You can't win at Monopoly

By John Hood | Dec 22, 2013

RALEIGH — During the holiday season, Hoods play board games.

While the play is all in good fun, our games are competitive. Competition breeds excellence and innovation. It drives self-improvement and challenges us to learn to win gratefully and lose graciously.

Competition makes sporting events more exciting, consumer products more useful, workers more productive, cars more luxurious, and groceries more affordable.

The same principle applies to the public sector. Although governments enjoy monopolies over particular geographic areas, they still face competition. People can choose where they want to live, invest, or open a business based upon the mix of government services and costs they prefer — although there can be a high “transaction cost” to making such a choice, in the form of relocation expenses or risk premiums.

Moreover, just because governments enjoy monopoly power to tax or regulate within a given jurisdiction doesn’t mean competition must be excluded from the provision of services. Most governments solicit competing bids to construct buildings, install software, acquire supplies, or widen roads. States such as North Carolina have also long fostered competition in educational services by including both public and private providers in their preschool programs and by offering financial aid to students regardless of whether they choose public or private colleges.

In 2013, the North Carolina General Assembly expanded the scope of educational competition by offering thousands of low-income students an opportunity scholarship to attend private schools if they wish. Lawmakers also had an opportunity to expand competition in health care, by allowing more competition among hospitals, but unfortunately they chose not to do so.

I’d like to see the General Assembly adopt a more consistent approach to fostering competition. Lawmakers should eliminate regulatory barriers that exclude new entrants to markets for medical care, education, transportation, and personal services. They should further limit the use of no-bid contracts and further expand the use of performance pay to encourage higher productivity..

Monopolists rarely give up without a fight. For example, the North Carolina Association of Educators, the state affiliate of the nation’s largest teacher union, has filed a lawsuit in an attempt to keep low-income families from escaping the public-school monopoly. Hospitals that dominate particular regions will continue to block competitors from entering their markets.

But policymakers should remember that their job is to maximize value for the general public, not to serve the interests of incumbent firms or vested interests. Competition can be messy. It can lead to dramatic change. Without it, however, sustained progress is impossible.

 

Hood is president of the John Locke Foundation.

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