The up and down sides of privatization

“If what gets measured is what gets managed, then what gets managed is what gets done.” -- From, "The Org: The Underlying Logic of the Office," by Fishman and Ellis.

There are instances in which privatization can help achieve broad social goals, writes Eduardo Porter in today's NYT, "When Public Outperforms Private in Services", but while profit is one of the most potent incentives known to man — it also has dangerous drawbacks. Drawing on Fishman & Ellis' analysis of  the transformation of BP from government-run to private as an example, Porter shows privatization's potential for distorted objections and social devastation.

He offers offers of the the consequences of prison privatization along with that of of mortgage banks "blindly offering risky mortgages to shaky borrowers and bundling them into complex bonds to sell to unwary investors." The pursuit of financial rewards, by private companies or even nonprofit organizations, he says, "can directly undermine public policy goals."

There's no better example of course, than the privatization of public education.

Says Porter:

Rewarding teachers for how well their students perform on standard math and reading tests will encourage lots of teaching of reading and math, at the expense of other things an education might provide.

He goes on to quote Northwestern economics professor Burton Weisbrod who says:

“The more we reward those things that we can measure, and not reward the things we care about but don’t measure, the more we will distort behavior.”