The Private Sector wants to Please us; the Public Sector wants to Change Us

Posted by PITHOCRATES - June 11th, 2011

The Private Sector versus the Public Sector

The best things in life aren’t free.  They come from the private sector.  Where they’re not free.  But can be purchased at some very affordable prices.  We willingly choose to go to the private sector and willingly choose to buy the things they’re selling.  Because we want what they’re selling.  And we enjoy our shopping experience.

The public sector is a different story.  We begrudgingly interact with the public sector.  And only do so when we absolutely have to.  To renew our driver’s license.  Deal with the IRS.  To get all the required building permits to add a deck in your backyard.  Rarely do we enjoy these experiences.  Or are happy with the high prices for these services.

So why is one experience enjoyable and the other one not?  Incentives.  And competition.  One of them has them.  The other doesn’t (see Two Different Worlds: The Public and Private Sectors by Ron Ross posted 6/1/2011 on The American Spectator).

There is in effect an undeclared race between the public and private sectors in regard to satisfying human wants. Who’s winning that race? Which sector is doing a better job of affecting peoples’ lives in a positive way? In fulfilling human wants the private sector is leaving the public sector in the dust. People get more and more value from the private sector and the same or less value from government activity even though the cost of government has increased at an exponential rate.

Why is there so much difference in how the two sectors function? Two important reasons are incentives and competition.

The University of Rochester economist, Steven Landsburg, says, “Most of economics can be summarized in four words: ‘People respond to incentives.’ The rest is commentary.” Although I think that’s an exaggeration, there is much truth in it. The private sector is vastly more effective and efficient than the government mostly because of the differences in the incentive structures. In the private sector you can get rich filling needs and solving problems. The public sector’s incentive structure is totally dysfunctional.

This is why no one cares at the DMV that you’ve been in line for an hour.  Because where else are you going to go?  You know that and wait.  Because you have no choice.  And they know that.  So they don’t hustle to process people as quickly as possible.  Because there is no chance of losing their customers to someone who does.

In a competitive environment, innovation, efficiency, and product improvement become matters of survival. Apple and Microsoft spend billions of dollars annually on research and development. They spend those vast amounts more out of necessity than choice. If they did not they would fall behind and lose market share.

President Obama complained recently about the White House’s obsolete phone system. He said that the White House phones are “30 years behind,” and “we can’t get our phones to work.” He said that he was disappointed by the lack of “really cool phones and stuff.” Does he ever wonder why this happens? I doubt that he does. I’m pretty sure no major corporation has an obsolete phone system.

All innovation comes from the private sector.  It’s on the cutting edge of technology.  Because they spend money in research and development.  And in improving the process of delivering these products to the customers.  And all of these costs are included in the sales prices of what they sell.  Where prices typically fall after a product is introduced into the market place.  Amazing.  Meanwhile, taxes are always going up.  And despite all of this money the public sector operates more like a third-world nation in comparison to the private sector.

The High Costs of Licensing and Regulations

Not only does the public sector do things poorly in comparison to the private sector, their policies hurt the private sector.  And the very people their policies are supposed to protect (see The Cancer of Regulation by John Stossel posted 6/8/2011 on Townhall).

Licensing prices poor people out of the business.

“Compare New York City, where a license to own and operate a taxi is $603,000, to Washington, D.C.,” George Mason University economist Walter Williams told me. “There are not many black-owned taxis in New York City. But in Washington, most are owned by blacks.” Why? Because in Washington, “it takes $200 to get a license to own and operate one taxi. That makes the difference.”

Regulation hurts the people the politicians claim to help.

If the government in Washington can license a taxi for $200, why does New York City need $603,000?  To restrict entry into the market.  Which is the typical purpose of licensing.  To restrict competition so those in the market can charge more.

People once just went into business. But now, in the name of “consumer protection,” bureaucrats insist on licensing rules. Today, hundreds of occupations require expensive licenses. Tough luck for a poor person getting started.

Ask Jestina Clayton. Ten years ago, she moved from Africa to Utah. She assumed she could support her children with the hair-braiding skills she learned in Sierra Leone. For four years, she braided hair in her home. She made decent money. But then the government shut her down because she doesn’t have an expensive cosmetology license that requires 2,000 hours of classroom time — 50 weeks of useless instruction. The Institute for Justice (IJ), the public-interest law firm that fights such outrages, says “not one of those 2,000 hours teaches African hair-braiding…”

No customers complained, but a competitor did.

The competitor complained not over concern for the welfare of customers.  But because her lower prices attracted customers away from the established businesses.  Because if people can get the same or better quality for less, they choose the same or better quality for less.

Once upon a time, one in 20 workers needed government permission to work in their occupation. Today, it’s one in three. We lose some freedom every day.

“Occupational licensing laws fall hardest on minorities, on poor, on elderly workers who want to start a new career or change careers,” Avelar said. “(Licensing laws) just help entrenched businesses keep out competition.”

This is not what America was supposed to be.

Occupational licensing was to protect consumers.  But it restricts entry into markets.  Keeping prices high.  Hurting both people that would like to start a business.  And those who have to pay the higher prices because of licensing restrictions.  Often it’s the poorest people that suffer most.  And the rich that benefit most.  Which is the exact opposite of the desired result of rules and regulations that are supposed to protect the consumer from businesses.  And the poor from the rich.

