/Private versus Government

Private versus Government


In his textbook Public Finance, 7th edition, 2005, Princeton University emeritus professor of economics Harvey S. Rosen, discussing the idea that incentives to monitor are better in the private sector than in government, quotes Adam Smith’s statement to that effect in The Wealth of Nations. He also gives a famous modern example. Rosen writes:

Anecdotal evidence for this viewpoint abounds. One celebrated case involved New York City, which spent $12 million attempting to rebuild the ice-skating rink in Central Park between 1980 and 1986. [DRH note: think about that–that’s 6 years.] The main problem was that the contractors were trying to use a new technology for making Iceland it did not work. In 1986, after spending $200,000 on a study to find out what went wrong, city officials learned they would have to start all over. In June 1986, real estate developer Donald J. Trump offered to take over the project and have it completed by December of that year for about $2.5 million. Trump finished the rink three weeks ahead of schedule and $750,000 under projected cost.

I remembered this passage when I was preparing for a Zoom interview on Monday with a high school senior in Arizona. He asked good questions and I gave him this example and a number of others.

Original Source