PRIVATE-PUBLIC SECTOR MIX IN THE ECONOMY
A message from Uwe Reinhardt, Ph.D., James Madison Professor of Political Economy, Princeton University:
Don:
I have just posted this message on the course website of my course in first-year economics. I'll e-mail you Paul Krugman's piece.
Sun, Sep 16, 2001 --
As part of this course, I shall from time to time link our course website to news articles or commentaries that are relevant to this course.
I have just posted there a commentary by my colleague Paul Krugman on the issue of the private- and public-sector mix in an economy. A vulgar theory with much political traction in this country is that "government" is a state apart from the American people, from which it follows that reducing government spending is always a good thing and that it is always better to let the private sector handle any chore rather than turning it over to that alien entity, our government. You can be very popular at country-club cocktail parties around the country by spouting this simplistic (and erroneous) theory. You can also hear it recited, time and again, by certain talking heads on TV.
In his commentary, Professor Krugman highlights the price we pay for such shoddy thinking. Properly trained economists appreciate that the private sector has a comparative advantage in the production and management of many functions, while the government is better at producing and managing other functions.
Ironically, you now hear even ultra-conservative commentators on TV demanding that airport security in this country be "federalized," that is, be made part of the civil service. They also, of course, ask that another government agency, the US armed forces, bail us out of our current predicament. Coming this late in the game, it is a sad irony to hear such talk from government's visceral critics.
One objective of this course is to make you more thoughtful citizens than the many vulgar "thinkers" (to use the term loosely) who believe that government is not part of us (and we part of it), but who think instead that government is an alien force that takes things away from us--either our money or our freedom. If you pay attention in this course, you will not need a major tragedy to understand the proper roles of the private and public sectors in a well-run country. We shall come back to this theme many times in this course.
Paul Krugman's opinion article: <http://www.nytimes.com/2001/09/16/opinion/16KRUG.html>http://www.nytimes.com/2001/09/16/opinion/16KRUG.html
Comment: Although Professor Krugman's article discusses the role of government in relation to the tragedies of the past week, all of us concerned about health care reform will understand the extrapolations to our health care system. Although the private sector health care system functions well when accessed, a publicly administered universal health insurance program can assure that access.