In sum, there’s no good reason why the private sector shouldn’t be allowed to compete to provide many, if not most, government services—but there’s no good reason why government shouldn’t, and can’t successfully, compete back. But as these instances of managed competition illustrate, realizing lower costs within government often requires exposing the government to competition in order to force government managers and workers to become more efficient. In short, the answer isn't privatization—it’s competition.

For instance, in Edmonton, Canada, a voucher system forced public schools to compete. Within two years, their quality had so improved that there were hardly any private or parochial schools left in the market. Similarly, a 2005 study of a federal prison privatization found no meaningful cost savings over traditional prison operations. But the report noted that “the threat of outsourcing” and the resulting “perception of competition forced all of the [public] facility managers to monitor their usual methods of ‘doing business.’”

This holds larger implications for what government can and should do in the 21st century. Take, for instance, one of the most long-criticized operations of the federal government: the Post Office.

Postal services were quasi-privatized in the US decades ago, but that hasn’t done much to reverse their financial problems. In many ways, that’s an industry- and world-wide problem. But Congress also has restricted the US Postal Service (USPS) from competing successfully, At one point, it prohibited the provision of services ancillary to mailing, like wrapping and copying. The USPS has done its best to make money despite the strictures placed on it, cleverly capitalizing on its reputation for slogging through rain or snow or sleet or hail by producing a line of branded all-weather clothing. Other countries allow their postal services more ambit to compete like a business—primarily in offering financial services, a not-illogical fit, with Japan Post owning the world’s largest bank.

In this country, though, the idea that the government might compete successfully against private enterprise tends to provoke opposition and incredulity. But the postal example illustrates what governments can potentially accomplish. In a world in which private companies increasingly offer government services, and governments increasingly must compete against the private sector, how do you draw a distinction between the two? What is a “government”? I’d suggest that, the more exclusively an entity is the provider of a service, and the more essential that service is, the more it is comes to resemble a government. For example, as Facebook came to function as a natural monopoly (and one central to people’s lives) it began to face growing demands from its customers for rights somewhat akin to people’s expectations of governments—and to attain popularity ratings akin to those of the IRS. As conservatives have rightly grumbled, governments are monopolies—but in many respects, monopolies are also, essentially, “governments.”