Don't ignore inefficiencies in private sector, either

There is a great deal of truth in the increasingly popular sentiment that the compensation levels for government employees have become distorted, more so during this Great Recession. But such distortions are prevalent in the private sector too.

I do not mean to deny the problem in the public sector. My graduate school professor, who has semi-retired now, often joked that he became a libertarian because of his experiences when working as a student intern with the Los Angeles County government — and this was 40-some summers ago.

In my own experience as a student intern and later as a full-timer with different government agencies in California, I did encounter employees who did not seem to be delivering service that was equivalent to their high salaries. In the decade since I returned to academia, one of my former employers has practically doubled the number of people on its payroll.

But such issues are not only a characteristic of the public sector; they plague the private sector as well. When it is a small business, like the one my neighbor owns, it is quite easy to maximize efficiency. But as organizations get larger (much to our displeasure as consumers and taxpayers), wastes do arise. Various forms of economic inefficiencies, of which compensation levels are one, are characteristic of large organizations — private, public and even nonprofits.

Academics and management experts have been studying these issues for a long time. A fellow graduate student — also from India — did his doctorate in "organizational behavior" and focused on such inefficiencies. The interesting irony was that until we met in Los Angeles as new graduate students, we didn't know that we had worked for the same employer in India, Indian Oxygen Limited, after which, naturally, we shared many jokes about the wasteful practices at the firm.

Perhaps it is easy to go after public sector compensation because it is the metaphorical fruit lying on the ground. But, while bending down to pick these up, are we overlooking far plumper fruits in the private sector?

A typical argument for ignoring the inefficiencies in the private sector is that options exist for us consumers, while as taxpayers we have no alternative but the government, which is a monopoly; i.e., if we do not like, for instance, a multinational company's wasteful approaches, then we can stop patronizing that business and move to somebody else. However, as we find with the oil companies, there is rarely a difference between large firms, which means that there isn't really a choice for us consumers — it is tweedledum or tweedledee.

Finally, looking at inefficient resource allocations within my own world of higher education, I would rather that we target first the ever-increasing expensive spending for athletics. It is not even news anymore that often college coaches earn far more than corporate CEOs.

But this is a losing battle. After all, even my left-leaning faculty colleagues love sports to the extent of organizing betting pools during "March Madness." I suppose we are stuck with inefficiencies that we don't like!

Published in the Statesman Journal, August 14, 2010

Update: In addition to the comments in the newspaper's page itself, the following is a verbatim copy/paste from a university email (I have "x"ed out the name) in response to my op-ed:

Dear Colleagues:  I invite you to read the latest editorical by Sriram Khe which appeared in the Statesman-Journal on Saturday (8/14/10).  It is in the Mid-Valley section as part of the regular editorial page.  It is about "inefficiencies" in the public and private sectors, although the term is never defined.  He refers to the inefficiencies in higher education particularly manifest in collegiate athletics.  Now we all know about excesses and corruption in intercollegiate sports, especially at the Division I level.  But the editorial gets better and the author makes an interesting claim.  Khe asserts that his "left-wing colleagues" who run "betting pools during March Madness" are somehow part of the inevitability of inefficiencies in higher education.  I presume that this means that if his colleagues are college basketball fans and participate in a division betting pool, then we either support or are oblivious to inefficiences in higher education.  There are many possible responses to this preposterous assertion.  Let me suggest just one.  My "left-wing" colleagues and I are all serious and at times even severe critics of excess and corruption in all levels of sports.  Most of this occurs at Division I and involves the intrusion of commercial capital, particularly in the form of television contracts.  This has nothing to do with intercollegiate sports at WOU, a Division II program.  At WOU, intercollegiate sports is used to recruit student-athletes and train teacher-coaches for mostly public school systems.  Does this sound inefficient to you?  Most student-athletes at WOU are not on scholarship and participate for the love of sport and as part of their future educational goals.  Does this sound inefficient to you?  So where is the "inefficiency" connection between sports at WOU and left-wing faculty participating in a ritual of March Madness??  You probably know that President Obama is also a college basketball fan and also participated in a "betting pool."  I wonder if Fox Television (Glenn Beck!?) will follow Khe and accuse President Obama of fostering inefficiences because he is like the "left-wing" faculty in Social Science. 

All the best, Comrade Bxxx