The recent financial meltdown should have made it abundantly clear that the "watchers" were in fact not watching
That's true, but it's a very specific example that has a clear explanation in two parts, those being the government and the private sector together creating the problem.
First, there was the government (e.g., Barney Frank's efforts) that was forcing industry to accept risks that industry would have avoided under more natural market conditions. Second, forced to absorb those risks, industry experimented with ways to mitigate and dissipate that risk -- but the experiment failed badly.
It showed that nobody knew how to properly model the situation -- neither the regulators nor the industry. And for that reason, it's not really an instructive lesson to draw conclusions about industry. We've learned those particular lessons now, so you shouldn't see this repeated again.
Shareholders do not watch companies for waste, they just watch the stock price
That is patently absurd. It's not even true for any responsible individual investor, but for any fund manager that would be outright negligence -- and then the yields of his funds would tumble, and even the stupidest of individual investors would throw him out on his ear.
By contrast, I offer government idiocy, programs that have blatantly failed by any objective measure, yet continue to be money black holes. Consider public education, and the war on (some) drugs. Both actively damage society, and waste uncountable sums of money in doing so.
In many cases government agencies are better managed than corporations of an equivalent size; there are usually better internal auditing and fraud controls in place
Citations, please? Here are some counters: Aside from my examples above, consider Medicare, a well-known money pit that politicians have said they'll clean up for years if not decades. Indeed, government does all it can to prevent us from seeing the depths of its waste. I have a friend here in NJ who works tirelessly to uncover government waste, and the reason it's such a big job is the constant resistance to the use of open public records laws.
"'According to some estimates we cannot track $2.3 trillion in transactions,' Rumsfeld admitted. $2.3 trillion -- that's $8,000 for every man, woman and child in America."
-- CBS News, 1/29/02, U.S. Secretary of Defense raises evidence of government, military corruption
"A GAO report found Defense inventory systems so lax that the U.S. Army lost track of 56 airplanes, 32 tanks, and 36 Javelin missile command launch-units. When military leaders were scrambling to find enough chemical and biological warfare suits to protect U.S. troops, the department was caught selling these suits as surplus on the Internet 'for pennies on the dollar.'"
-- San Francisco Chronicle, 5/18/03
"The Defense Department spent an estimated $100 million for airline tickets that were not used over a six-year period and failed to seek refunds even though the tickets were reimbursable."
-- New York Times, 6/9/04
It's funny you mention Medicare, since it's actually more efficient than most private insurers when measured by fraction of revenue spent directly on patient care. The reason Medicare is a money pit is that it pays for expensive care for a huge population of elderly people,
Many people say this, but it's simply not true. The numbers miss crucial information, and I'll explain why. The reason that I've got this knowledge that isn't widely known is that my wife works for a hospital, where she is the "Manager of Budget and Reimbursement". That means that half of her job (and that of her department) is to secure reimbursement from Medicare (and Medicaid).
If you're sharp, you'll already see where this is headed.
The problem is that Medicare, while not quite a monopsony, is so large that they can call the shots pretty much as they like. Where other healthcare insurance providers (say, Aetna) still exist, Medicare's market share -- and thus power in the market -- is many times larger than the biggest of them. That being the case, Medicare can largely dictate unilaterally the terms under which it's willing to pay out. And that is the very raison d'etre for my wife's department.
So while other providers show greater expenses for administrative costs, Medicare's own expenses for the equivalent is far lower. But that doesn't mean that, in the larger picture of the patient's care, these expenses are not being incurred.
Medicare's size and market power allows them to demand that providers (e.g., my wife's hospital) offload a huge amount of the administrative costs, doing much of what ought to be Medicare's own work (by comparison with what's done by and for other carriers) for them. This means that while Medicare isn't paying directly for it, the administrative expenses are still incurred in the course of patient care; it's just that the costs are hidden from Medicare books, and must be amortized across the rest of the hospital accounting.
This means that half of the expenses the hospital pays for my wife and her department are really Medicare expenses, but don't show up on Medicare books -- instead, they're amortized as a fixed expense across the whole hospital.
That's true, but it's a very specific example that has a clear explanation in two parts, those being the government and the private sector together creating the problem.
First, there was the government (e.g., Barney Frank's efforts) that was forcing industry to accept risks that industry would have avoided under more natural market conditions. Second, forced to absorb those risks, industry experimented with ways to mitigate and dissipate that risk -- but the experiment failed badly.
It showed that nobody knew how to properly model the situation -- neither the regulators nor the industry. And for that reason, it's not really an instructive lesson to draw conclusions about industry. We've learned those particular lessons now, so you shouldn't see this repeated again.
Shareholders do not watch companies for waste, they just watch the stock price
That is patently absurd. It's not even true for any responsible individual investor, but for any fund manager that would be outright negligence -- and then the yields of his funds would tumble, and even the stupidest of individual investors would throw him out on his ear.
By contrast, I offer government idiocy, programs that have blatantly failed by any objective measure, yet continue to be money black holes. Consider public education, and the war on (some) drugs. Both actively damage society, and waste uncountable sums of money in doing so.
In many cases government agencies are better managed than corporations of an equivalent size; there are usually better internal auditing and fraud controls in place
Citations, please? Here are some counters: Aside from my examples above, consider Medicare, a well-known money pit that politicians have said they'll clean up for years if not decades. Indeed, government does all it can to prevent us from seeing the depths of its waste. I have a friend here in NJ who works tirelessly to uncover government waste, and the reason it's such a big job is the constant resistance to the use of open public records laws.
And the military (the remainder quoted from http://www.wanttoknow.info/corruptiongovernmentmilitary ):
"'According to some estimates we cannot track $2.3 trillion in transactions,' Rumsfeld admitted. $2.3 trillion -- that's $8,000 for every man, woman and child in America." -- CBS News, 1/29/02, U.S. Secretary of Defense raises evidence of government, military corruption
"A GAO report found Defense inventory systems so lax that the U.S. Army lost track of 56 airplanes, 32 tanks, and 36 Javelin missile command launch-units. When military leaders were scrambling to find enough chemical and biological warfare suits to protect U.S. troops, the department was caught selling these suits as surplus on the Internet 'for pennies on the dollar.'" -- San Francisco Chronicle, 5/18/03
"The Defense Department spent an estimated $100 million for airline tickets that were not used over a six-year period and failed to seek refunds even though the tickets were reimbursable." -- New York Times, 6/9/04