Is America Encouraging the Wrong Kind of Entrepreneurship?
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The Queen does not personally take away my rubbish, or lay the city water pipes. The government pays people to do that, and private contracting is one way of organising that. State-owned corporations (or whatever you want to call them) are other.
Sure there are opportunities for rent-extraction by contractors. But the same opportunities exist for bureaucratic empire builders and public-sector unions.
I'm pretty sure a government internet service would beat Comcast, and likely force all ISPs to up their game quickly.
Monopoly on contracts is my issue with purely a state-owned approach. Some well-run countries do seem to make it work though.
the point is that if it were only a gov't service, that ISP would be just as bad as comcast. The problem is not due to it being gov't or not, but due to lack of competition!
Sure, it's just one data point.
Typically, the employees are contractors. Some of them might still be in date for some of their professional qualifications, some of them might be years or even decades from their last professional military refresher. I'm sure they can get by swapping tips and visiting gunranges, but it can't compare to spending nine months of the year on exercise or deployment.
Regulation should determine the minimum number of competitors a market should have (N).
Say there are 5 companies bidding for service (each targeting 1/N of the market).
* 100 for 1/N
* 120 for 1/N
* 125 for 1/N
* 150 for 1/N
* 200 for 1/N
The lowest N bids win, the less expensive winners receive some percentage of the difference between the highest rate and their rate as a bonus. (Which could be 100%, could be 0%, I feel 1/N % is fair)
I also think that N should be targeted based on the type of work. Things which require /many/ bodies, like utilities, construction/repair, etc should favor far more successful businesses within a market. Things that require more substantial investment of resources should be more tightly regulated; vertical and horizontal integration (but not public feedback loops such as 'it would be really beneficial if your processes were nicer for this type of target') should be broken up where-ever possible.
Most crucially the regulating bodies should be thin. They should have extremely clear mission statements. They should also be directly accountable to, and elected by, the public. That process should not have the defects of today's elections, no artificial sub-regional representation and no pre-election filtering of choices (other than, perhaps, a minimum signature requirement to get /on/ the ballot).
Basically we all know the government is not as efficient as the private sector at performing lots of tasks. It turns out the government is especially bad at contracting out large government services.
"America's fetish for privatization promotes rent-seeking"
"Not having single payer healthcare is the single biggest reason we have so much rent seeking in healthcare"
A society with fully socialized means of production is not free of rent-seeking. On the contrary, every single job in every organization in the economy is rent-seeking in that case.
Anyone with experience in Indian public industries pre-liberalization, will tell you.
Human beings in large organizations will often try to act in their own interest as opposed to the organizations interest. It is up to the organization to build up structures and culture to fight this innate tendency in humans.
The problem is, organizational cultures tend to drift over time. Though an organization may be founded small, with a lot of idealism, and selfless workers, in the long run, political players will infiltrate the upper ranks ... you soon see people trading influence for their own benefit.
The worst aspects of this are seen in India still, where people get a job, and then use whatever powers the job grants to extract rents from co-workers, the public, etc.
The market plays a role in preventing this.
The market is the ecosystem which provides predators which hunt and kill the decrepit organizations that have too much rent-seeking behavior internally.
When a government company is full of rent-seekers there is no solution except to wait for some revolution to occur, because its never politically feasible to fire so many public sector workers.
In the case of private companies, unless the government intercedes, an organization that is inefficient and full of rent-seekers will soon be overtaken by spry rivals who focus on consumer benefits.
Let me give you some concrete examples. Have you ever read about how labor and management used to act at General Motors? There used to be jets for the upper level managers. Special dining rooms for them. Separate bathrooms for them. The company was struggling, and the employees (the managers) were giving themselves all kinds of cushy perks.
The relationship between the board and the shareholders was terrible. The shareholders couldn't do anything against management and the workers. In ordinary cases such a company would have gone belly up after shareholders lost faith and committed capital elsewhere. Instead, the government propped up GM with defense contracts, government contracts, and finally a bailout. It was government intervention that allowed rent-seeking by individuals to continue.
It's funny I read comments like yours and feel the same sense of despair. Humanity is weak and foolish, markets make everything right, and even if they don't they'll crush any aspirations to anything else or better. Don't bother with government, don't bother with humanity. Markets markets markets. Socialism bad. Capitalism good. Also anything the government does is socialism and bad and anything companies do is capitalism and good and inevitable.
I won't generalize, though. I will agree that without mechanisms, individuals will play the office game. Two mechanisms in Sweden are "offentlighetsprincipen" - anybody working for a govt job can have their costs/emails/documents/etc examined by other citizens by requesting them (no need to even motivate the request - but some docs are kept secret). "The right to roam" is another one that keeps rent seeking behaviour under control when it comes to property - a billionaire keeping the public off a big beach (like Khosla near the Valley) cannot happen - http://www.mercurynews.com/2016/04/27/martins-beach-appeals-....
