How Not to Cope with Government Failure

A member of a Google Group to which I belong has posted an article from the Dayton Daily News of September 9. It says, in part, that

The Air Force Institute of Technology has launched an “acquisition center of excellence” to reduce costs and better manage the test and evaluation of U.S. military weapons and programs from the KC-46 aerial refueling tanker to anti-missile defenses, a program leader said.

The Defense Department initiative will partner with 20 acquisition programs worth more than $150 billion across each branch of the military to outline plans to more rigorously test weapon systems and other programs in development….

Loren B. Thompson, a defense analyst with the Lexington Institute in Arlington, Va., said the addition will be “a definite plus” for the Air Force, which has been plagued with acquisition issues such as the recent cancellation and rebidding of an estimated $350 million program to equip the Afghan air force with 20 light attack turboprop aircraft.

The Air Force also has dealt with hypoxia-related issues to the F- 22 stealth fighter program that temporarily grounded the high-tech fighters and later forced the Pentagon to impose flying restrictions for the safety of pilots.

“This (center) will not help the F-22 situation because that is a … very unusual challenge where normal procedures have not uncovered what the problem is,” Thompson said. “But it will certainly help the Air Force get better at obtaining the performance it wants for a lower price.”…

My reaction?  The establishment of the “acquisition center of excellence” is from the standard repertoire of responses to bureaucratic failure: appoint a “blue ribbon” panel, appoint a “watchdog” agency or “czar,” and/or reorganize. Bureaucratic failure is a systemic problem because bureaucracies are not self-correcting. The particular response to a particular bureaucratic failure might rectify that failure, but it is unlikely to prevent or correct the next bureaucratic failure, which will be of a different kind and will crop up in an entirely different bureaucracy.

Markets “fail,” in that individual firms make mistakes, but free markets are self-correcting. Even if a mistake is not fatal to a particular firm, its customers (almost always) will have the option of getting what they need (or a good substitute) elsewhere. And, unlike government agencies, bad mistakes result in the elimination of the entities that make them — unless those entities are bailed out by government, of course.

In sum, the best way to cope with government failure is to have less government in the first place. There is no other preventative or cure for government failure. At the same time, less government interference in markets is bound to make markets more efficient and effective in providing what people want.

If you disagree with me, I advise you to think of a counter-example other than the financial crisis that sparked the Great Recession. That crisis was deeply rooted in government failure. For chapter and verse, see Arnold Kling’s monograph, Not What They Had in Mind.