Canadian Politics from Canada's Centre

Friday, March 17, 2006

Government: More Services at Less Cost in 3 Steps

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More services should cost more. Less/fewer service should cost less. More services at lower cost is thus counter-intuitive. It’s quite possible though, and constitutes probably one of the greatest arguments for moderation in politics. While the left argues for greater services, and the right for fewer taxes, the centrist solution of boosting services and cutting costs effectively synergizes (not compromises, because the value of the whole here is greater than the sum of the parts) the two approaches.

Before seeing how to get more services at less cost from our government, it is necessary to see why this is possible. The following chart, a Production Possibility Curve (sometimes called Production Possibility Frontier), explains this in simple terms.

In an economy, it is possible to have goods and/or services produced. Since there are limited resources (labour, natural, and capital) to produce these goods and services, there are a limited amount of goods and services that can be produced.

This chart is called the Production Possibility Curve because it shows how much we can produce (i.e. the production possibility) using all our resources, by being as effective as possible. When we are at a point on the curve (not shown; this graph was made for prior purposes), we can move along the curve towards more goods only at the expense of having fewer services. Similarly, we move towards having more services only at the expense of having fewer goods.

What happens if we don’t use all our resources? Simple: we’re ineffective, so we don’t produce as much as is possible. That is represented by a point on the inside of the curve.

SO…

How effective is government? By most accounts, government is only interested in producing services; being cost-effective isn’t a central concern. The point is that the government’s PPC has current output charted somewhere within the curve. By making government more effective, we can approach and maybe even attain the PPC (100% effectiveness isn’t very common outside small business and organizations).

Tomorrow I’ll post the first step as to how we can achieve this increased effectiveness.

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Related:

Immigration Improvement Could Benefit Our Productivity

GDP since NAFTA

Canadian Politics’ Moderate Circus

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