Month: August 2026

In times of tight budgets, state governments usually cut spending.  Whether the tight budget was self-inflicted or not. One common “cost savings” approach is to fire state workers and eliminate positions; another is privatization of such things as prisons and school busing.

The reasons given for privatizing are usually intended to seem reasonable. Privatizing is supposed to save money, proved higher quality service and reduced red tape. If privatizing did these things, then it would be a good idea. After all, getting better service for less cost and less red tape would be great. In fact, even if privatizing only improved one area (cost, quality, or bureaucracy) then it would be a good thing (assuming it did not make things worse otherwise). However, there is the question of whether privatizing can deliver these alleged goods.

While it is often claimed that privatizing saves money, this does not seem true. While more studies are always needed, the evidence indicates that privatization has tended to increase costs. While supporters of privatization sometimes argue that this claim has not been well studied, this does not prove that privatization saves money.

Intuitively, it is unlikely that privatizing would save money. After all, there is no private sector magic that enables it to do things that just cannot be done by the state. As such, the state could save money by doing whatever would be done by contractors to save money. This would, of course, save the state even more money than privatizing. After all, private contractors need to make a profit on top of what it costs them to provide the service, something the state does not need to do. For privatization to save the state money, the costs incurred by the contractor plus the profit must be less than what it would cost the state to do it. It is not clear how this would be possible without the assumption that the state, as a matter of necessity, must always pay higher costs than the private contractor.

It could, of course, be countered that the state simply must do things inefficiently and in a costly manner. That is, the private sector is just better than the public sector because it is private sector and hence privatizing can save money.

This reply just begs the question by assuming the private sector will be more cost effective than the state and be able to save the state money while making a profit. What is needed is evidence that this can be done. Ideology is, of course, not evidence. As noted above, the existing (albeit limited) evidence is that privatizing is not a money saver.

This is a factual matter. I have no objection to privatization in principle—my objection is based on the evidence that it does not save money. If it can be shown that the only way to save is to go private while also maintaining quality, then I would be for that privatization. If, however, the state can save more money by adopting effective cost savings measures, then that would be the better option. After all, if the goal is to save money, then the greater savings win. That said, it is also important to consider the quality of the services.

As far as quality goes, a stock argument is that privatization is a good idea because it will improve quality.  It is often argued that the state is bad at doing things and hence provides low quality services. In contrast, the private sector is supposed to provide higher quality services (at a lower cost).  While higher quality (at a lower cost) is appealing, there is the obvious question of whether this is true or merely ideological faith. As with the matter of saving money, this is a factual matter.

While people do point to problems with the quality of state services, it is also easy to point to quality problems with privatized services. These can be horrible, as shown by the way the privatized half way houses in New Jersey were run. Paul Krugman provides an interesting analysis of this problem that is still worth reading. And I am sure most readers are thinking “enshitifictaion” and have countless examples of how the private sector industries are making everything worse. As such, the idea that the private sector will simply be better because it is private is not true.

As I argued with savings, unless it is assumed the state is incapable of providing quality service, there is nothing that a private contractor could do in terms of quality that the state could not do. After all, there does not seem to be a private sector magic that enhances quality. In fact, the opposite now seems true.

There is also the obvious point that the private contractor must make a profit, and this usually leads to cutting corners. After all, lowering costs can be an effective way of increasing profits. However, cost cutting usually involves cutting quality and this practice is common fodder for all those news stories about the horrors of quality cutting to save money.  Again, we are in the age of enshitification.

It might be replied that the private sector must have better quality because the contractor must keep the customer happy. However, the people they must keep happy are the same people who would be “customers” of the state. So, if a need to keep people happy leads to good quality, then the state should be subject to this as well. After all, just as unhappy people would change companies (if they could), they would also presumably vote to change the people running the state. Somewhat ironically, it might be easier to change the government than change the companies one must deal with. While the state has a monopoly on power, we (for now) get to vote people in and out of office. In the case of the megacorporations like Amazon, Google, Meta and Apple, we have no role in deciding who runs them or what they do.

I am in favor of what would provide the highest quality services for a reasonable cost. If privatization did this better than the state, then that would be the sensible thing to do. However, this must be based on evidence rather than an ideological view that simply favors the private (or public) sector. 

In terms of  reducing red tape, privatization clearly does not do that. In fact, it adds more bureaucracy.  Instead of two levels (state and state employees) there are now three levels (state, contractor, and employees). 

It might be countered that there will be less bureaucracy at the state level because most of it will be privatized. While this would be true, it does not actually reduce the bureaucracy, it just moves it.

It might then be countered that the private sector is just less bureaucratic than the state and hence it will be able to do the same with less bureaucracy.

