Like Jennifer, I too found the Wall Street Journal’s story on latter-day federal penny-pinching fascinating. I have two comments:

1) Here is the perfect example of why the government should never run anything it doesn’t absolutely have to. Because corporations are wealth-creation machines and Benjamin Franklin was right (”A penny saved is a penny earned”), corporate management spends much of its time looking for ways to save money.

The most famous example of this cost-scavenging attitude, perhaps, is the story of John D. Rockefeller and the drops of solder. He was at a Standard Oil factory where kerosene was being put in five-gallon cans sealed with solder. He asked the manager how many drops of solder were being used. The answer was 40. “Try 38,” Rockefeller said. A few of the cans leaked, so they tried 39. No leaks. The yearly savings — which went, of course, directly into the pockets of Standard Oil shareholders — were over $100,000. No wonder Rockefeller created the greatest fortune of his age.

But bureaucrats have no incentive to save money. Indeed, since bureaucratic prestige is measured in the size of one’s budget, they have every incentive not to save money. That probably accounts for why the Forest Service was buying white vehicles and painting them green, instead of — wait for it! — buying green vehicles to start with.

2) How do we get bureaucrats to think like corporate managers and look constantly for ways to save money? Simple, incentivize them to do so and they will be all over waste and inefficiency like ducks on a june bug. The Royal Navy showed how it’s done in the 18th century. The navy, naturally, wanted to capture as many enemy vessels in wartime as possible and disrupt enemy commerce to the maximum possible extent, so they simply gave the ships’ officers and crews the profits. All captured vessels became the property of the men who captured them. Merchant vessels and their cargoes were sold to the highest bidders, and warships were bought by the Royal Navy (which is why so many Royal Navy ships in the days of Nelson had French names). A single happy capture could make a captain very rich, and members of the crew would have more ready money in their pockets than they had ever known.

If the federal government were to give half the first year’s savings generated by each cost-saving idea to the bureaucrats who came up with it, they’d save a lot more than $100 million. That would hardly get the government out of deficit, to be sure, as most of the federal budget goes to entitlements and interest on the debt, which would remain unaffected. But it would create a different culture, and at least we’d see the end of $600 toilet seats.

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This entry was posted on Thursday, July 30th, 2009 at 10:28 AM and is filed under Contentions. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.