Compare to third world countries which have very low trust and high corruption. Bribes are common in every area of life and no one trusts authorities. It's very difficult for any system to function in a culture like that. Just replacing the government or changing to democracy doesn't seem to help that much, because the underlying culture is the same.
> Costs for health and medical care amounted to approximately 9 percent of Sweden’s gross domestic product in 2005, a figure that remained fairly stable since the early 1980s. By 2015 the cost had risen to 11.9% of GDP -the highest in Europe
> According to the Euro health consumer index the Swedish score for technically excellent healthcare services, which they rated 10th in Europe in 2015, is dragged down by access and waiting time problems, in spite of national efforts such as Vårdgaranti
Seems like the effects of socialism is starting to take effect
I could not find much details on public transport in Sweden
So what you're seeing in those numbers is not really "effects of socialism".
Your profile says that you use this account specifically to support conservative viewpoints. You need to try harder than just pick random statistics and proclaim socialism.
So the healthcare quality could be because of privatized healthcare ?
The larger point I'm trying to make is that Sweden is nothing like its Breitbart caricature. It's a very competitive free market economy with a hybrid approach to most social services. Socialism in the early 20th century sense doesn't describe 21st century Sweden.
That's the ideal, but in reality there are plenty of corrupt, inefficient companies - as anyone who has worked in a large company can tell you. Also, there is no ideal free market in existence: Politics always plays a role, and powerful market players dislike the competition of the free market and create barriers to entry and other unfair advantages for themselves.
Even in the ideal, the 'free market' is a great tool but, like all tools it's not a universal one. For one thing, it needs to allow businesses and industries to fail; for another, it distributes goods to those most able to pay. For gaming software, that's fine. For health care, basic housing and food, police protection, and basic communication (the Internet), those are not acceptable outcomes.
> In ordinary cases such a company would have gone belly up after shareholders lost faith and committed capital elsewhere. Instead, the government propped up GM with defense contracts, government contracts, and finally a bailout. It was government intervention that allowed rent-seeking by individuals to continue.
Could you provide some basis for this version of events? As far as I know, which isn't much, GM used its enormous market power to survive; the car industry is hardly an ideal free market.
just only 20 years ago, basic communication (the Internet) wasn't on that list. What amounts to minimum requirements seems to be growing, and can't possibily be supplied indefinitely to people ala basic income.
Communication was; in the U.S., phone service was subsidized for rural consumers, for example. Now Internet is the requirement.
> What amounts to minimum requirements seems to be growing, and can't possibily be supplied indefinitely to people ala basic income.
It's great that it's growing; I want the world and society to advance, not stagnate in the state it was 20 years ago. We're much better off than people 100 years ago (or 20 years ago), and it's on us to pass on that legacy and make sure the people 100 years from now are doing even better.
Income and wealth are growing and have been almost continuously since WWII. The U.S. in 2017 is the wealthiest, highest-earning nation in the history of the world, with ~$90 trillion in wealth and ~$18 trillion in income. Taxes relative to income are at historical lows. The notion of scarcity in public goods is not based on fact; though of course there are limits, we are nowhere near them.
This is a future that capitalism with its self congratulatory 'winners' and survival of the fittest race to the bottom cannot envision or enable.
On the contrary it actively thwarts these possibilities by empowering and creating incentives for a self absorbed minority to sustain a system that benefits the top layer.
Human beings are not a cost, they are an asset.
Someone has already supplied counter examples from Sweden. I will give you one from India. ISRO is a government organization, it operates on shoe string budget as compared to its competitors and still does wonders. Why here isn't a wealthy Indian group(Ambani, TATA etc) spending money on fundamental research.
Counter example is Indian IT sector. Do you see any company investing in anything fundamental. I think this behaviors is a classic example of rent seeking. They are perfectly happy playing the middleman seeking a commission.
In reality most of the private organizations are the real rent seekers. They shy away from anything where making money in short term is not possible. I will encourage you to watch this talk[1]. Private companies just polish and market the fundamental research done at Government organization once its utility is proven beyond the point. IMHO this should be called rent seeking. its akin to building a hotel in an area once Government have build the basic infrastructure.
Take the example of deep learning as it is the hot topic nowadays. Private funding started flowing only when Geoffrey Hinton working for University of Toronto proved the viability of it beyond question.
https://www.ted.com/talks/mariana_mazzucato_government_inves...
> The market is the ecosystem which provides predators which hunt and kill the decrepit organizations that have too much rent-seeking behavior internally.
