Introduction
In the book ‘You don’t Always Get what you Pay For’ by Elliot D. Sclar, the author examines the merits and demerits of privatizing the public sector in United States. He provides a detailed explanation of how the private sector works in conjunction with the public sector and the assumptions made by supporters of privatization.
Sclar says that although the model of competitive market may be preferred by many, it lacks a full and comprehensive explanation of the intricacies involved in providing public services on contractual basis. This essay will present a critical book review of Sclar’s book ‘You don’t Always Get What You Pay For’.
Book Review of ‘You don’t Get what you Always Pay For’ by Sclar
The book “You don’t Always get what you pay for’ by Eliot Sclar is a focus on privatization which has seemingly been elusive. In his attempt to analyze the subject, Sclar utilizes case studies to show the advantages and disadvantages of transforming public services into private ones.
After referring to various case studies, his conclusion is that privatization of public services is detrimental to the society. Sclar argues that the perspective presented by neoclassical adherents regarding competition in the market is not clear enough to explain the concept of competition.
However, it is apparent from the way he presents the model that he is against free markets. “The economic playing field is more realistically conceived as mountainous terrain that includes several high peaks from which well endowed corporate and individual warriors swoop down to seize targets of opportunity”.
The perspective held by Sclar from this statement is that there is monopoly in the economy where wealth rests in the hands of a limited group of people.
Sclar’s book is easy to read since information is presented in a clear manner. The book lays emphasis on two major issues the first one being that privatization is not the solution to effective and better means of production. He points out that various situations have their uniqueness hence privatization decisions should be based on particular cases.
The approach used by Sclar to analyze the concept of privatization basically revolves around the government’s decision on whether it is supposed to buy or make its own goods.
According to him, the efficiency achieved when the government decides to produce its own products is not different from the one achieved when competitive markets are involved. Sclar argues that the focus should not be on economy analysis but on dealing with management organization.
The case studies he uses present a valid contribution and the challenges he finds out to be inherent in the process of contracting out. For example, identification of the services to be provided by the private companies becomes difficult.
Judging which is better between producing goods privately or publicly also becomes a difficult task. In addition, what determines the production of goods most is the organizational structure as opposed to the question of whether the producer is from the private or public sector.
Sclar points out that the issue is not producing goods privately or publicly but what matters is recognition of the fact that both public and private production of goods can be used in the improvement of public service.
Sclar attempts to make an evaluation of the degree of success in privatization. He points out that privatization should be aimed at reducing the production cost and it does not necessarily reduce the cost instantly. The notion that producers and consumers gain important information from the prices when assigning resources is an extremely simplified one.
Sclar argues that government agencies incur additional costs such as monitoring costs that are ignored by those who support privatization. The cost of the whole agency should also be put into consideration instead of focusing on the section that is under contract.
To sclar, the most appropriate method of making a comparison between work done on the basis of a contract and in-house work is basing it on the avoidable cost. On the basis of this accounting strategy, Sclar views the merits of privatization to be minimal.
Sclar has a feeling that private competition affects the consumers negatively through increased costs. For instance, when trying to analyze the medical industry he points out, “we pay a steep price for this competition. In the United States about 25 cents of every health care dollar is spend on administration and profits.
In Canada, which has national health insurance, the comparable overhead figure is 15 cents”. Sclar is not concerned with the cost or the quality of the product. According to him, the problem of producing goods for public use cannot be solved by privatization but the solution lies in adopting different organization structures for the bureaucratic agencies.
Sclar argues that the ultimate goal should be improvement of the services offered to the public by public agencies. He uses the view of institutions on the economy and costs of transaction to show how the economy can achieve such a goal.
Sclar is keen to identify some of the problems associated with contracting services although he does not acknowledge the steps that have been taken to solve the problems. He suggests that contractual deals between private and public institutions are usually characterized by immense corruption and interference from the political class.
He attributes this kind of interference to the failure of competitive forces. He believes that corruption takes place when the private sector gets involved in matters of the public sector but is not caused by organizational or competition issues.
This book criticizes the way neoclassical theories explain competition as well criticizing the view that bureaucrats and individuals from the political class can produce goods and services better than players from the private sector.
Sclar argues that analyzing the economy in the right manner and having appropriate organizational structures is the key to determining the most appropriate means of production but not relying on ideologies.
He points out that the focus of conservatives is ideology and trimming the size of the government, a factor that causes them to advocate for privatization with little regard on whether it is cost effective with regard to provision of public services.
The contracting method has some problems and can actually lead to reduced government costs but it is not real privatization. He says that the theoretical approach of competition in Austria where privatization involves transfer of resources from the public to the private sector has been successful.
However, to him this should not be an ideology to be emulated by small governments but a factor of appropriate analysis of economic situations.
Conclusion
In the last chapter of his book, Sclar gives examples of privatization in New York as he attempts to explain the challenges of privatization. He outlines several rules that can be used to improve service provision in the public sector.
Sclar points out the negative aspects of standard economic model which is used by supporters of privatization. He argues that supporters of privatization make assumptions that are not realistic. He further argues that they do not have the right ideologies hence ruling out the possibility of reforming the public sector.
Bibliography
Calcagno, P. You Don’t Always Get What You Pay For: The Economics of Privatization. By Elliot D. Sclar. The Quarterly Journal of Austrian Economics, 2001: 83-85.
Sclar, E. You Don’t Always Get What you Pay For. Ithaca: Cornell University Press, 2000.