A Price Based Case for Privatization

While the government typically enters into various industries with the goal of bettering outcomes for citizens, the industries they enter often become damaged in ways they never predict. People often resent the higher level of government control theoretically, but even from a consumer welfare perspective most government industry entries leave much to be desired. While every industry has felt the heavy hand of government involvement, a few stand out in just how controlled they are. The result of government interference in these industries has deeply damaged the well-being of the American people. Government interference in higher education, most notably through FAFSA, has shifted school’s pricing methods, and created far worse outcomes for students. Intervention in healthcare through Medicaid and other support programs has driven up healthcare costs. A desire to help homebuyers has made them far worse off in the long run by letting licensing become a prohibitively high cost for new building. These industries and countless others should be allowed to step towards private conversation for the good of American citizens. 

More than almost any other industry, the sticker price for college has made a rapid ascent. The Federal promise to help with students’ financial aid was created in a world that had little understanding for the profit-seeking tendencies of universities. The rapid increase in college sticker prices was not matched by the increase in what students had to pay. For the most part, the tuition increase was being foisted onto taxpayers. Price discrimination is not wrong, but universities managed to price in such a way there was almost no welfare pass-through of government aid to the students themselves. Although If we were to insert government aid into a competitive university pricing system there would be better outcomes for students, the reality is that prices simply shifted up to account for this new pool of available government aid. Both poor and rich students now have to pay much more for college than they did in the past, and billions of dollars of tax revenue are masking the slow decline in performance of universities. Even with government support at the expense of their students, many universities have shut down in the last 15 years, signaling that their distorted understanding of their financial situation given by government intervention was simply too much to bear. Particularly due to their role as purveyors of ideas, universities should free themselves from government bondage, and stop taking advantage of their students by becoming truly private and rejecting government money. Pandora’s box has already been opened, but any step away from government control will have outsize benefits.

The damages of government interference in healthcare have been widely documented. Liability to directly charge the government for whatever services those on welfare need has rewarded unscrupulous hospitals and care providers. The strictness of in-market networks means that people cannot meaningfully escape poor care or doctors. If one is evaluating the market from a traditional, perfect competition perspective, having customers that truly cannot leave makes everything else obvious. The declining care standards and increase in prices should only raise surprise in the fact that it has taken so long for them to get this high. The incentives are horrific for consumers when compared to a free market solution. Government involvement in healthcare must be greatly reduced if prices and quality of care are to be reset such that they will be both realistically affordable and further from the nightmares of socialized countries like Canada.

While it’s easy to proclaim about a housing shortage and the high cost of living, politicians haven’t made any significant moves towards the simple solution at the heart of it all: reduce zoning and building regulations. While individual communities have the right to set standard standards for themselves, the externally imposed restrictions put on by states or the federal government have done little but increase prices for people who would do anything for affordable housing. Even with supply chain disruptions and modern higher standards of living, construction would still be going on at a far faster rate than it is today if it weren’t for the constant barriers of legislation. Tens of thousands of dollars and countless hours must be set aside to deal with the dictates of the building code and zoning, particularly in states like California. State and federal governments need to take their hands out of building codes, and enable the private market and local governments to make more of the relevant decisions in housing. This is a direct example of a problem created and perpetuated by the government that could be solved almost instantly if privatized. .