One obvious reply is that the private sector has its own bureaucracy. For example, try cancelling your internet service if you have Xfinity or dealing with some other customer support issue. Another is that if the contractor can do the job as well with less bureaucracy, then the state could simply take the same approach—unless, of course, there is a contractor magic that must of necessity be denied to the state.

As with cost and quality, the bureaucracy reduction is a factual matter. If privatization did reduce the overall bureaucracy (rather than shift it) while still being able to provide the same (or better) management, then this would be a gain. However, this is something that must be shown rather than being assumed based on ideology.

Overall, if privatization could save money, reduce bureaucracy and increase quality, then it would be a good idea. However, this is not something that should be accepted (or rejected) because of ideological faith. As it stands, the evidence is that privatization is no magic bullet and makes things worse. In terms of why it is done, it does excel at one thing: funneling public money into private hands.  

 

 

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In the United States, the number of homeless shelters increased in the 1980s due to a variety of factors (mostly Reagan). One factor was a recession which resulted in more people being unable to afford housing. A second factor was a shift away from single room housing. Though limited in size, this was cheaper than the alternatives. Back in the early 1990s, some of my fellow graduate students lived in singles, but these seemed to be (like most graduate student housing) relics from another time. A third factor was the infamous closing of mental institutions and reduction in care for the mentally ill. While proponents of the approach lauded the cost savings, some critics saw it as simply dumping people onto the streets.

In the face of this surge in homelessness religious groups, charitable organizations and local governments increased the number of homeless shelters. The intent was to provide people with a place to stay until they could sort things out and secure a permanent home. This approach does make some sense and did work in some cases. After all, it seems reasonable to infer that people become homeless because of problems (financial, mental and so on) and that once these problems are fixed, then a person will be ready to have a home. Unfortunately, this approach did not prove successful and there are now about 771,480 people without homes.

Fortunately, an alternative approach had a more positive impact. This approach reverses the old approach: rather than “fixing” people so that they are ready for permanent homes, this approach involves getting the homeless into more home-like shelters or permanent housing. Those who need treatment are given treatment and the results seem to have been positive.

While this approach seems to have merit, there is the stock concern that the state funded programs are wasting the taxpayers’ money by supporting free riders. Somewhat ironically, the troubled economic times that increase homelessness also decrease the funding available for such programs and gives some support to claims that scarce financial resources should be better used, perhaps by allowing more tax breaks for the job creators or bailing out corporations whose bad decision making wrecked them. As such, there seem to be two main arguments against funding such programs with state money.

The first is a utilitarian argument. As there is less state money available than what was normal before it is even more important that the money be spent effectively. Putting money into shelters, programs and permanent housing for the homeless would yield fewer positive results than using the money elsewhere (such as deficit reduction, tax breaks for the rich or maintaining infrastructure). As such, the money should be spent in these other areas rather than in addressing the problem of homelessness.

This argument can, of course, be countered by showing that the money spent on addressing homelessness would be less than the cost of not addressing the problem. If this is the case, then the cost argument favors spending the money rather than incurring the costs that can be avoided or mitigated by spending.

While homelessness is clearly bad for the people who are homeless, it is also costly to society. One area of cost is the medical costs of homelessness. On average, homeless people average hospital stays longer than comparable non-homeless people. Also, since homeless people tend to not have insurance, the cost is born either by the state (that is, us) or by those with insurance (in the form of increased premiums).

Not surprisingly, people do become homeless because of medical problems and medical problems are caused or worsened by being homeless. Those who are homeless are more likely to become ill than those who have homes and are more likely to suffer from problems of greater severity. As such, homelessness adds a burden to the health care system, especially the emergency rooms. Addressing the problem of homelessness would help reduce these costs. That said, no doubt some people profit off this problem and they would argue that this is a good thing.

Another area is crime and prisons. People who are homeless tend to spend more time in prison than the non-homeless, especially since the United States tends to address many social problems by criminalizing them. In some cases, they are arrested for “general” criminal activity, but they are often arrested for breaking laws that are aimed specifically at the homeless, such as laws against loitering and begging. That is, they are arrested because they are homeless. While this laws are often pitched as a means to coerce the homeless to go elsewhere and be someone else’s’ problem, they also help feed “customers” into the for-profit prison system.

While prisons can be quite profitable for the private companies that run them, it is expensive to imprison people. The prices vary greatly. For example, a prison stay in California costs $127,788 a year. While those who profit from prisons will not see it this way, reducing homelessness would be a good thing because it would mean fewer people in prison and lower the cost to the taxpayers. Those who profit from prisons will, of course, wish to ensure that people keep suffering from homelessness as long as this increases the chances they are imprisoned. After all, every prisoner means more profit.

A third factor is the cost of emergency shelters, which are the traditional homeless shelter.s These shelters are more expensive than the cost of a permanent residence. As such, permanent housing would provide savings over temporary shelters.

