The Unstarvable Beast

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As the world watches the United States grapple with its fiscal future, the contours of the battle reflect larger social andphilosophical divisions that are likely to play outin various guises around the world in the comingdecades. There has been much discussion of how to cut government spending, buttoo little attention has been devoted to how to make government spending more effective. And yet, without more creativeapproaches to providing government services, their cost will continue to rise inexorably over time.
Any service-intensive industry faces the same challenges.Back in the 1960’s, the economists William Baumol and William Bowen wrote aboutthe “cost disease” that plagues these industries. The example they famouslyused was that of a Mozart string quartet, whichrequires the same number of musicians and instruments in modern times as it didin the nineteenth century. Similarly, it takes about the same amount of timefor a teacher to grade a paper as it did 100 years ago. Good plumbers cost asmall fortune, because here, too, the technology has evolved very slowly.
Why does slow productivity growth translate into highcosts? The problem is that service industries ultimately have to compete forworkers in the same national labor pool as sectors with fast productivity growth,such as finance, manufacturing, and information technology. Even though thepools of workers may be somewhat segmented,there is enough overlap that it forces service-intensive industries to payhigher wages, at least in the long run.
The government, of course, is the consummateservice-intensive sector. Government employees include teachers, policemen,trash collectors, and military personnel.
Modern schools look a lot more like those of 50 years agothan do modern manufacturing plants. And, while military innovation has beenspectacular, it is still very labor-intensive. If people want the same level ofgovernment services relative to other things that they consume, governmentspending will take up a larger and larger shareof national output over time.
Indeed, not only has government spending been rising as ashare of income; so, too, has spending across many service sectors. Today, theservice sector, including the government, accounts for more than 70% ofnational income in most advanced economies.
Agriculture, which in the 1800’s accounted for more thanhalf of national income, has shrunk to just a few percent. Manufacturingemployment, which accounted for perhaps a third of jobs or more before WorldWar II, has shrunk dramatically. In the US, for example, the manufacturingsector employs less than 10% of all workers. So, even as economic conservativesdemand spending cuts, there are strong forces pushing in the other direction.
Admittedly, the problem is worse in the government sector,where productivity growth is much slower even than in other service industries.Whereas this might reflect the particular mix of services that governments areasked to provide, that can hardly be the whole story.
Surely, part of the problem is that governments useemployment not just to provide services, but also to make implicit transfers. Moreover,government agencies operate in many areas in which they face little competition– and thus little pressure to innovate.
Why not bring greater private-sector involvement, or atleast competition, into government? Education, where the power of moderndisruptive technologies has barely been felt, would be a good place to start.Sophisticated computer programs are becoming quite good at gradingmiddle-school essays, if not quite up to thestandards of top teachers.
Infrastructure is another obvious place to expandprivate-sector involvement. Once upon a time,for example, it was widely believed that drivers on privately operated roadswould constantly be waiting to pay tolls. Modern transpondersand automatic payment systems, however, have made that a non-issue.
But one should not presume that a shift to greaterprivate-sector provision of services is a panacea.There would still be a need for regulation, especially where monopoly ornear-monopoly is involved. And there would still be a need to decide how tobalance efficiency and equity in the provision of services. Education isclearly an area in which any country has a strong national interest inproviding a level playing field.
As US President in the 1980’s, the conservative icon RonaldReagan described his approach to fiscal policy as “starve the beast”: cuttingtaxes will eventually force people to accept less government spending. In manyways, his approach was a great success. But government spending has continuedto grow, because voters still want the services that government provides.Today, it is clear that reining in government also means finding ways to shapeincentives so that innovation in government keeps pace with innovation in otherservice sectors.
Without more ideas about how to innovate in the provisionof government services, battles such as one sees playingout in the US today can only become worse, as voters are increasinglyasked to pay more for less. Politicians can and will promise to do a betterjob, but they cannot succeed unless we identify ways to boost governmentservices’ efficiency and productivity.

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关键词：beast East STAR ABLE ABL government attention effective providing continue

There has been much discussion of how to cutgovernment spending, but too little attention has been devoted to how to makegovernment spending more effective. And yet,without more creative approaches to providing government services, their costwill continue to rise inexorably over time.
Any service-intensive industry faces the samechallenges. Back in the 1960’s, the economists William Baumol and William Bowenwrote about the “cost disease” that plagues these industries. The example theyfamously used was that of a Mozart string quartet,which requires the same number of musicians and instruments in modern times asit did in the nineteenth century. Similarly, it takes about the same amount oftime for a teacher to grade a paper as it did 100 years ago.
Why does slow productivity growth translate into highcosts? The problem is that service industries ultimately have to compete forworkers in the same national labor pool as sectors with fast productivity growth,such as finance, manufacturing, and information technology.
The government, of course, is the consummate service-intensive sector. Governmentemployees include teachers, policemen, trash collectors, and militarypersonnel.
not only hasgovernment spending been rising as a share of income; so, too, has spendingacross many service sectors. Today, the service sector, including thegovernment, accounts for more than 70% of national income in most advancedeconomies.
the problem is worse in the government sector, whereproductivity growth is much slower even than in other service industries.
Surely, part of the problem is that governments useemployment not just to provide services, but also to make implicit transfers. Moreover,government agencies operate in many areas in which they face little competition– and thus little pressure to innovate.Whynot bring greater private-sector involvement, or at least competition, intogovernment?
Education,
Infrastructure is another obvious place to expandprivate-sector involvement.

But one should not presume that a shift to greaterprivate-sector provision of services is a panacea.There would still be a need for regulation, especially where monopoly ornear-monopoly is involved.And there wouldstill be a need to decide how to balance efficiency and equity in the provisionof services. Education is clearly an area in which any country has a strongnational interest in providing a level playing field.