The Green Report

This\’ll be interesting:

More than £6 billion could be shaved from public spending by eliminating wasteful state spending on mobile phones, stationary, photocopying and empty office space, one of the country’s leading businessmen has told ministers.

Assuming that this precis is correct we\’ve got two things going on here.

The first is Friedman\’s four ways of spending money:

There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income.

We\’re at stage three here and as we know, that doesn\’t lead to particularly efficient use of the money being spent.

And of course companies are subject to exactly the same problem: over there we often call it the principal/agent problem.

But a company is subject to a pressure that a bureaucracy is not. The desire to make a profit. Which means that there\’s a constant pressure to be shaving pennies here and pennies there in order to boost that bottom line. Those myriad little efficiencies which, when added up, lead to the continual improvements in productivity that we see.

And we\’ve also got a method of dealing with those companies which don\’t do this: bankruptcy.

Be interesting to see what the whole report says later in the day.

3 thoughts on “The Green Report”

  1. So “constant pressure to be shaving pennies here and pennies there” doesn’t exist with government? Hmm, try telling that to George Osborne.

    Perhaps don thinking cap, before applying fingers to keyboard?

  2. Nick,

    And I was thinking that the pressure applied by Georg Osborne was disruptive compared to the previous situation…

  3. Problem Mr Green will face is in your blog
    https://www.timworstall.com/2010/10/11/from-the-bureaucracy-for-the-bureaucracy/

    Mr Green will report on what he thinks can be done.

    Mr Osborne will direct the Permanent Secretaries et al to get things done.

    A bureaucracy will become responsible for this.

    That bureaucracy will not have profits to measure its success by.

    The bureaucrats will not understand or be willing to consider opportunity costs so will go around directing cuts to costs of acquiring, maintaining, running or replacing-with-more-efficient technology. Relative labor costs will increase for that reason.

    And, as you say
    “It’s a commonplace that the motivating reason of most bureaucracies is the survival of the bureaucracy”

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