Is this comment satire? It's seriously so deep in some kind of magic-market-fetishism that I actually can't tell.
If anything, the less several years has shown us that the magic hand of the 'market' is neither effective, nor it seems, even real: as soon as things turn slightly against them, those businesses with the means simply change the game so that it favours them again which makes the argument that 'the market is the ecosystem...kill the decrepit organisations' pretty much moot. Look at Fannie May and Freddie Mac (spelling? I'm not American so I'm not terribly familiar with them) 'too big to fail' they said. Until they failed. And then, instead of failing like they would in a 'real' free market system, they went and groveled so that the Government had to step in and save them. Real good free market system there.
Shall we not bother with firefighting, since the fire only gets worse when you replace the water in the hoses with oil?
In those cases, democratic accountability through the government process is the best we can do, and better than the no accountability that will otherwise happen. Industries where meaningful competition is possible should be privatised, but natural monopolies should be nationalised.
manufacturing - economy of scale.
distribution/communication network effects. hub and spoke.
retail - shopping centers. retail hubs. cities. amazon.
Also, shows like shark tank(while entertaining) give some non-entrepreneurs the perspective that business is a lottery. So many people, when I talk to then about starting a company, they mention some mythical day when I suddenly become rich, and it just doesn't happen that way.
The best definition of money I use is, "money is nothing but a reflection of value you create for other people" -Tony Robbins
i bet many other people use a different definition : "money is the measure of value i extract from other people's production"
Awesome term, explained in a referenced paper[0] as one of the following:
1. A new product.
2. A new method of production.
3. A new market.
4. A new supply of raw materials or components.
5. The re-organization of an industry.
The question, then, would be "what isn't covered by Schumpeterian?" .. rent-seeking only?
[0] http://www.colorado.edu/ibs/es/alston/econ4504/readings/Baum...
Normal businesses that are created for traditional reasons. For example, to partake in a gold rush (like phone apps a few years ago). Or to attempt to get a slice of economic pie, typically in a "perfect competition" market that precludes monopolies. Anyone who produces a commodity by standard methods.
These aren't rent seeking, they are adding fair competition to an (un)established market. They aren't Schumpeterian either, they are more-of-the-same to help the market meet demand. Arguably a rational actor would invest their money in the commodity to allow existing companies to grow, but some people prefer to get their hands dirty instead.
But what are the potential remedies? The article "tragedy of the commons" in wiki mentioned privatization or regulation as potentials solution to "tragedy of the commons". While I am not trying to equate the two terms, I think the solution to rent seeking behaviour deservers more discussion
This kind of solution won't work for all shared resources, but it's at least worth considering: the people using the resource usually know better how to manage it than a centralized government body, and these communities can think longer-term than a market which tends toward short-term exploitation.
What about entrepreneur focusing on raising money for themselves ? Example from this week: https://medium.com/token-economy/the-analysis-filecoin-doesn...
I think parasite entrepreneur will always exist. Before they were selling miraculous potion for hair growth, now they are selling cryptocurrency or promises of unicorn startups.
Question titles like this fall under clickbait. Also HBR is awful...as illustrated by their clickbait titles and fluff for content.
I have never found a counterexample.
https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headline...
Not too hard to find exceptions. IMO it's a pretty worthless law even if only stated for entertainment value. A lot of times a yes-no question, like above, is just used as a low-effort intro to a low-effort article but sometimes a yes-no question could act as a well-thought-out intro to a well-thought-out article. It doesn't take too much experience to understand when a title is just being vague to draw you into a bad article.
I honestly don't understand the point of reporting such "phenomena" in such stilted, euphemistic, academic terms. Every time I read such a milquetoast description of corruption, I'm reminded of this essay discussing the ways in which well-meaning "discoveries" in economics and political science serve mostly as a prophylactic against the immediacy, urgent, and valid claims made in other epistemic registers.
It really feels like some people just don't want to "give credit" to the angry mob for realizing something that eluded them for so long, so they come up with these strange parallel constructions that quantify, and "prove", what was already obvious to everyone else, but in slightly different/more mathy ways, to make it seem like fresh knowledge. However, in doing so, they de-legitimize the ways that other people used to arrive to such conclusions, such as a cursory reading of Marxist literature.
It's such a weird dance.
https://clrjames.blogspot.ca/2014/04/ideas-whose-time-has-be...
It's more than a little conspicuous that an article regarding rent-seeking and the growth of unproductive enterprise over the last three decades fails to once mention banking or the stratospheric growth of financial engineering over that same period.
> such as a cursory reading of Marxist literature.
I never knew Marx was so anti-regulation
"But, in general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade."
Beware of hindsight bias!! http://lesswrong.com/lw/im/hindsight_devalues_science/