Public Service Privitization: Ideology or Economics?

Public Service Privitization: Ideology or Economics?

In a February 1993 New York Times op-ed article, a municipal bond analyst for a major security rating service argued that the cure for New York City’s fiscal problems was to force it into bankruptcy and then to massively privatize public services. The writer’s only evidence that this could work was an anecdote about a small Michigan town that did precisely that and reportedly saved massive amounts of money. Leaving aside the possibility that the reported cost saving was nothing more than an accounting fiction, the town in question is so small that it falls within the bounds of statistical error on the census of the nation’s largest city. Yet for the editors and most readers of that day’s paper it was probably the case that neither the idea nor the evidence seemed implausible. Such is the power of conventional wisdom.

New York Newsday columnist Jim Dwyer, commenting upon the influence peddling scandal that arose from the Dinkins administration’s attempt to privatize the Parking Violations Bureau, defended the culprits and chastised those who brought the abuse to public attention. He bitterly observed that these high-ranking public officials were only trying to save hard-pressed taxpayers some money. From his perspective, the scandal was a teapot tempest stirred up by bureaucrats trying to hold on to useless jobs at taxpayer expense. How did Dwyer know that the proposed privatization would actually save rather than cost money? He didn’t. It was nothing more than a presumption based upon conventional wisdom.

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