That there is a Pavlovian dog: Obamacare and mismatched incentives
This one ought to go down in the annals of “You just can’t make this stuff up,” but sadly when it comes to the twisted rewards system innate in government, this is more the rule than the exception.
Recently the Daily Caller reported that the very firm responsible for the disastrous roll out of Obamacare was awarded six more contracts by the administration’s Centers for Medicare and Medicaid Services AFTER the massive flop of a launch! Yes, you read that right… AFTER!
In the private sector, businesses and individuals are rewarded for doing more with less. The company that is able to provide a better product that costs them less to make will be able to charge less than the competition and will sell more. Win!
Individuals that are able to accomplish more in less time or with fewer resources tend to get promoted, get raises, bonuses, more responsibilities. Win! Their behavior gets rewarded, so they do more of it. The incentive system focuses them on being more efficient, accomplishing more with less.
The company that is able to generate greater returns for investors with fewer resources is rewarded with increased investor interest, lower borrowing costs, (as they’ve shown they are less risky) and better talent shows up on their doorstep, wanting to be associated with such a successful organization, (think Google).
These normal human desires, when expressed in the public sector, get seriously wonky. Bureaucrats publicly state with great pride that some societal ill is a serious problem and they are going to marshal their resources to address it. Fantastic. We’d all like to see a lot less of whatever ill is the flavor of the week. Who could possibly be against that? So now all these well meaning sorts get together to work on the problem. They come up with a budget to address the issue over the next few years and off we go.
Except unexpected things happen along the way, as they always do, and we can’t quite get this addressed the way we originally planned. The easiest solution would to just get more money. In the private sector, getting additional funds takes a lot of work, is time consuming and in the end may be impossible. In the public sector, just whip up some stories that pull at the heart-strings and what politician can risk appearing heartless? More funds are granted and government spending goes up. If the plan actually starts to work, now we have to worry, as how do we justify our salaries? The budget we control? Ah ha, scope creep! Now we need to expand into yet another area that is in “crisis” and probably need a bigger budget too while we are at it.
In the private sector, more funds are awarded when you prove you are able to accomplish your goals. In the public sector, more funds are awarded when you can’t accomplish your goal as originally planned. In the public sector, the greater the problem, the harder it becomes to solve, the larger your budget.
The private sector pressures individuals and organizations to be efficient with the resources, (money and time) that is invested in them. The public sector rewards ineffectiveness with bigger budgets and greater scope … because clearly now that I look at it, this problem is just so much bigger than I originally thought!
Bottom Line: In the private sector you always have to answer to someone for what you are doing with their money, which keeps the pressure on. In the public sector, there is no such pressure, so the reward system is no longer tied to effectiveness and taxpayers in the end pay too much for too little.
