Economy I and Economy II

Brooks begins this article positing that there are two types of economies that exist side by side: the first being the economy that produces goods and faces fierce competition that forces it to innovate constantly; the second being the economy (like the public sector) that does not face much competition and becomes bloated and inefficient over time. 

Brooks begins the first part of an argument, that Economy II must become more efficient because Economy I can no longer support it.  I was interested to hear him discuss this in more detail, particularly the question of how we can cut the bloat from Economy II without actually damaging Economy I by killing demand, but instead it turned into an article about the Chicogo teacher's strike. 

http://www.nytimes.com/2012/09/14/opinion/brooks-apres-rahm-le-deluge.html?hp