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Wednesday, September 21, 2005

Intelligent Design Economics

I wrote recently about why I think that it's unlikely that the federal government will ever be able to do a good job leading natural disaster relief efforts. Just today, I've noticed that Arnold Kling is in the middle of a series of essays at Tech Central Station about the same subject. The first essay, titled A Challenge for Brad DeLong, (Brad DeLong is an economist at UC Berkeley) points out that economists like DeLong seem to believe that:
An Intelligent Designer can create policies, programs, and organizations through legislative fiat and top-down administration that operate effectively in a centralized manner. Government agencies and bureaucracies are like highly-tuned cars, needing only good navigators and drivers to race them to their goals.
Kling believes the opposite as shown by his following statements:
Large organizations, in the private sector and the public sector alike, are inherently dehumanizing to employees, clumsy, inflexible, and unable to handle sudden new challenges. In addition, public sector organizations are hampered by political constraints and the stultification that comes from the absence of competition.
Kling also echoes my sentiments that the people screaming most loudly that government failed in the wake of Katrina are the same people screaming for more government:
For the most part, however, believers in Intelligent Design are impervious to empirical data. The more government fails, the harder they want to try. If public education performs poorly, then spend more money or impose more centralization in the name of "No Child Left Behind." If Medicaid fails in its mission to ensure good health care for people on low incomes, then expand it. If pork-barrel public works projects contributed to the catastrophe in New Orleans, then appropriate billions for pork-barrel public works projects as "relief."
Kling's latest TCS column is the first part of a two part essay about the inherent conflict between planning and improvisation within in an organization. Large organizations must excel at planning (since they are unable to improvise well), while smaller ones must excel at improvisation. Regarding natural disasters, there needs to be some of each.

This essay sets the stage by beginning to explain why huge private enterprise organizations such as Walmart seem to be so far superior to small decentralized competition even though, according to Kling, large organizations are clumsy and inflexible:
Large organizations exist, in spite of their awkwardness, because they create or exploit economies of scale. Wal-Mart built an efficient, globe-spanning logistics system, which can bring the right products from the right suppliers to the right stores at the right time. It turns out that in comparison to smaller retailers that lack such a logistics system, Wal-Mart is able to operate with much lower costs. This scale economy offsets what would otherwise be the organizational disadvantage inherent in Wal-Mart's sheer size.
The next essay promises to discuss "how military operations, disaster planning, and many other government functions are necessarily caught between the two extremes" of planning and improvisation.

I'm looking forward to it!

1 comment:

Howard said...

saw this - looks interesting