Center for Limited Government Newsletter – January 13, 2011

1. How Government Should Do What It Does

By Ed Robinson

The Center for Limited Government newsletter for November 2010 established criteria for when governments should enact laws or regulations. In sum, a government should do only those things which: (1) are permitted by its charter (such as a federal or state constitution); (2) must be done by someone (in other words, aren’t optional or in any way a matter of choice); and (3) can only be done by government (for example, passing and enforcing criminal or environmental laws).

This recommendation was based on the belief that, in general, less government is better than more government, and also on the near-universal agreement that governments are generally not very effective or efficient in what they do.

In response, our son then asked me if this prescription should apply to public K-12 education. After all, government is not the only body that can provide education, though it does provide the great majority of K-12 education in this country. It is a great question, and one that allows us to explore another aspect of advocacy of limited government.

The first issue is philosophical: Should the government be the provider of education? On this topic, reasonable people can certainly differ. Those in favor would, among other things, point to the importance of education and argue that its standards and provision shouldn’t be haphazard. They would also probably argue that the poor shouldn’t be excluded from the same education available to everyone else. The naysayers, on the other hand, would likely argue that most parents are perfectly capable of grouping together to figure out what’s needed for their children. Further, they might point out that financial issues can be dealt with separately from control of the educational process.

This philosophical debate is important, and it will take time to flesh out. So let’s assume for now that government should both mandate education and control its standards as the only entity that can successfully do so. The question then becomes: How shall that education be provided?

This question suggests another operational statement for government: When it is reasonable to do so, the government should set the standards and the enforcement techniques for whatever service or regulation it is trying to provide, then let the private sector compete to provide those services while meeting the governmental standards.

In some areas, this competition will be for a monopoly contract that comes up for competitive renewal periodically, as in the production of some military hardware. In other areas, this competition will be multiple providers all offering the service, with the customers choosing whom to use, and the government monitoring efficacy and compliance, as in the way that many states monitor automotive emissions.

What is the advantage of this approach? Most importantly, it allows the government to dictate the critical terms for services deemed necessary for it to provide, while also allowing citizens to benefit from the better service, greater innovation, and lower costs that result when the private sector competes within itself to win and keep customers and business.

This approach can also lead to much smaller governments and a more thriving private sector, with less favoritism shown for political gain. Think how much better off we would be if the federal government simply set and monitored emission requirements, rather than mandating that ethanol be used in automotive fuels, which is an expensive and ineffective “solution,” although it does please many corn farmers (especially Iowa primary election voters).

It should be noted, however, that the small-government advantage of this approach will only materialize if it is pursued reasonably and with care. For instance, a government contracting process without proper accountability measures can be abused by politically savvy businessmen to limit competition or steer lucrative contracts to themselves and their friends – breeding corruption instead of good government. But for the sake of brevity, an in-depth discussion of this important issue will be left for a future newsletter.

Going back to our starting point – education – this approach would mean that governments should set the broad standards governing who should attend schools and what should be taught, while allowing competition over the specifics. Governments should also establish the means of testing adherence to those rules and should decide how education is to be paid for. Then, governments should let providers compete to provide the actual schooling.

If this approach were adopted, it would obviously require a transition period to move from the current government-run school system. But states and municipalities could all figure out their own answers for how to achieve those transitions, which should lead to lots of innovations (some good and some bad) from which everyone would learn and further adapt.

As in the November newsletter, Sutherland isn’t contending that government is bad or unnecessary, but rather that both the body politic and its elected representatives should recognize government’s strengths and inherent limitations. Then they should try to accomplish governmental goals in the manner most likely to bring effective and efficient results, and that will more easily adapt over time through competition and citizen choice while still achieving the mandated governmental goals.

The author, Ed Robinson, has been a financial adviser to corporations, a senior executive and a management consultant. Prior to retiring in 2006, he operated Robinson Partners, consulting CEOs on corporate strategy and mergers and acquisitions. Before that, he was an executive vice president of Texas Commerce Bank (later Chase Bank of Texas and now JPMorgan Chase), where he ran the investment banking business, and then created and ran The Private Bank; was an executive director at Azurix, an international water utility business, responsible for corporate strategy and M&A; and was a managing director at First Boston (now Credit Suisse), running the firm’s Los Angeles office and the regional M&A practice. Mr. Robinson has a B.A. from the University of Michigan and a J.D. from New York University School of Law.


2. City Website Transparency report makes headlines

Several cities took note of their rankings in Sutherland’s recent report on city website transparency, Grading City Government Transparency, and its companion chart, Utah City Transparency Scores. The Salt Lake Tribune also reported on Sutherland’s findings. For more information, see these links:

Sandy City: Sandy Receives A- for Transparency on Website 

From Where I Sit – In South Ogden, Utah: South Ogden City gets a … 

Provo’s Website Rated Among the Best in the State

Campbell: City Web sites are not clear windows into open … 

City web sites get mixed reviews for transparency