This short series looks at why some services or products are delivered by the private or public sector. It also considers the ways in which the public and private sectors provide different forms of accountability. In Part II, we looked at markets and competition as the way that the private sector provides accountability.

Part III focuses on the public sector. Have you ever asked why some services are in the public sector? Have you ever thought whether it makes a difference whether a service is private or public?

Below are some answers.

In a March 27, 2005 Denver Post editorial, Wise use of taxpayer dollars,
Steve Hogan, executive director of the Northwest Parkway Public Highway Authority, said:

The public highway authorities that run toll roads should have their primary obligation to their customers and to bondholders, not to officeholders, voters or taxpayers. This is accomplished by running an authority like a private business, paying attention to spending and protecting investors. Dollars are put where we need them to maximize revenue and make a whole project work. For example, on E-470, Parker and Douglas County don't demand that tolls collected at Plaza A have to stay around Plaza A - they cooperatively allow the Brighton sections of the road to get the benefit from those tolls.

This statement is a hodgepodge of poorly thought through ideas that do not add up to the conclusions Hogan wants to reach. Here’s why.

Public goods

Recall that in Part I, Professor Moshe Adler said that history explained why some services are public. Adler says that corruption in the running of some vital services meant that the only way to provide them was for government to do so.

There is another reason besides bad experiences. In some cases, if government does not provide a service or good, no one will. This happens with what we call public goods. Steve Hogan said that “toll roads are more like a private sector product than a public sector service.” He did not explain what he meant by this, but, in any case, he is wrong. Roads are an example of a public good.

Something is a public good when it is impossible to exclude others from the benefits of what you have created. Street lights are an example. If I put up a street light in front of my house, I cannot exclude other people from using it. Vaccinations are another. If I am vaccinated, not only do I benefit, but so do others because there are fewer of us who can catch and spread a disease.

Something typical of public goods are that they lose value from being disconnected from a system. Roads are a classic example. I can put in a road in front of my house and exclude others from using it, and so can all my neighbors, and so can everyone in the country. But if we all do this, none of us can travel anywhere. Whenever anyone tries to bar traffic on their slice of a road, the system is less useful. Roads only have value when they are part of a system.

This goes for toll roads as well. If Colorado’s E-470 had no connections to any other road, it would be an extravagant toy. In fact, the basic reason that the cities and counties around E-470 agreed to their covenants not to compete seems to have been because if they did not, E-470 would literally pass them by. In other words, this was about where interchanges - entrances and exits - would be built. See Roads Scholar story.

So Hogan is wrong when he says any road, including a toll road, is more private than public. Roads are a public good.

When he says this, Hogan seems to be thinking that anything that has private money invested is automatically private

Even the Market is not Private

Privatization proponents talk of The Market as if it were a part of nature, created by God. But this is not the case. Markets are socially constructed institutions. We create markets through social customs, through laws such as contract law or corporate law, and by providing enforcement mechanisms, such as courts, police, and jails.

As with all social institutions, markets are prone to failure. The truth is that markets depend on rules and regulations if they are to operate effectively.

So even if it were possible to operate more efficiently with no rules other than competition, values other than economic efficiency also matter. This makes it is reasonable to trade-off some efficiency in order to secure other values, such as fairness and honesty. Put another way, how long can a market function if no one can trust that they will not be cheated?

Public accountability

It is easier to see accountability and regulation as a cost, rather than a benefit to the public. Regulation and oversight slow decision making and narrow the range of options. However, if government services are provided by a democratic government, their delivery should be infused by democratic values, such as voice, due process, equal protection, inclusiveness, and checks on the improper exercise of power – processes that are slow decision making.

Many of the tools we the public have to hold government accountable come from our Constitution. These include rights to fair treatment provided by due process and equal protection. Others come from statute and force open government decision-making so we can see what is happening and affect what is done. These include Freedom of Information and Open Meetings Acts. Still other laws put up barriers to shield public employees from inappropriate pressure and keep public employees from being beholden to special interests. Examples are civil service and whistleblower laws.

Yet other laws allow the People access to the democratic decision-making process.

While Hogan rail against these laws as bureaucratic Red Tape, the reality is they are drawn from the core of our democracy. They are what protects us from tyrants and petty thieves - the very sort of people who would love nothing more than removing these protections and giving them free rein to prey on us.

• colorado
• e470
• privatization