Your Electric Car in Oregon may Kill You

So the public sector does not do things as well as the private sector.  And their rules and regulations hurt the private sector and consumers.  But those in government know what’s best for us.  Currently there is a push to get us is into electric cars.  They’re subsidizing them to make them more appealing to buy.  Because they are expensive.  And have limited range.  Which is a real turnoff to a car buyer.  But that doesn’t stop them.  Because they don’t care about what we want.  It’s about what they want.  And they want to put us into electric cars.

One of the biggest drawbacks of an electric car is that you cannot pull into an electric ‘gas station’, fill up and go on your way.  The current electric cars charge overnight at home.  And people drive them to and from work.  As long as the round trip is a hundred miles or less.  And they don’t use their lights and heater too much.  But they’ve come up with an idea to fix this problem.  But first, let’s look at some electrical safety.

Electricity is dangerous.  Especially at higher voltages.  That’s why our houses have 120V electrical outlets.  You may have a 220V electric oven, but you don’t play with the electrical connection.  A common industrial voltage is 480V.  It has more energy so it can do more work.  But because of that energy, it is more dangerous.  And people die in the workplace from electrocution.  And arc flash (see What is Arc Flash? by Mike Holt posted on mikeholt.com).

Arc Flash is the result of a rapid release of energy due to an arcing fault between a phase bus bar and another phase bus bar, neutral or a ground. During an arc fault the air is the conductor. Arc faults are generally limited to systems where the bus voltage is in excess of 120 volts. Lower voltage levels normally will not sustain an arc. An arc fault is similar to the arc obtained during electric welding and the fault has to be manually started by something creating the path of conduction or a failure such as a breakdown in insulation.

The cause of the short normally burns away during the initial flash and the arc fault is then sustained by the establishment of a highly-conductive plasma. The plasma will conduct as much energy as is available and is only limited by the impedance of the arc. This massive energy discharge burns the bus bars, vaporizing the copper and thus causing an explosive volumetric increase, the arc blast, conservatively estimated, as an expansion of 40,000 to 1. This fiery explosion devastates everything in its path, creating deadly shrapnel as it dissipates.

Yes, arc flash is so dangerous that there are costly and time-consuming OSHA regulations when working with or operating 480V equipment.  Safety programs.  Short circuit studies.  Arc flash calculations.  Employee training.  Warning labels showing the arch flash radius where personal protective equipment is required.  And personal protective equipment (gloves, face shields, fire-resistant clothing, fire-suits, etc).  Depending on the level of hazard.  Determined from the studies and calculations.

So working with 480V is dangerous.  But guess how they’re going to address the problems of electric cars in Oregon?  That’s right.  By installing 480V charging stations for ‘quick’ half-hour charges (see Oregon’s electric highway by Michael Vaughn posted 6/11/2011 on The Globe and Mail).

The Oregon Department of Transportation has announced it’s going to install Level 3 DC fast-charging stations along that portion of the highway.

Level 3 is the key. Level 1 chargers use 110 volts from a regular home outlet and charge a vehicle overnight. Level 2 uses 240 volts, like a dryer or stove, and charge a vehicle in three or four hours. Level 3 uses 480 volts and the heavy juice can take a Nissan Leaf’s 45-kilowatt battery from near empty to 80 per cent in half an hour.

And if there is an arc while you’re connecting or disconnecting, it can incinerate you.  Unless the OSHA regulations for worker safety are just a waste of time and money.  (Note:  Most arc flash standards are for AC voltages.  DC arc flash safety standards were developed after the AC standards.  Both are dangerous.  And both AC and DC will be present in these DC charging stations due to the long distances between stations.  DC does not work well over long distances.  So the charging stations will probably have an AC to DC converter built in.)

However, there are fewer than 50 electric cars registered in all of Oregon, so why do it?

John MacArthur, of Oregon Transportation Research Consortium, says the installation of fast-charging stations will build acceptance for electric vehicles by making it possible for people to take trips beyond the typical range of 100 miles. These stations will be spaced 30 miles apart and located close to the interstate around gas stations, restaurants and restrooms. You need to do something during that half-hour recharge.

Why do it?  To make us do something we don’t want to do.  Unlike Apple and Microsoft who can.  And they can do it without massive government spending.  Or make us wait for a half hour until we can use their product again.  A lot of which runs on easily replaceable batteries.  Which comes in handy during a power outage.  That and a car with an internal combustion engine so you can drive someplace that has power to wait until your power is restored.  Which you couldn’t do if you had an electric car.

The Private Sector Functions According to our Will 

The best things in life come from the private sector.  The things we don’t like tend to come from the public sector.  The influence of the public sector on the private sector increase consumer costs.  And creates barriers in some markets.  Which also increases consumer costs.  And government regulations and policies are often attempts to make us do something we’d rather not.  Like drive an electric car. 

So it’s not hard to see why the private sector is such a greater success than the public sector.  The private sector functions according to our will.  The public sector operates against our will.  That’s why there’re incentives and competition in the private sector.  And why there aren’t in the public sector.  Because one gives us what we want.  The other doesn’t.  Unless you want long lines, poor service and high costs.

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