of my body on several occasions and i just think nhs is great and and um you know just the doctors and nurses they're just really good at what they do i think and you know i've got two children well i've got three but two of them you know were born very very prematurely like three months early and and the the care that they got was just astonishing you know and i just hope that eventually i'm able to sort of pay all this back in taxes um yeah that's my thought on this so um anything to add anyone before i wrap up before we before we pay
Speaker B:you in cash in a in a uh in a brown paper envelope i think just one point you mentioned about national
Speaker C:statistics uh nick um have you seen the the coronavirus stats on on the government website yeah they actually have all the the details there in fact they have a name of a very swish dashboard
Speaker A:which is dynamic and yeah awesome okay um we'll stop there if you've got any comments on the show please drop us a line we want to hear from you where you can contact us at podcast at aleph insights.com um especially if you've got suggestions for topics let us know um and if you've uh enjoyed listening to this podcast please leave a review wherever you get your podcast from it helps others to find us thank you as always for listening to the cognitive engineering podcast i'm Fraser McGruer we've been here with Nick Hare and Anna Pearson of Aleph Insights until next time goodbye