Naturally, it is reasonable to wonder what impact the permanent home programs might have on the cost to society of homelessness. Studies have shown that these do save money, although they do obviously cost money to implement.

Of course, these savings assumes that the temporary shelters would be funded. For those willing to allow homeless people to live on the streets or who want to drive them away to become someone else’s problem, this sort of program would not yield the highest savings. After all, the cost of housing the homeless on the street is nothing. Of course, this would not reduce the other costs associated with homelessness and would almost certainly increase them. After all, people living on the street are more likely to get ill or injured and more likely to be arrested. But, as noted above, these could be profitable features for some or a chance to inflict harm (cruelty is, after all, often the point).

Of course, changing the law so that people can be refused even emergency medical care if they cannot pay and ending all state-funded treatment programs for addiction and mental illness could reduce the medical costs. That is, we could entirely abandon the homeless, other than imprisoning them when they are arrested. Of course, there would remain the question as to whether this would result in a cost saving. After all, the abandonment approach might result in a large enough increase in number of homeless people being imprisoned to offset the savings from abandonment. Naturally, this does not consider the moral cost of abandonment, just the financial cost.

Overall, the evidence does seem to be that providing permanent housing for the homeless would be a cost saver, though perhaps not as big a cost saver as the complete abandonment of a sort worthy of fiends. The second argument is a moral argument or, rather, various moral arguments. One stock argument is based on the idea that we have no moral obligations to others and hence not obligation to help the homeless. On this view, we could provide such support, but we are not obligated to do so.

A second stock argument is that providing such support is immoral because it creates a culture of dependency. That is, by providing the homeless with permanent homes and treatment for any health problems they might possess they are learning to depend on others and will be unable to carry their own weight. While not supporting them might seem harsh, the argument is that this sort of “tough love” will enable then to pull themselves up by their bootstraps. Those who make this argument are often the wealthy who are bailed out by the government when their bad decisions cause their businesses to fail or who are lavishly gifted state subsidies.

While this line of reasoning has some appeal, one obvious reply is that this approach is like responding to a broken leg by refusing to treat it because putting a cast on a broken leg will just make the person dependent on the cast.  As with a broken leg, a person whose life is broken needs support until they can stand on her own again.

One reply to this is that while this might hold for those who will be able to stand on their own, it does not address the problem of those who will remain dependent forever. These people, it can be argued, are just parasites and should not be supported.

I do, of course, agree that someone who is just free riding the system should not be supported. However, the number of people who will intentionally become homeless and unemployed just so they can free ride seems to be rather low (but probably more than zero). After all, most people want to be self-supporting rather than dependent on others. To deny people who need the support to rebuild just because some small percentage of poor people would free ride seems as unreasonable as getting rid of handicapped parking because some people will get a decal for those spaces that they are not really entitled to.  It can also be countered that supporting a free rider in such a program would be cheaper and less damaging than having them free riding on the alternative system.

Another moral argument against providing support for other people is that those being supported are stealing from the taxpayers by having their housing and treatments paid by others. As such, the homeless are morally wrong and we should not enable their theft by allowing such programs. Alternatively, the homeless people could be cast as being pawns used by the politicians who are stealing money from taxpayers and giving it to the homeless. Or, for extra immorality, the homeless and those who enable such support can be seen as being in wicked (or at least misguided) cahoots.

One obvious reply is that by this sort of reasoning we all spend years as thieves. After all, as children we live off our parents (or whoever is keeping is alive), we steal education from the state (or whoever is paying for it), and until we pay enough in taxes to pay for all the public goods and services we use we are stealing every time we walk down a public sidewalk, drive on a public street or go to free a public park. We also steal from all those who have come before us and who enabled us to live in a modern society with technology, medicine and such. That is, we are all beneficiaries of the labor, money and ideas of others. As such, it would be hypocritical to regard the homeless as thieves because others assist them. It would be especially hypocritical of the wealthy who benefit from tax cuts, subsidies, bailouts and government contracts.

The obvious reply is that the non-homeless who do pay taxes (and presumably pay off their financial debt to their families) eventually pay back what they stole (or borrowed) from society when they were young thieves. Of course, the same could be said of the homeless, if they are able to return to society and work, they can repay what they owe to others.

This does not, however, address the problem presented by those who will either never be able to return to contributing to society or who will not be able to repay what they cost society, perhaps because of mental illness. The obvious reply is that it would seem unreasonable to see such people as thieves. It could, of course, be argued that we should be rid of those who cannot support themselves—but this would be a different moral argument than the one based on thievery. And would take us into a monstrous place.

What, then, about people who could return to society but elect to be free riders? That is, their situation is entirely a matter of choice and tomorrow they could pay their own way. In this case, it would be reasonable to regard these people as thieves. After all, they are taking what they could earn by honest labor and there would be (by the scenario presented) no justification for them receiving support. These do seem to be limited cases, unless we consider the wealthy people supported by the public. As argued above, the fact that very few people might exploit something intended to help people in need does not give an adequate reason to treat everyone in such a program as being an exploiter.

