From: Robin Hanson (rhanson@gmu.edu)
Date: Fri Jun 09 2000 - 08:57:32 MDT
Below is a description of an excellent paper.
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ARCTIC EXPEDITIONS ILLUSTRATE THE MERITS OF PRIVATIZATION
The benefits of privatization are easy to grasp conceptually, but
measuring them precisely presents economists with many challenges.
Differences in accounting methods, regulations, market environments
and -- most importantly -- bottom-line objectives can make comparing
the performance of privatized companies and government operations as
dubious as comparing apples and oranges.
Fortunately, examples appear now and then making the difference
between the two quantifiable, as economist Jonathan M. Karpoff (Univ.
of Washington) explains in a new study comparing public and private
exploration of the arctic ("Public Versus Private Initiative in
Arctic Exploration: The Effects of Incentives and Organizational
Structure" Independent Institute Working Paper #23).
"From 1818 to 1905," writes Karpoff, "35 government and 57
privately-funded expeditions sought to locate and navigate a
Northwest Passage, discover the North Pole, and make other
significant discoveries in arctic regions. Most arctic discoveries
were made by private expeditions. Most tragedies were publicly
funded. By other measures as well [ship losses, crew deaths, scurvy],
publicly-funded expeditions performed poorly."
Karpoff uses statistical methods to factor out differences in
exploratory objectives, country of origin, leadership experience, and
decade of expedition, allowing him to reach some remarkable
conclusions.
* Government expeditions had a death rate almost 50% higher than that
of private expeditions (8.9% death rate versus 6.0%).
* Government expeditions had a ship-loss rate about 55% higher than
that of private expeditions (32.5% loss rate versus 20.9%).
* Of government expeditions that lasted longer than one year, 47%
were debilitated by scurvy, compared to 13% for private expeditions.
"Compared to private expeditions, public expeditions: (1) employed
leaders that were relatively unmotivated and unprepared for arctic
exploration; (2) separated the initiation and implementation
functions of executive leadership; and (3) adapted slowly to new
information about clothing, diet, shelter, modes of arctic travel,
organizational structure, and optimal party size. These shortcomings
resulted from, and contributed to, poorly aligned incentives among
key contributors."
The bottom line?
"Men died and ships were lost not because of the public nature of the
funding per se, but rather, because of the perverse incentives, slow
adaptation, and ineffective organizational structures that frequently
accompanied public funding," Karpoff concludes.
For "Public Versus Private Initiative in Arctic Exploration: The
Effects of Incentives and Organizational Structure," Independent
Institute Working Paper #23, by Jonathan M. Karpoff, see
http://www.independent.org/tii/lighthouse/LHLink2-21-1.html
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This paper is of course suggestive regarding the benefits of private
exploration of space. It would be interesting to have dollar
estimates for the cost of such explorations, relative to then
current per capita income. That might help us estimate how low
the cost of space exploration needs to fall before substantial
private exploration might begin.
Robin Hanson rhanson@gmu.edu http://hanson.gmu.edu
Asst. Prof. Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030
703-993-2326 FAX: 703-993-2323
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