Considering the above arguments, providing permanent housing for the homeless seems to be both a cost saver and morally acceptable.

 

 

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The United States has great economic inequality, but the American narrative is that upward mobility is not only possible but the normal order of things. This narrative has many components. One is the idea that each generation will (or should) do better than the previous. Another is that individuals can use their talents, gumption and a bit of luck to rise from humble beginnings. This general narrative is typically accompanied by specific anecdotes, such as the popular tales of Steve Jobs, Bill Gates and Mark Zuckerberg.

While narratives and anecdotes can be interesting, they are not a substitute for evidence. After all, anecdotes can and often are about cases that are unusual rather than what is supported by statistical evidence. This is why there is a fallacy called anecdotal evidence. This fallacy is committed when a person draws a conclusion about a population based on an anecdote (a story) about one or a very small number of cases. It is also committed when someone rejects  statistical data supporting a claim in favor of a single or small number of examples that go against the claim.

Unfortunately, the United States is a high inequality and low mobility country. Years ago,  Esmé Deprez appeared on CNN to discuss a Bloomberg report on this fact and other researchers have been discussing the matter for some time. Since then, things have only gotten worse.

42% of the men raised in the bottom 20% income remained there as adults, which matches poorly against Britain (30%) and Denmark (25%). 8% of the men in the bottom 20% were able to reach the top 20% while this rate was 12% in Britain and 14% in Denmark. 65% of those born in the bottom 20% stay within the bottom two-fifths. Of those born in the bottom 10%, 22% remain there. In Canada, the number is 16%.

The news is, as always, better at the top: about 62% of those raised in the top 20% remain in the top two-fifths. For those in the top 10%, 26% of American men born there stay there. Canada fares worse here: only 18% of Canadian men born into the top 10% remain there.

This mobility from income class to income class is relative mobility.  It is relative in that the movement is defined relative to the person’s class of origin. So, for example, someone born in the bottom 10% who moves on up to the top 10% would be upward relative mobility.

Another type of mobility is absolute mobility. This measure involves a comparison of incomes rather than economic class. Looked at in terms of absolute mobility Americans seem to be doing well: back in 2012 81% of Americans had a higher income than their parents because the United States was richer in 2012 than it was earlier. This is, of course, changing and we are seeing the youth on track to make less than their parents.  No conversation about economics in the United States would be complete without mentioning the middle class, which is said to be vanishing.  

As far as why the United States has limited mobility (especially upwards), this is a matter of dispute tainted with competing political ideologies.

Years ago, Rick Santorum claimed that the poor in the United States are more likely to be raised by single mothers relative to other countries. This is taken by some to be a factor in the lower mobility and as something to be utilized as a premise in arguing in favor of the traditional family.

Another factor is that the United States leads the world in the percentage of its citizens who are in prison. Being imprisoned is a major economic impediment that impacts the rest of the person’s life. As such, the high incarceration rates reduce economic mobility by trapping people in poverty. This seems intentional, so is a feature of America rather than a bug.

A third factor is the great economic inequality in the United States such that the distance between economic classes is large. To use an analogy, the lowest economic class starts out at the base of Mt. Everest while the top class begins at the summit. Working up from the bottom or even in the middle requires a significant change in income and wealth.

A fourth factor is that the economic playing field is obviously not level. Some people have great advantages (such as starting wealth, family connections, political influence, and race). To use a sports analogy, moving up is like running a marathon in which some people start at various miles along the course, with the poorest starting at the very beginning and the rich starting miles closer to the end. Catching up to folks who have such a huge lead might not be impossible, but would at best be very difficult.

One advantages people have is education, which is one of the many reasons the Republican party has been focused on this area. While people in the lower classes can attend college, this is more difficult in terms of paying, being prepared (wealthy areas tend to have the best K-12 schools while poor areas have the worst), and having the connections needed to get into the better schools. The trend is to cut public education spending that benefits the lower classes which hurts poorer families more than wealthy families and this will lower mobility.

A fifth and controversial factor is unionization. While the fantasy narrative of the right is that unions are job killers and economy destroyers, lower rates of unionization lead to lower wages and reduced benefits, thus reducing the ability of workers to work their way up. Interestingly, the lowering of wages is sometimes seen as a good thing since it increases profits and it is claimed that this leads to more jobs. However, some see the creation of more lower paying jobs ass less than ideal.

A sixth factor and one that might seem odd is the obesity epidemic in the United States. While the exact impact of modern obesity will not be known for some time, it is known that being obese increases health care costs and generally has a negative impact on success. Some of this impact is due to the health impact of obesity that can cause a person to miss work and be less productive. Weirdly enough, the United States might be less mobile because of obesity.

 

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